The price of Arabica coffee beans is expected to rise sharply during 2019. According to a Reuters poll of nine coffee experts, the price shift will likely come from the global coffee deficit which is expected to hit markets as Brazil begins a smaller year of harvesting. By the winter of 2019, experts predict the price of coffee will hit $1.25 per pound. Currently, Arabica beans are trading at around $1 per pound.
Although consumers will feel this price increase, it may inject much-needed cash into the coffee production industry. Years of record harvests have driven the price down so low that many farmers, particularly in South America, cannot turn a profit with their existing crop. The pending decrease in supply may be the boost growers need to continue operations.
“Arabica prices should find some support by the fact that 2019/20 is set to be an ‘off year’ output in Brazil,” said Capital Economics’ analyst Caroline Bain while speaking to Reuters.
Like all other industries, coffee prices are influenced by supply and demand. With the current outlook on Brazilian coffee harvests this year, experts believe the demand for coffee will exceed supplies by about “one million 60 pound bags,” according to a report from Fox Business. This is in sharp contrast to the current surplus of more than four million bags.
Even with the price hike, the global demand for coffee is expected to grow. Over the last several years, beverage companies have invested heavily in coffee. In China, a new Starbucks cafe opens about every 15 hours, according to Fortune. Other beverage giants like Nestle S.A. and Coca-Cola have also signed multi-billion-dollar deals to increase their share in the coffee market. Although these companies have capitalized on low bean prices, experts have long believed the current price is unsustainable for farmers.
“You can’t have everybody in the chain winning at the same time,” said Lucio Dias, commercial director at the world’s largest coffee-growers cooperative, Cooxupe, during an interview with Fortune. “Now, it’s been the time of the industry.”
Although Brazil is the leading player in world coffee supply, other countries with lower production like Colombia and Vietnam will also benefit from a higher price. In Colombia, struggling coffee farmers have shifted to growing coca, the main ingredient in cocaine, to stay afloat. Hopefully the decrease in supply will encourage these growers to revert to growing coffee.