The global coffee industry is currently facing exceptional volatility, creating serious challenges for roasters, traders, and producers alike. At Black Baza, we believe in transparency and want to keep you informed about how this turbulence is shaping our pricing decisions.
What’s Driving These Changes?
Coffee prices have surged to levels not seen in decades, with the market currently sitting at $3.24 per pound, approaching the historic high of $3.30 from 1997. This rapid price increase is driven by a range of global factors:
Changing Climate: El Niño impacts in Brazil, like lower than average rainfall and warmer temperatures have resulted in the world’s largest coffee producer facing crop damage. Similar patterns are being seen in Vietnam as well - both resulting in lower output projections for two of the largest coffee producers, creating disruptions in coffee markets and record-high prices.
EUDR Deforestation Ordinance: The European Union’s new deforestation regulations are affecting global coffee supply chains, even for countries that don’t directly export to the EU. This regulation requires companies involved in the trade of certain commodities, including coffee, to ensure that their products do not result in deforestation after December 31, 2020. Is this good? Mostly, yes (some disclaimers about how these are monitored) but regardless, there are market impacts.
US Tariffs: US tariff measures have already affected coffee-exporting countries like Vietnam, with other nations expected to face similar impacts soon. These tariffs add to the volatility of the coffee market, as trade barriers can disrupt supply chains, raising prices and further complicating global coffee dynamics. The ongoing trade tensions highlight how tariffs can significantly affect coffee prices and market stability worldwide.
Additional Pressures: Rising shipping costs, growing global coffee consumption, speculative investments, and political instability in coffee-producing countries (such as Ethiopia and Sudan) are further compounding the situation. Additionally, emerging consumer markets in Europe and the Middle East are driving further shifts in demand.
Impact on Coffee Producers:
In response to the market instability, many producers are adjusting by limiting long-term contracts and selling at higher market rates. While these elevated prices may offer sustainable profitability for some farmers, there’s no certainty on how long these conditions will persist. Even more concerning is the confusion and urgency some traders are creating, declaring high market rates for wet coffees without proper weighing in front of producers. This lack of transparency leaves room for exploitation.
Black Baza’s Approach:
For us at Black Baza, this volatility requires a flexible sourcing approach, but one that remains firmly rooted in strong relationships with both our importers and producers. We are committed to prioritising quality and sustainability, which means maintaining our buy-back guarantee—we purchase coffee from all our partner producers, regardless of price. In a market like this, where reference prices are volatile, our consistent purchases ensure that producers can rely on us, even when others hesitate.
In most landscapes, we set the benchmark for fair prices. When we don’t buy, producers lose the ability to negotiate effectively with us and other traders. Our approach, built on transparency and trust, is designed to offer stability to those who grow the coffee we all rely on.
Commitment to Stable Pricing:
At Black Baza, we have only raised prices thrice in the last 8 years, with the most recent adjustment in June 2024. It is always our goal to limit the fluctuations in pricing changes to minimise the impact on our customers while ensuring the sustainability of our operations. Our thoughtful approach reflects our dedication to balancing market realities with customer expectations.
The Path Forward for Black Baza:
The coffee industry’s evolving pricing landscape may necessitate adjustments to our pricing model. Our commitment to delivering exceptional quality and fostering sustainable practices means balancing these challenges with the needs of our customers and producers. By working with Black Baza more closely on your future needs, you may be able to help us plan for future purchases and reduce the chances for price changes.
We aim to:
- Ensure access to premium coffee through proactive purchasing strategies that do not compromise on traceability or quality
- Maintain transparent communication about pricing changes and their underlying causes.
- Support our producer partners during this challenging period.
As we navigate this turbulent period in the coffee industry, Black Baza remains dedicated to our mission of precipitating positivity within our community. By understanding the factors at play and staying adaptable, we strive to continue delivering the exceptional coffee experience our customers expect.
We appreciate your understanding and support as we adjust to these market realities.
Stay tuned for further updates as we continue to monitor the market and adapt our strategies to meet the evolving landscape.
If you have any questions about the coffee pricing market and how it may impact your business profitability, please reach out to me directly by email.
Thank you for your continued partnership!
Arshiya - Founder-Black Baza Coffee
(arshiyabose@blackbazacoffee.com)