Do you love coffee? Do you hate feeling jittery? You can thank economics for both. In fact, the fluctuations of the coffee price have tripled in the last 15 years, making your daily cup of joe more expensive than ever. So, what’s causing these fluctuations?
In this post, I will explore the economics of coffee. Specifically, I’ll look at the factors that determine coffee prices and how they have changed. Additionally, I will focus on the fluctuations of the coffee price and their impact on both producers and consumers.
Firstly, supply and demand play a key role in determining the price of coffee. If more people want to buy coffee than what is available, prices go up. Conversely, if there is more coffee than demand, prices go down.
Several factors, therefore, impact supply and demand in the coffee market:
To begin with, the cost of growing coffee beans fluctuates based on weather, pests, and crop yields. As a result, if production costs increase, the fluctuations of the coffee price will rise as well.
Furthermore, after harvesting, coffee beans are transported to processing facilities and roasters. Consequently, shipping costs can change due to fuel prices and tariffs. Thus, these increased costs are passed onto consumers, affecting the fluctuations of the coffee price.
In addition, general economic conditions also impact the coffee market. For instance, in a strong economy, consumers are more likely to buy coffee. However, in a struggling economy, fluctuations of the coffee price can drive consumers to cut back or switch to cheaper alternatives.
Moreover, specific events can greatly impact coffee supply and demand. For instance, a poor harvest in Brazil could lead to a bean shortage and higher local prices. On the other hand, increased competition, such as a new café opening nearby, might lower prices.
The fluctuations of the coffee price have more than tripled since 2000. Notably, in 2016, prices reached a peak of $3.88 per pound. So, what caused this increase? Several factors contributed:
Café culture has grown, especially in countries like China and India. Thus, this surge in demand has driven up the fluctuations of the coffee price.
Similarly, droughts and disease have increased the cost of coffee beans. Consequently, these factors have led to higher prices as producers struggle to meet demand.
Additionally, a strengthened US dollar has raised the cost of imported goods, including coffee. This has further contributed to the fluctuations of the coffee price since 2015.
While higher coffee prices can have mixed effects on consumers and producers, it is important to look at both sides. On one hand, consumers may be negatively impacted, but on the other hand, producers can benefit from these changes.
Negative Impacts of Rising Coffee Prices
For coffee drinkers, there are several steps to take in response to higher prices. Consider switching to more affordable alternatives or cutting back on consumption. Additionally, making coffee at home and buying in bulk can help save costs.
In conclusion, it’s important to recognize that the fluctuations of the coffee price may pose challenges for consumers. Nevertheless, coffee prices remain relatively low compared to other commodities. Therefore, while higher prices might be inconvenient, they are unlikely to drastically affect the global economy.