globalEDGE Blog: Concerns over Rising Coffee Prices

Concerns over Rising Coffee Prices

The price for a cup of coffee could rise in the coming months, as a fungus, known as coffee rust, hits the coffee crop throughout South and Central America. The fungus, which cannot be treated, has significantly affected much of the crop in several major coffee producing countries, such as Brazil, Ecuador, Columbia, and Mexico. In Guatemala, officials have estimated that an incredible 70 percent of the crop is infected, worrying farmers across the country who depend on coffee sales. The loss of such a large portion of the world’s coffee supply will force prices up, impacting people in countries around the globe, as well as many major food corporations that rely on coffee.

The rising prices of coffee will affect corporations and those selling coffee first, forcing them to decide whether to raise the price of their products. So far, most large businesses, such as McDonald’s and Starbucks, have absorbed the costs, hoping that the price will stabilize. If global prices stay high or rise higher, businesses which rely heavily on coffee sales, such as Starbucks, could see a large drop in profits, forcing difficult decisions for executives. If the decision is made to raise prices for consumers, demand for coffee could drop, further hurting companies dependent on the drink.

The coffee rust fungus will also have an obvious impact on the economies of many countries in Central and South America. Coffee sales are important in the agricultural sector in many of these countries, especially those with less developed economies. Many small farmers have lost large portions of their crop, making things especially tough for themselves and their families. This has led to an estimated 100,000 coffee-related jobs being lost, as farmers have laid off many of their workers. And with warmer temperatures forecast in the next several months, the coffee rust fungus could continue to spread, continuing to hurt coffee farmers and raising the price for coffee drinkers around the world.

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