Coffee prices are falling. What it means for your cup of joe

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CNN Business

The future of coffee crashes. But that might not mean much for the price of your cup of coffee.

Arabica coffee futures were trading at $2.43 in August per pound By Wednesday, the price had fallen to $1.59, a decline of about 35%.

There are a few reasons for the steady decline in prices, explained Carlos Mera, head of Rabobank’s agricultural commodity markets team.

On the one hand, the climate in Brazil is better than it has been in the last two years. This fall’s rains suggest the country will have a good coffee harvest, ensuring supplies.

“September is usually the beginning of the rainy season,” explained Mera. “The start of this wet season was really, really good.”

Coffee futures are down thanks to, among other factors, better weather in Brazil.

Then there is the strength of the US dollar.

“When the dollar goes up, everything measured in dollars, like international coffee prices, tends to go down,” Mera said. Farmers outside the United States are incentivized to sell their produce because they will earn a price in US dollars that translates into a larger amount of currency at home.

“Farmers are more willing to sell whatever stock they may have,” Mera said.

The situation marks a sharp reversal compared to what happened last year.

In November 2021, coffee futures rose to the highest level since January 2012. This was thanks to severe drought and unusual frost conditions in Brazil, which caused market turmoil.

And short supplies of shipping containers put roasters on edge, inspiring them to stock up as much as possible.

Now, “there are some delays, but nothing compared to what there was before,” Mera said.

Coffee has also become more expensive for consumers.

In the year through October, not adjusted for seasonal changes, coffee prices rose 14.8% at the grocery store, according to data from the Bureau of Labor Statistics.

Starbucks ( SBUX ) said in November that it has raised prices this year by 6%.

But improving conditions won’t necessarily mean a big drop in coffee prices for consumers, Mera noted. This is because while coffee prices are falling, other costs, such as labor and distribution, remain high for growers.

“I think if we see prices go down, [they] they will be modest,” he said.

In addition, large coffee companies like Starbucks secure long contracts, which help protect them from short-term volatility.

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