Yes, it seemingly defies logic but a glut in coffee beans—driving prices down—could wind up making your morning java more expensive down the road.
Though prices rallied, rising 10% from a 15-year low at the end of May, it was short-lived, Axios reports, and coffee is again trading below $1 a pound, less than half the value it fetched 5 years ago.
That’s because Brazil, the world’s leading producer and a country falling into recession, is flooding the market with beans. because of a flood of beans from leading producer Brazil, which is falling into recession and has seen its real currency weaken.
So how does that translate into higher consumer prices down the road?
“Many growers around the world are having to abandon their farms or turn to illicit crops such as coca. This, in turn, is casting doubt over the future sustainability of supplies—and could, ultimately, prove costly for consumers,” finance writers Chelsea Bruce-Lockhart and Emiko Terazono say.
“Consumers might assume that at least part of any price increase for their morning cup of coffee is passed on to the farmer. But in an everyday $3.18 brew, the coffee itself accounts for just 4 percent of the cost, or about 10cents, while rent, labor and tax make up three-quarters of the overall price, according to consultancy firm Allegra Strategies.”