Why are coffee prices so high?

No, you’re not imagining it. The price of that flat white at your local coffee shop has skyrocketed in the last year and even the instant stuff in jars is soaring.

In fact, instant coffee prices are rising so fast that one supermarket has put security trackers on jars to tackle shoplifting – while in other supermarkets the price of instant coffee has surpassed £10.

Staff at a Co-op franchise in North East London this week placed ‘display only’ coffee pots on shelves after a 200 gram pot of Kenco Smooth instant coffee rose in price by 13 per cent.

Also this week, the British Retail Consortium (BRC) said rising coffee costs were to blame for food price inflation of 15.4 percent in May.

Helen Dickinson, chief executive of the BRC, said: ‘The knock-on effect of increased production and packaging costs meant that ready meals became more expensive and coffee prices also increased due to the high cost of coffee beans, as well as key producer countries that are less export.’

So why are coffee prices so high and is there any sign of when they may fall again?

Why have coffee prices increased?

The problem of steep coffee prices has been going on for a long time. For years, global coffee prices remained fairly flat.

Figures from analysts Trading Economics show that the price of a pound of coffee fell below $1.50 (£1.20) in January 2017 and stayed there until April 2021.

It then rose to a high of $2.40 per pound in September 2022 before declining and hovering around $1.80 throughout 2023.

For consumers, figures from the Office for National Statistics show that annual coffee price inflation has been between 7.6 percent and 16.5 percent each month for the past year.

There are several reasons for higher coffee prices.

In 2021, Brazil – which produces a third of the world’s coffee – experienced both severe drought and sub-zero temperatures in the same year. This led to shortages in 2022, which in turn led to higher coffee prices.

Higher fuel costs in 2022 also drove up the cost of shipping and transporting coffee – and the final price to consumers.

According to investment firm eToro, the price of the caffeinated drink has increased by 94 percent between 2020 and 2022.

The cost of living crisis, which started in October 2021 with rising energy bills and continues to this day, also means higher coffee costs.

Coffee shops pay higher prices for coffee, milk, energy and staff, all of which are passed on to customers.

Prices at coffee shop chain Pret A Manger rose by 18 percent this year. The price of the top three coffees (latte, cappuccino and flat white) has risen from £2.95 to £3.30 over the past year.

Most major coffee chains have regional prices, but Pret uses the same prices in almost all of its stores, making comparisons easier.

Caffe Nero charges £3.25 for a flat white and £3.15 for a national level latte, with prices generally higher in London.

When will coffee prices fall?

Banks Goldman Sachs and Rabobank both think coffee prices will remain below 2022 levels this year, as does rating agency Fitch – as long as harvests are decent.

The prices of food and drink for consumers rise and fall slowly.

That’s because it’s common practice for all parts of the coffee supply chain to sign contracts that keep prices at a certain level for a certain period of time.

According to Trading Economics, the world price of coffee has fallen from its 2022 high.

That should mean that consumers should soon be paying less for their coffee – or at least less than in 2022.

However, it remains to be seen whether coffeemakers, retailers and cafes will pass on their savings to customers – after all, Britain has quickly become a country of coffee guzzlers.