Why is the price of coffee going up?

Why is the price of coffee going up?

We we’re doing a live stream of Coffee Roasting on Facebook and TikTok the other day, and one of the guests from TikTok asked an interesting question; Why has the cost of Coffee gone up?

So, first let me start by saying here at Foxen Coffee we closely analyze our costs on a regular basis so that we can always remain competitive in the marketplace with our pricing. We’re also a business, so we need to make profit to continue operating - but we are not here to gouge you. We roast coffee because we love doing it, 30+ years and counting we just can’t seem to stop getting ourselves back into this industry.

We hope you enjoy the passion we put into our beans as much as we enjoy making them for you.

Now let’s get into the question at hand: why has the price of coffee gone up over the last 2 years? Well, I’m no licensed economist, but what I can tell you is from my perspective on the industry side. The cost of purchasing Green Coffee from various farmers around the world has nearly doubled over the last 2 years.

In early 2020 governments around the world shut down their economies and stopped nearly all commerce due to COVID19. We stayed in our homes and waited while “2 weeks to slow the spread” turned into many months of who knows what’s going on. Economies turned on and off at the whim of politicians, and consistency in the Supply chain went right out of the window… Now I’m not going to get into the details of my opinion on whether that was a good idea or not, but what I will say is that these actions caused severe damage to the global supply chain… You can think of it like a slinky effect on supply and demand. Shipping containers with all kinds of products (including coffee) are coming in on boats from around the world, when local economies slowed down, the containers didn’t stop coming – they were already on their way! So the “slinky” of supply was compressed, and new imported commodities became slow to receive because of a backlog related to the lack of workers who were forced to stay at home because of a “pandemic.” In addition to producers that slowed down production for the same reasons.

When supply is low and demand is high, Prices go UP (econ101). We all continued to eat food and drink beverages over the last 2 years, right? So, consumer demand didn’t change – but the rate of supply DID.

Now here’s the compounding effect that made it even worse. The cost of fuel. The demand for fuel in the global economy had the same effect as everyday consumables. People used less fuel while we were locked in our homes, but when economies opened again suddenly the demand skyrocketed. The supply chain goes from a compressed slinky, to a stretched-out snake. Supply goes from an abundance to scarcity forward and back again while a new equilibrium is found over time as things get back to normal. Our cost from green coffee suppliers around the world doubles in what feels like an overnight experience due to the compounding effect of supply & demand issues + the increased and volatile cost of the fuel to transport it.

In conclusion - I believe we should see prices and the economy start to stabilize again over the next couple years. Supply chain is a complicated beast, it doesn’t react well to sudden and dramatic change because it’s planned months (even years) in advance by producers . When you change the plan in the middle of its execution – thing’s just get messed up… I’m just glad things are finally getting back to normal, and if nothing like that happens again soon, then we should see the economy recover and prices stabilize over the next couple years. Personally, I knew all of this was coming back when governments first started locking us down in early 2020. But alas, I’m not a politician, I’m just a businessman and a coffee lover so what do I know...

Thanks for reading and enjoy your coffee. There are good times ahead for all of us!

-Nicolas Milone, Co-Founder of Foxen Coffee Company

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