A drought in Brazil might make coffee at your local shop or grocer a little more expensive, experts say. Prices for arabica coffee beans, the main variety produced in Brazil, are the highest they've been since 2016. And since that one country produces one-third to one-fourth of the world's coffee beans, the effects could show up in your grocery or coffee-shop bill, says Sean Dunlop, an equity analyst covering restaurants and e-commerce at market research firm Morningstar.
"I wouldn't be shocked if your latte costs a couple more quarters in October or November," Dunlop says.
Here's how Brazil's drought could affect you, and how to save money on coffee if prices start to skyrocket.
Typically, there is far higher supply than there is demand for coffee, explains a spokesperson from the National Coffee Association. "For many years, the world grew more coffee than we drank, but the drought in Brazil is one reason that the U.S. Department of Agriculture forecasts that this year we'll consume more coffee than farmers can grow."
This won't immediately affect consumers, though, as coffee farming and trading "operate on long timelines," the NCA says. "Coffee is often ordered years in advance, which helps ensure that changes in any given year don't have too great an impact."
Coffee sellers typically buy beans from a distributor who fixes the price for anywhere from 6 to 24 months, Dunlop says. That means for now, prices will be stable. But when that contract eventually expires, sellers will need to buy beans at the higher price brought on by the drought.
That's when coffee shops may have to raise the price of their drinks, Dunlop says. Some shops might choose to absorb the price bump, given the recent pandemic-related losses they've faced. Others will likely try to share the burden.
"As those consumers start to come back, you don't want to alienate them with higher prices," he says. "Coffee shops are trying to decide how much [cost] they want to pass along to customers."
Video by Courtney Stith
Whether coffee prices see a sharp increase or not, brewing a pot at home is always more cost-effective, Doug Boneparth, a certified financial planner and the president of Bone Fide Wealth, previously told Grow.
Boneparth created a calculator to show exactly how much money you can save by making coffee at home. It shows that brewing your own coffee will save you about $2 per cup. If you drink two cups a day, that's a whopping $1,500 a year.
So before fall rolls around, a coffee machine might be a smart buy.
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