Worldwide coffee bean shortages and rising fuel prices hit cafes hard, with price spikes here to stay

How much are you willing to pay for a cup of coffee?

That is the question consumers need to consider as the cost of everything from green coffee beans to milk, containers and petrol has gone up.

At some cafes a hit of caffeine now costs about 30 to 50c extra.

In central-west New South Wales, coffee roasters and cafe owners say they have been absorbing these spikes for several months and it is now time to pass them onto the consumer.

The Coffee C contract, which is the world benchmark for arabica coffee, has effectively doubled from about $1.24 USD at the start of 2021 to approximately $2.40 USD per pound today.

The price of coffee beans has nearly doubled in the past year. (ABC Central West: Xanthe Gregory)

Academy, based in Orange, sources its beans from Southern and Central America and increased its price per cup by 50c a few months ago.

Owner Matt Swiatkiwsky said one of the worst frosts in half a century hit Brazil in the middle of last year and created a worldwide shortage, pushing up the cost of beans.

He said it would take plants another three years to recover and grow.

Businesses scrape by

Mr Swiatkiwsky said the price for a pallet of coffee had almost doubled from about $7,000 to $13,000 over the past two years.

“Freight would be the big one for us with the cost of fuel going up,” he said.

Mr Swiatkiwsky does not expect the price of coffee to fall anytime soon, if ever, because some businesses are “just getting by”.

“In all honesty, I think a lot of these prices should have been passed on some time ago,” he said.

With farmers along the equator facing tough climatic conditions and receiving low wages, he warned the industry was in a dire state.

A struggling hospitality industry

Worker shortages have further compounded pressures for businesses in the region.

The unemployment rate is heading to lows not seen since the 1970s, below 4 per cent.

“There are more people at work now than what there has been in 40 years, people have just moved away from hospitality,” Mr Swiatkiwsky said.

Michael Everett makes coffee at coffee shop in Orange
Michael Everett started his cafe business 18 months ago and didn’t expect it to still be difficult in 2022.(ABC Central West: Xanthe Gregory)

Michael Everett, who owns three cafes in Orange, said that like the cost of living, the cost to run a business had also spiked.

“Unfortunately, no, I can’t see it ending anytime soon,” he said.

Across the establishments he employs 20 people but cannot adequately staff any of his stores.

A sign showing why a cafe is pushing up coffee prices, stuck to tiled wall
Customers at a cafe in central-west NSW will pay 50c more per cup. (ABC Central West: Xanthe Gregory)

“My business is viable, yes, but it does get harder each and every day,” Mr Everett said.

A bigger economic picture

Former chief economist with ANZ Bank Saul Eslake expected inflation to grow above 3.5 per cent this quarter.

The increased coffee prices were “certainly an illustration of something that’s happening to a wide range of prices,” he said.

Mr Eslake explained inflation is exceeding annual wage growth, which means real wages are effectively falling.

It means the Reserve Bank of Australia will likely hike interest rates this year.

“It takes time for interest rates to ultimately have their intended effect,” he said.

In the meantime, Mr Eslake said, small businesses would have to pass on increased input costs as long as their larger competitors were doing so.