Drought and other conditions are affecting costs from coffee shops to grocery stores
At Tapestry Coffee in Lakeville, Minnesota, a hot cup of coffee is practically a necessity during a frigid Minnesota winter. Customers want to be warmed by coffee, though, not burned by prices, and owner Scott Van Daalen is trying to hold the line on customer costs.
Coffee being harvested now is fetching record prices due to extreme weather and shaky geopolitical conditions. That’s bad for coffee drinkers in places like Lakeville.
“We are seeing a massive increase in almost every coffee,” Van Daalen says. Tapestry is sourcing the same Ethiopian coffee from the same farm as last year, yet it will likely have an increase of 60 to 75 cents per pound as a green, or not yet roasted, coffee.
And, because there is a lag in the market from when coffee is harvested to when it arrives in the U.S., the most significant price increases are still to come for many companies. At Tapestry, that will equate to about $2 to $3 per pound for customers.
Van Daalen says that the main factors for the rising prices of coffee come down to farming conditions and political issues. “In the primary countries of origin, there have been droughts, frost, and other issues that affect the coffee yield,” he says. Brazil, which is the biggest exporter of coffee, has had its forecasted yield lowered by 11 million bags of coffee a year over the past two years due to droughts and other factors.
“This creates an increase in demand as the supply drops,” Van Daalen says. He adds that Tapestry has not yet increased prices, but is planning those increases now as prices are finalized for this year’s supply. The shop will do all it can to avoid raising prices on the customers that stroll into their shop for a cup in person.
“Our hope is to primarily focus on raising prices for our retail bags of coffee, coffee sold online, and through our wholesale business,” Van Daalen says.
The data show how Brazil’s parched soil is causing the price of java to rise. Everstream Analytics recently released a report that found southeast Brazil — the heart of the country’s coffee production — is currently experiencing its lowest mid-March soil moisture levels since 2003. This is particularly acute in key coffee-growing states including Minas Gerais, São Paulo, and Paraná. This could continue to impact global coffee markets in the coming months.
Jon Davis, chief meteorologist at Everstream Analytics, says current soil moisture conditions in Brazil’s coffee belt are in the lowest 10% of historical records dating back to 1948
“These drought conditions have stressed late summer coffee crop development,” Davis says. “The timing is particularly concerning as it affects crucial development stages for next season’s production.”
Although some larger importers and roasters can have locked-in prices via longer-term contracts, price increases will eventually be felt at every point along the supply chain, says Mike Perry, co-owner of California-based Klatch Coffee, which includes a roastery and 12 coffee shops.
Perry says the price pinch will be felt on the grocery shelf, online, or at the local cafe. Klatch had to increase prices on fresh-roasted coffee bags, an increase that came out to about 10 cents per cup of brewed coffee, which he doesn’t expect to dampen demand.
Perry adds that the company’s ability to avoid passing on future increases will be based on careful buys at the right time, anticipating market changes, and, most importantly, leveraging its direct trade relationships.
“Working directly with producers — as opposed to a brokers and middlemen — is an important strategy to help control costs,” Perry says.
Francisco Martin-Rayo, founder and CEO of Helios AI, which assist large food companies to predict the disruptions to agricultural commodities due to climate risk, says that coffee prices will remain elevated over the next 6 to 12 months.
“Expect your daily cup of coffee to cost 50 cents to $1 more at cafes and grocery store prices to rise by 10 to 15% depending on the brand and roast,” Martin-Rayo says. He adds that climate change will continue to drive uncertainty.
“Changing weather will remain the biggest unknown factor impacting coffee prices. If El Niño persists or a new La Niña emerges, coffee-growing regions could face further disruptions, driving prices even higher,” Martin-Rayo says. A worst-case scenario could see coffee prices spike another 15 to 20% by early 2026.
Walter Haas, co-owner of San Francisco-based Graffeo Coffee Roasting Company, says that even with the inflated prices, there is still a lane for ultra-premium brew.
“When we raised prices, we saw no drop in sales — online, in-store, or wholesale,” Haas says. He added that ultra-premium coffee is a daily ritual, and people aren’t giving it up.
“And when it’s as good as ours, you’d probably skip breakfast before downgrading your morning cup,” Haas quipped.
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