Rising coffee prices are creating a new rut at your local cafe – National

The Han Langenbahn in Ottawa has a daily ritual to check the weather forecast in Brazil.

The master roaster of Happy Goat Coffee Co., a cafe chain in the nation’s capital, says it’s a hectic time for the industry.

Periods of severe drought in Brazil and Vietnam are among a handful of factors pushing up global coffee prices just as Happy Goat prepares to lock in bean prices with its suppliers for the coming months.

Langenbahn tells Global News that the latest price spikes have put Happy Goat in a difficult position. Either the cafe absorbs the higher costs to make a profit, raises prices for its customers, or switches to a cheaper bean – the latter, he says, is not an option.

“We don’t skimp on our quality,” says Langenbahn. “This is not in our mentality. No question for us.”

But he acknowledges that the firm stance and pressure on prices comes at a difficult time for Happy Goat customers. While inflation has cooled in recent months, the cumulative effects of recent price spikes and higher interest rates aimed at curbing pressures have suppressed spending among Canadians.

“How far can you stretch it so that the consumer can pay? That is the big question mark,” he says.

“We know that money is not so loose in many people’s pockets and that home consumption has increased enormously. We have to be aware of this at coffee shops.”

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Much of the disruption to coffee prices is due to extreme weather events in Vietnam and Brazil, which together account for more than half of the world’s coffee production. The drought in Brazil is the worst the country has experienced in more than seventy years. It has also experienced forest fires.

Adam Pesce, president of Reunion Coffee Roasters, which operates its flagship cafe in Toronto, explains that coffee is a particularly sensitive crop, requiring precise amounts of rain and sun for an ideal harvest.

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Although Brazil’s current harvest is expected to be plentiful, roasters such as Pesce and Langenbahn buy their beans based on futures prices on global markets – where traders expect prices to rise in months.

With supply expected to be limited next season based on current weather conditions, coffee futures prices are up about 75 percent compared to last year, Pesce says.

“The commodity price that really drives the price of coffee wherever you buy it has just skyrocketed,” he says.

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Pesce expects prices could rise even higher in the coming weeks, although he notes that conditions could change at a moment’s notice, creating a healthier crop than currently forecast.

Climate change has made planning coffee prices under rapidly changing and harsher weather conditions a more challenging process than ever before, Pesce says.

“That is causing a lot of commotion within the sector: how do you plan for such an uncertain price environment in the future?”

According to data from Statistics Canada, the average retail price for roasted or ground coffee hasn’t increased much in the past year: about 1.6 per cent.

However, over a four-year period the increase is much stronger: 23.2 percent between July 2020 and July 2024.

“We have seen coffee prices rise in recent years,” said Michael von Massow, a food economist at the University of Guelph. “And what this news suggests is that they will continue to rise and we will feel that in our morning cuppa.”

But he says the extent to which global coffee price dynamics impact the end consumer will likely vary depending on where you pour your cup of coffee.

When it comes to coffee grounds or beans you buy in the supermarket, Von Massow expects a “significant increase” in the end price because, although there is an element of packaging and transport involved, the product you buy is very directly linked to it is. to the price of the raw material on world markets.

In coffee shops, however, he says the price of a drink also affects wages, the cost of cups and other inputs such as creamers and sweeteners. The costs that contribute to this can, for lack of a better term, blunt the impact of rising coffee bean prices on the overall costs paid in a café.

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Although coffee prices are rising, it is not all good news for farmers when production declines. The volatility in coffee farming is driving some farmers out of the business entirely, von Massow notes, as many rely on the crop for subsistence farming and cannot tolerate erratic yields.

Impacts on the supply of premium beans could also reduce quality, Von Massow suggests, if retailers use cheaper beans in their products to save on margins.

For those like Happy Goat who don’t want to compromise, coffee prices will have to compensate for the commitment to quality.

While Langenbahn acknowledges that consumers may not be as willing to pay big bucks in tight economic times, he takes comfort in knowing that other roasters are in the same position.

“If we have to raise prices a little, we are not alone,” he says.

Pesce says the most serious impacts of climate change, such as the devastating and more frequent weather disasters and changes in agricultural patterns affecting coffee bean farmers, have not yet been felt in many parts of Canada.

But he says if current trends continue, Canadian coffee drinkers will get a reminder of these consequences every morning.

“If these prices hold, there is no way that roasters, cafes and restaurants can maintain their prices where they are now,” he says.

“For many people, this is a way that the climate change story will really sink in. And it ends up in our wallets.”

Despite the pressure, Langenbahn says he feels comfortable with the prospects for Happy Goat – not just because he recently noticed rain in the weather forecast for Brazil.

While climate change could increase the level of “speculation” in coffee markets, he says coffee chains and their suppliers have had to do this price dance for hundreds of years.

Langenbahn expects that price pressure will decrease in the coming years, because beans will always have to settle for a ‘tradeable’ price before the global market can continue to function.

“You just have to find the right time to get a good deal. That is nothing new,” he says.

– with files from Anne Gaviola of Global News and Rosa Saba of The Canadian Press

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