Han Langenbahn from Ottawa has a daily habit of checking the weather in Brazil.
The head roaster at Happy Goat Coffee Co., a chain of coffee shops in the nation’s capital, says it’s a busy time for the industry.
Severe droughts in Brazil and Vietnam are among several factors driving up global coffee prices just as Happy Goat prepares to adjust bean prices with its suppliers in the coming months.
Langenbahn tells Global News that recent price increases put Happy Goat in a difficult position. Either the cafe absorbs higher costs to make ends meet, raises prices for its customers or switches to cheaper beans – the latter not an option in his mind.
“We are not lowering our standards,” said Langenbahn. “This is not on our mind. It is not asked of us.”
But he acknowledges the tight environment and pricing pressures come at a difficult time for Happy Goat customers. Inflation may have eased in recent months, but the cumulative effects of recent price increases and high interest rates aimed at curbing pressures have weighed on Canadians’ spending.
“How far can you stretch it so that the consumer can pay? That is the big question,” he said.
“We know that money is not always loose in the pockets of many people and that the consumption of houses has increased significantly. We have to be aware of (that) in coffee shops.”
Why are coffee prices rising?
Much of the disruption in coffee prices is due to the extreme weather in Vietnam and Brazil, which account for more than half of the world’s coffee production. Brazil’s worst drought in more than 70 years. It is also prone to wildfires.
Adam Pesce, president of Reunion Coffee Roasters, which runs its flagship cafe out of Toronto, explains that coffee is a very sensitive plant, requiring a specific amount of rain and sun to harvest.
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Although Brazil’s current crop is expected to be plentiful, coffee roasters such as Pesce and Langenbahn buy their beans based on future prices on world markets – in fact, where traders expect prices to be months from now.
With expectations of limited supply coming into next season based on current weather conditions, coffee prices are up about 75 percent from last year, Pesce said.
“The price of the commodity that really makes up the cost of coffee, regardless of where you buy it, has just gone up,” he said.
Pesce expects prices to rise even further in the coming weeks, although he notes that conditions can change in an instant, giving a healthier harvest than the current forecast.
With climate change, planning where coffee prices can fluctuate rapidly and extreme weather has become a more challenging process than ever, Pesce said.
“That creates a lot of confusion in the industry as to, how do you plan for this kind of price environment going forward?”
How climate change affects your cup of coffee
In the past year, the average price of roasted or ground coffee has not increased much, according to data from Statistics Canada – about 1.6 percent.
However, in four years, the increase is much greater: 23.2 percent between July 2020 and July 2024.
“We’ve seen coffee prices go up over the last few years,” said Michael von Massow, a food economist at the University of Guelph. “And what this news means is that they will continue to rise and we will hear that in our morning cup.”
But he says how much global fluctuations in coffee prices affect the end consumer will vary from where you pour your cup of joe.
When it comes to coffee grounds or store-bought beans, von Massow says to expect a “significant increase” in the final price because, although there is a packaging and transportation factor involved, the product you are buying is tied directly. in the price of raw materials in world markets.
However, in coffee shops, he says the price of the drink also depends on the salary, the cost of the cups and other ingredients such as creams and sweets. Those contributing costs would, for lack of a better term, reduce the impact of rising coffee bean prices on total costs paid to the store.
Although prices are rising for coffee, it’s not all good news for farmers when production is down. The instability in coffee cultivation is driving some farmers out of business altogether, notes von Massow, as many rely on the crop for short-term farming and cannot tolerate variable harvests.
The effects on the supply of premium beans could reduce quality, von Massow suggests, if retailers turn to cheaper beans in their products to save on their margins.
For those like Happy Goat who aren’t willing to trade, coffee prices will have to compensate for the quality commitment.
While Langenbahn acknowledges that consumers may be less willing to pay top dollar in tough economic times, he takes comfort in knowing that other roasters are in the same situation.
“If we have to raise prices a bit, we won’t be alone,” he said.
Pesce says the worst impacts of climate change, such as devastating and frequent weather disasters and changes in agricultural patterns affecting coffee bean farmers, will still be felt in many parts of Canada.
But he says if current trends continue, Canadian coffee drinkers will get a reminder of those impacts every morning.
“If these prices hold, there is no way that coffee roasters, cafes and restaurants will be able to keep their prices where they are,” he said.
“For many people, this is how the climate change narrative will hit home. And it comes home to our pockets. “
Despite the pressure, Langenbahn says he feels comfortable looking at the Happy Goat – and not just because he recently saw rain in the forecast for Brazil.
While climate change may increase the level of “speculation” in coffee markets, he says coffee chains and their suppliers have had to do this dance of pricing for centuries.
Langenbahn expects that price pressures will ease in the coming years, as beans will always have to pay a “marketable” price for global markets to continue to stagnate.
“You have to find the right time to make a good deal. That is not something new,” he said.
— with files from Global News’ Anne Gaviola and The Canadian Press’s Rosa Saba
