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Why Your Morning Coffee Costs More Than You Think: Understanding Australia’s Coffee Economics

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Why Your Morning Coffee Costs More Than You Think: Understanding Australia’s Coffee Economics

If you’ve noticed your daily flat white creeping up in price, you’re certainly not alone. But why exactly is coffee getting pricier, and who’s benefiting? The answer isn’t as straightforward as you might think. This article breaks down the economics of coffee from plantation to café, highlighting recent pressures that Australian coffee roasters and café owners face, especially with current global price
dynamics.

The Coffee Value Chain: Then and Now

The coffee value chain is all the steps coffee goes through, from farmers to your local café. Let’s compare typical conditions from a few years ago to today’s market:

What’s Driving Up Coffee Bean Prices?

Global coffee prices have surged recently due to smaller harvests caused by severe weather, including droughts in Brazil and flooding in Colombia, and rapidly rising demand from markets like Asia and the Middle East. These regions exhibit a higher willingness to pay, putting upward pressure on global prices. In fact, green bean prices globally have jumped by as much as 50% over recent years, significantly altering margins along the value chain.
Real-World Impact: Small Businesses Feeling the Pinch

Take the example of a typical boutique coffee roasting business. Green bean cost have risen 100% over the past two years, significantly higher than the 30% previously reported. Meanwhile, wage expenses increased about 12%, and energy costs jumped another 30-40%. Despite raising retail prices by around 15-20%, they’ve absorbed most of these increases themselves, dropping their ultimate profit margins from about 15% to less than 8%. This is the difference between affording debt repayments or not.

Green bean cost have risen 100% over the past two years, significantly higher than the 30% previously reported.
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