The Future of Coffee: potentially rising prices due to climate change
Leading international coffee businesses in Brisbane
In 2023, Adept Economics has been privileged to strengthen its relationships in Australia’s sizeable coffee industry, which we profiled in this 2022 article: Coffee’s economic contribution in Australia. One of the companies we have got to know well is International Coffee Traders (ICT). Based at the Coffee Commune in Brisbane, ICT is a resource for the coffee industry, specialising in sourcing high-quality green coffee from farms worldwide. Led by internationally recognised coffee experts Phillip Di Bella and Raihaan Esat, the company aims to provide coffee roasters with access to good quality coffee at the right price. Indeed, ICT has helped Adept Economics team member Tim Hughes source the beans for his new healthy coffee label Lumo Coffee.
The Coffee Commune, located on Abbotsford Road in Bowen Hills, is a unique village-like space that brings together various businesses in the coffee industry. It is a hub for collaboration, education, and support, allowing businesses to thrive and accelerate their potential. The Coffee Commune offers resources, access to facilities, and educational opportunities to help coffee brands grow and stand out in the market. Coffee Commune is a world-beating facility. The Coffee Commune took home the Overall Winner and Gold Medal Winner title in the ‘Milk’ category in the world’s largest coffee roasting competition, Golden Bean World Series 2022.
ICT is crucial in their customers’ coffee supply chain by sourcing green coffee beans directly from farms in Brazil, Colombia, Costa Rica, Ethiopia, and many more countries. Raihaan works closely with clients to understand their specific requirements, such as organic or Rainforest Alliance certifications and then seeks out the proper coffee to meet those needs. The company also explores alternative coffee-growing regions to find unique flavours and better value for its clients.
Tim Hughes (Adept) and Raihaan Esat (ICT) recording Economics Explored episode 217 on the Future of Coffee in November 2023.
Climate change and coffee
Climate change is expected to impact the coffee industry, with significant implications for coffee production, quality, availability, and price, according to Raihaan. Scientific evidence of the effects of climate change on coffee is starting to accumulate (e.g. see reporting by The Guardian) In late November 2023, Adept Economics Director Gene Tunny and team member Tim Hughes interviewed Raihaan for the Economics Explored podcast about developments in the global coffee market:
You can listen to the episode via podcasting apps or using the embedded player below:
According to Raihaan, one of the most significant impacts of climate change on coffee is the proliferation of pests, specifically the borer beetle that bores holes into coffee beans and consumes them from the inside out. In addition to pest infestations, changing weather patterns also challenge coffee production. Rains occur at unexpected times, leading to inconsistent flowering in coffee plants. This forces producers to move higher up the mountains, where the colder temperatures are more suitable for coffee cultivation. However, this also means less land is available for coffee production, creating a scarcity of suitable areas for cultivation.
Moreover, climate change is causing shifts in the geography of coffee production. Countries that were previously unsuitable, wholly or in part, for coffee cultivation due to being too cold or high in altitude are now becoming viable coffee-growing regions. Examples of such countries include Nepal, Argentina, Cameroon, and Ecuador. This shift in coffee production geography indicates climate change’s impact on the industry.
Other coffee market influences
As well as discussing the implications of climate change for coffee, Raihaan provided many other insights into the coffee market in his conversation with Gene and Tim. The demand for coffee continues to grow. However, there are demographic shifts in coffee consumption. While professionals and older generations tend to consume more coffee, the younger generation’s coffee consumption has plateaued. This demographic change may impact future coffee demand. Economic factors, such as fluctuating interest rates and supply chain disruptions, can also affect coffee prices and availability.
ICT face the challenge of balancing supply and demand in the coffee market. The company has witnessed a significant increase in coffee prices in recent years, driven by factors like restricted supply, economic fluctuations, and political issues in coffee-producing countries (Figure 1). These price increases have started flowing through to cafes, leading to higher consumer prices.
Despite the challenges, ICT remains committed to sourcing high-quality coffee and supporting sustainable practices. The company works closely with coffee producers, cooperatives, and communities to ensure fair trade and ethical practices. They also explore innovative approaches, such as partnering with producers to experiment with fermentation techniques to create unique and flavorful coffees.
Conclusion
In conclusion, ICT and the Coffee Commune are integral players in the Australian industry, connecting coffee roasters with high-quality green coffee worldwide. They navigate the complexities of the coffee market, including supply and demand dynamics, economic factors, and the impact of climate change. Through their dedication to sourcing and promoting sustainable practices, they contribute to the growth and development of the coffee industry while ensuring a delightful coffee experience for consumers.
This article was authored by Adept Economics Director Gene Tunny and published on 7 December 2023. For further information, don’t hesitate to contact us via contact@adepteconomics.com.au or 1300 169 870.