Except we are nowhere near a situation like that. Articles like this don’t tell the actual prices because they are so small people might start questioning why they pay so much for coffee.
The poll had a median forecast for arabica prices at the end of 2025 of $2.95 per pound, a drop of 30% from Wednesday’s close and a loss of 6% from end-2024.
$3 per pound - $6 per kilo. Or to put it in another way, 4.8 cents per shot of espresso, two of which go in a 16 oz Starbucks latte that costs you $5.75, which would be enough money to buy 120 shots worth of bulk arabica.
If that goes up by 7% or 70% or 700%, the cost of that latte should hardly change.
Exactly. And all of those stay the exact same price even if raw coffee price increases, meaning the price of a ready made cup of coffee hardly changes as the actual raw bulk coffee is only 1/60th of the total price of a starbucks latte.
There is a reduced supply of coffee beans. Let’s say 30%. This requires that 30% of customers have to be priced out of the market.
If the coffee shop owners only increase the price by several cents then the demand stays the same. They have to fight for coffee beans which drives up their costs step by step.
However, if they increase the price in advance, and far more than necessary right from the start, then the reduced demand matches the available supply and the value of the coffee beans roughly remains the same which allows them to profit from most of the price hike.
You’d be right in theory - the cost of logistics should scale with weight or volume, not price - but we’ve already seen from the price shocks over the last few years that in reality corporations will always take the opportunity to price gouge on any upstream change, even when it has no impact on their costs.
But even putting aside the fact that capitalism will take it’s cut, you’re citing the potential impact of 700% price increases, but I’m not ruling out the possibility of 7,000% increases or higher. With the potential scale of impact that we could see from climate change, and how it affects delicate ecosystems like those in which coffee grows well, that’s not outside the realm of possibility.
Oh yeah, even a tiny increase in bulk price is a fantastic excuse to bump the profit margins for corporations, I’m not even pretending that wouldn’t happen in real life. Just look at the US egg prices and the massively increased profits of the companies selling them.
As for what’s the upper limit on the price increase in the long run, that’s quite hard to estimate, because the more expensive coffee becomes, the more options there will be for growing it in sub-optimal conditions. At some point, somewhere, growing coffee in a greenhouse becomes profitable to do.
Is that at $10/kg, $30/kg? $100? Over 9000? I don’t have a clue.
But for quite a lot of people the coffee they currently drink is so ridiculously overpriced that even an absolutely massive increase wouldn’t have to mean they actually need to stop drinking coffee - to make a latte at home that was expensive as the one from Starbucks, the coffee itself could cost $350/kg - 15 grams of it would be $5.25, plus the milk. It would just completely kill coffee shops as a concept.
Except we are nowhere near a situation like that. Articles like this don’t tell the actual prices because they are so small people might start questioning why they pay so much for coffee.
$3 per pound - $6 per kilo. Or to put it in another way, 4.8 cents per shot of espresso, two of which go in a 16 oz Starbucks latte that costs you $5.75, which would be enough money to buy 120 shots worth of bulk arabica.
If that goes up by 7% or 70% or 700%, the cost of that latte should hardly change.
Logistics cost money
Shucking and processing the beans costs money
Roasting the beans costs money
Exactly. And all of those stay the exact same price even if raw coffee price increases, meaning the price of a ready made cup of coffee hardly changes as the actual raw bulk coffee is only 1/60th of the total price of a starbucks latte.
How about this explanation:
There is a reduced supply of coffee beans. Let’s say 30%. This requires that 30% of customers have to be priced out of the market.
If the coffee shop owners only increase the price by several cents then the demand stays the same. They have to fight for coffee beans which drives up their costs step by step.
However, if they increase the price in advance, and far more than necessary right from the start, then the reduced demand matches the available supply and the value of the coffee beans roughly remains the same which allows them to profit from most of the price hike.
You’d be right in theory - the cost of logistics should scale with weight or volume, not price - but we’ve already seen from the price shocks over the last few years that in reality corporations will always take the opportunity to price gouge on any upstream change, even when it has no impact on their costs.
But even putting aside the fact that capitalism will take it’s cut, you’re citing the potential impact of 700% price increases, but I’m not ruling out the possibility of 7,000% increases or higher. With the potential scale of impact that we could see from climate change, and how it affects delicate ecosystems like those in which coffee grows well, that’s not outside the realm of possibility.
Oh yeah, even a tiny increase in bulk price is a fantastic excuse to bump the profit margins for corporations, I’m not even pretending that wouldn’t happen in real life. Just look at the US egg prices and the massively increased profits of the companies selling them.
As for what’s the upper limit on the price increase in the long run, that’s quite hard to estimate, because the more expensive coffee becomes, the more options there will be for growing it in sub-optimal conditions. At some point, somewhere, growing coffee in a greenhouse becomes profitable to do.
Is that at $10/kg, $30/kg? $100? Over 9000? I don’t have a clue.
But for quite a lot of people the coffee they currently drink is so ridiculously overpriced that even an absolutely massive increase wouldn’t have to mean they actually need to stop drinking coffee - to make a latte at home that was expensive as the one from Starbucks, the coffee itself could cost $350/kg - 15 grams of it would be $5.25, plus the milk. It would just completely kill coffee shops as a concept.
You’re forgetting the most obvious factor: charge the most people are willing to pay.