- Commitment
A bitter pill to swallow: Coffee prices.
“Coffee is a luxury.” – I don’t know how many times I’ve written this sentence here on the Mount Hagen blog, like a prayer wheel, to express our appreciation. For the farmers, their work, and the result: Highly aromatic beans. As you can see from the current coffee prices: The sentence is true. And that won’t change in the future.
Barbara Beiertz
5 reasons why coffee prices have risen so much.
Climate change, extreme weather conditions with crop failures, increased demand, stock market speculation with green coffee, and EU laws are the main reasons for prices of 20 dollars and more per pound of coffee.
Let’s take a closer look at this.
Climate change & extreme weather conditions.
I don’t think we need to discuss the fact of climate change any more here. We were able to feel its effects quite clearly in 2024:
Brazil, the largest coffee producer in the world, especially for Arabica coffees, had extreme weather conditions last year and massive crop failures due to drought. In Vietnam, the second largest coffee exporter, it was flooding that reduced the harvest (especially Robusta). In addition, the warehouses are empty, so there is no buffer to compensate for such situations.
The current price increase is primarily due to concerns about future production. La Niña, one of the strongest weather phenomena in the world, is causing droughts in Brazil. The country is currently experiencing the worst drought in years, which could limit Arabica production in the 2024/2025 season, resulting in a deficit instead of the expected surplus. In addition, Typhoon Yagi in Vietnam has destroyed many trees and the expected rains in the coming months due to La Niña could lead to numerous diseases affecting the coffee trees. (xtb, September 2024).
The consequence: Arabica coffee cost 76% more in December 2024 than in the previous year (Dec. 23: 185.23 US cents/pound vs. Dec. 24: 326.97 US cents/pound*). Which brings us to the next big price factor…
The principle of supply and demand. Or: Welcome to Wallstreet.
As described, the supply of coffee is not particularly high at the moment. However, demand is increasing significantly. China is developing into a coffee country. India is also on its way there. It is clear that this is driving prices up further. To a level that coffee farmers could previously only achieve with fair trade or direct trade coffees. Now they get over 75% more for a “normal, conventionally grown coffee” than they did last year.
The consequence: If you want to buy certified organic (and therefore very expensively grown) green coffee, you have to offer prices that are above the world market level – i.e. above the 75+%. Of course, this also applies to Fair trade coffees. Please don’t misunderstand – there is also inflation in the countries where the coffee is grown and energy prices have risen. But there is another complicating factor…
The EU Deforestation Regulation (EUDR).
In 2023, the EU passed a law to protect against deforestation, the EU Deforestation Regulation (EUDR). It is intended to ensure deforestation-free supply chains for coffee, timber, cocoa, soy, etc. exported to the EU and will apply from this year on. All areas that have been farmed since 2020 are affected. That’s actually great. Who wants tropical forests to be cut down for their favorite espresso?
However, the law has a huge impact on everyone involved – including coffee farmers and cooperatives. For example, they are required to provide GPS data for the traceability of resources, i.e. coffee-growing areas. Imagine a farmer in Papua New Guinea having to provide GPS data from his coffee garden with 4 or 5 bushes and prove that there was no forest there in 2020. He then sends this to his cooperative, which in turn collects all the paperwork from umpteen smallholder farmers…
Apart from the fact that this is a lot of effort, which costs money and of course has an impact on prices: Why should the farmers or cooperatives do this if they can sell their coffee to the USA or China at any time without this effort?
You have to have very good, cooperative relationships with your producers in order not to be left empty-handed in a situation like this. Fortunately, we have that at Mount Hagen. Because we have always invested in supporting the farmers, be it botanically, geologically, or structurally. Our development aid involves the local structures – e.g. universities, non-governmental organizations, etc. – and is therefore geared towards long-term cooperation. But sometimes it also means procuring a specific machines. Or spontaneous financial help, for example with school construction in Papua. Or the pre-financing of the Demeter coffee harvest in Peru, including the construction of a new coffee processing plant with drying areas on the La Chacra D’dago farm. This is our very own understanding of business relationships. Of respect. And that is the basis of our exceptional coffee. I think you can taste it.
You can find out more about Mount Hagen and its coffee farmers here:
“Respect – the foundation of extraordinary coffee.”
„Unsere Werte. Kurz. Knapp. Und vor allem verbindlich“
“Being better.”
“How fair is fair trade? Part 1.”
“How fair is fair trade? Part 2.”
Inflation, geopolitics, logistics, and other “trivialities”.
A blocked Suez Canal, a new president, inflation, war – all of these naturally have an impact on the price of coffee. Increased logistics costs are just as noticeable as more expensive energy. Unfortunately, you can’t really do anything about it, everyone is affected.
What drives me personally up the wall, however, is the short-sightedness of us consumers. We pay attention to the price and are happy when we find a bargain: 1kg (2.2 pound) of Arabica beans for €9.99 (About 10.80$) at the discounter. Amazing! But it’s no longer “amazing” when you take this price apart:
9,99€
– 2,19€ German coffee tax
= 7,80€
– 3,57€ (Green coffee, based on 12/23 price, see above)
= 4,23 €
4.23 €? For roasting, packaging, transportation, wholesalers, retailers? And 3.57€ for traders, logistics, cooperatives, farmers? What’s left over for the coffee farmer and all his work? Nothing – or even less.
Even if this is just a rough calculation, it makes one thing clear: How little coffee and all the work that goes into these delicious little beans is respected – let alone appreciated. And we’re not even talking about organic coffee. Which brings us back to the beginning:
Coffee is a luxury.
The caphea arabica is a sensitive plant that needs certain amounts of light and shade, sun and water (the famous coffee belt near the equator). Nurturing and caring for it – without chemical pesticides – is hard work.
Our organic coffees do not grow on plantations in monocultures where large machines can be used. Quite the contrary: They grow in small coffee gardens under shade trees such as casuarinas and bananas together with papaya etc. Which is good for the soil because it can store water much better. There is a much greater diversity of species – which helps against pests. Overall, the plants are more resilient, which is definitely helpful considering the effects of climate change. These are the advantages. The big disadvantage is that they are harvested by hand (picking), not mechanically stripped like it is the case on a large industrial plantation.
Did you know that you have to harvest about 180-250 oz of coffee cherries for about 35 oz of green coffee? That alone takes about 4 hours. (Remember the 3.57€). Then there’s the depulping, washing, sun-drying and so on and so forth. If you want a really good, aromatic coffee – and we definitely do – then it takes time. A lot of time.
This also applies to roasting. Industrial roasting, for example, which is geared towards mass and efficiency, takes 2-3 minutes at very high temperatures. We roast for at least 11 minutes at a gentle temperature of 392 °F in our drum roasters in Hamburg. Why? Because you can taste it. Because this is the only way the coffee’s more than 800 aromas can really unfold. A little chocolate perfectly balanced with hazelnuts, a little spice and a fine, elegant acidity. All in all, that’s what we call (yes, a little profane): Peru coffee. This is a single origin from the Demeter cultivation of La Chacra D’dago. And of course, it is a luxury – but worth every single penny. (And not bitter at all, by the way).
