Well, that didn't last long.
Just when we thought all the bad news holding the price of raw coffee up at record-high levels was behind us, along comes another new conflict, disrupted shipping lanes, oil shortages, and fuel cost hikes.
Ever since the start of the pandemic in early 2020, the global coffee supply chain has been in chaos—and at times, full-blown crisis. Barely has there been a period of genuine stability where all parts of the industry have been able to "catch up."
Instead, we seem to lurch from one negative narrative to the next, leaving no space to measure or optimize the constant adjustments required to run a coffee roasting business. If it's not a shortage of shipping containers, coffee leaf rust epidemics, or adverse weather like excessive rains, drought, or frost lowering harvest yields, you can almost bet that next month something new will hit the headlines to keep the price of raw coffee high.
The Meteoric Rise of Raw Coffee Prices
For those of you who have not followed the market since the pandemic, here are some wild headline stats: raw coffee has doubled in the last 2 years, and tripled in the last 5 years.
Apparently, all this trading chaos is caused by a perceived shortage of coffee. We all know the basic economic rule: when supply falls short of demand, prices rise.
I say "apparently" because, for some of us working in the Australian coffee industry, we don't buy that story. Sure, the frost in Brazil kicked off the extreme pressure on prices, and large producers like Vietnam, India, and Colombia hiccuped with their volumes. But let me just point out one thing:
At no point has any coffee roasting brand in any part of the world ever put up their hand to say, "Heck, we just ran out of raw coffee."
Let that sink in for a moment. Nobody ran out of coffee. No brand shut up shop, switched off their equipment, or delisted their business because they actually ran out of beans.
So, How Are Raw Coffee Prices Actually Set?
Raw coffee prices are often an "artificial" construct. They are based on future price speculation, the strange use of "replacement costs," and origin differentials—essentially, the games played in each coffee-growing country about whether they are (or will be) in a state of shortfall or surplus.
Combine this with the whim of those who currently hold the raw coffee inventory (farmers and exporters) wanting to sell at current prices or hold on for a higher profit, and you have a complex system that has favored sellers for a long time.
The uncomfortable truth is that Australian coffee brands are relatively tiny with zero global influence. We basically get offers to either "take it or leave it." While some industries have a low cost of goods compared to their selling price, roasted coffee is different. The price of raw beans has a massive impact on the final retail price, making market movements incredibly sensitive.
How the Middle East Conflict Impacts Coffee Shipping
It's too early to see the full picture, but we have already seen upward pressure on global raw coffee prices over the last week due to recent Middle East conflicts.
Putting the base price aside, there is another major supply challenge: shipping lanes are disrupted around African coffee-growing nations.
For Ethiopian coffee in particular—an origin always in high demand—shipping has always been challenging. But now, there is a hefty price premium applied to new crop Ethiopian coffees due to how the Ethiopian Coffee Exchange (ECX) sets market pricing.
This means two things for the industry:
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Higher Base Prices: Ethiopian coffees now command a massive price premium, significantly higher than the rest of the global coffee market.
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Quality and Delay Risks: Added to this base price is the extra cost of shipping via longer routes. These delays take extra weeks and increase the risk of coffee quality degradation due to heat exposure inside shipping containers.
For other African origins like Kenya, Uganda, Rwanda, and Burundi, we can expect added shipping costs to increase base pricing or reduce availability, depending on what cargo ships prioritize. Watch for a bit of arbitrage on African coffees in the next few months!
What This Means for myCuppa Customers
Transparency is important to us. Because replacement costs are already many dollars higher than last year's 50-year record highs, we will be increasing the price of Ethiopian coffees at myCuppa. We also need to temporarily throttle the flow of our Ethiopian beans. As other sellers inevitably run short, coffee lovers seeking this specific origin may jump across to our store, which would result in rapid, unsustainable declines in our inventory.
We appreciate your continued support and understanding as we navigate these complex global challenges together.
Frequently Asked Questions
Why are raw coffee prices still so high?
Raw coffee prices remain elevated because several pressures are occurring at the same time. These include concerns about global supply, weather-related crop problems, higher production costs, speculative futures trading, origin price differentials, expensive freight and disruptions to international shipping routes. Even when coffee is physically available, expectations about future supply can still push market prices higher.
Does a high coffee price mean there is actually a global coffee shortage?
Not necessarily. Coffee prices can rise because traders, exporters and buyers expect future supply to become tighter, even when coffee is still available today. Futures markets are influenced by forecasts, inventories, weather, demand and sentiment, so prices can move significantly before any physical shortage is experienced by roasters or consumers.
How are global raw coffee prices determined?
Many commercial Arabica coffees are influenced by international futures markets, with additional premiums or discounts known as differentials applied according to origin, quality, availability and demand. The final price paid by a roaster can therefore include the underlying market price, origin differential, freight, insurance, currency movements and other supply-chain costs.
Why do problems in shipping lanes affect the price of coffee?
Coffee is an international agricultural commodity and often travels thousands of kilometres before reaching Australia. When shipping routes are disrupted, vessels may need to travel further, freight rates can increase and transit times can become longer. Higher fuel costs, congestion and delays can then add directly to the landed cost of green coffee.
Why are African coffees particularly affected by shipping disruptions?
Many African coffee origins depend on shipping routes that can be heavily affected when major trade corridors are disrupted. Coffees from countries such as Ethiopia, Kenya, Rwanda, Burundi and Uganda may face longer transit times, higher freight costs or reduced shipping capacity, depending on the routes available at the time.
Why can Ethiopian coffee cost more than coffee from other origins?
Ethiopian coffee can attract significant premiums because of strong global demand, distinctive flavour profiles, local pricing structures and the cost of moving coffee through the export system. When freight becomes more expensive or availability tightens, those premiums can increase further.
Why do coffee roasters sometimes raise prices before their current stock runs out?
Roasters have to consider the cost of replacing the coffee they are selling today. If the next shipment will cost substantially more than the current inventory, continuing to price entirely from the historical purchase cost can leave the business unable to replace stock at sustainable margins. This is why replacement cost is an important part of coffee pricing.
Can shipping delays affect coffee quality?
Yes. Green coffee is relatively stable, but long transit times and prolonged exposure to excessive heat or humidity can affect quality. Delays can therefore create both additional cost and additional risk, particularly when coffee spends longer than expected in containers or warehouses.
