Why Brazil's Severe Weather May Lead to a Price Increase at Your Local Starbucks

This year has been nothing short of harsh for labor, manufacturers, and retailers. Now coffee is joining the growing list of shortages. Severe weather is damaging crops in Brazil and, since Brazil is the largest manufacturer of coffee at 40 percent, that means a shortage is on the horizon. How will that affect coffee prices at home and at retailers like Starbucks?

According to Bloomberg, the weather has all but thrashed the crops in Brazil with intense freezes and multiple droughts. While it’s natural for crop harvesting to fluctuate, the amount produced in Brazil has been alarming. It is reported that the top manufacturer produced 40 percent less arabica coffee compared to last year and has made a record for the least amount produced since 2009. So what does that mean for Americans, who statistically consume 400 million cups of coffee per day?

Brazil’s 40 percent loss in production accounts for two-thirds of the coffee consumption in the United States alone. Needless to say, there is a shortage. Regis Ricco, director for Consultoria Rural in Brazil spoke on the shortage, “There’s no line of trucks waiting to load coffee at the warehouses.” He continues admitting his growing concern on the change in production, “Farmers send a truck with coffee to the warehouses, and a few hours later the truck is back, when normally it would take as long as a day. It is alarming.”

As of now, the cost of arabica beans has increased by at least 50 percent. It can be assumed that a price hike in coffee is surely on the way, if not already here. This includes a slight change in how your coffee tastes. To combat the lack of arabica beans (which Starbucks lovers know is the heart of a perfect cup) harvesters have decided to supplement with robusta. Robusta is a cheaper and heartiest bean to cultivate —and a little bitter. Bloomberg reports that blends that used to be 50 percent Robusta, will instead be higher—up to 90 percent.

Starbucks has a history of raising prices for coffee to combat inflation. Notable price hikes were a 2-3 percent increase in 2000 to an average 17 percent increase in 2011 and a hike by 30 cents in 2018. Clearly, Starbucks isn’t afraid to raise prices. So what will the next jump be? It is claimed via CNN Business that the expected shortage and volatility with coffee production won’t impact what people are going to pay for a cup off of coffee.

CEO Kevin Johnson went as far as to say that Starbucks savvy purchasing methods help the company to avoid having to raise prices, but that was in July. As of August, the company admitted to feeling the pressure in response to coffee supply issues, “Pricing will be one of many levers that we use to offset these headwinds.”

It has already been reported that Starbucks in fact has increased the prices by 10 cents for tall cups of brewed coffee. Whether or not this slight increase will grow to affect the rest of the menu remains to be seen.