A letter from Joe’s VP of Coffee, Amaris Gutierrez-Ray
Today I’d like to briefly discuss something you may have been seeing across the coffee industry: many coffee companies are raising their prices to customers. Joe recently increased prices for hot, iced, and retail coffee, as well as chocolate drinks. The context for these increases is both simple and complex, and in light of misinformation or oversimplification of the facts in the media, it is worth investigating and offering some transparency. I hope to share more in-depth details over the coming weeks, but if you have questions after reading this, please reach out.
To understand what is influencing higher costs, and the correlated higher prices to consumers, we have to separate out two separate things that are happening. These two are not connected, though the second has the power to influence the first. We will take this in two parts. The first is extreme market volatility. The second is the most recent, the tariffs announced by the US government.
A quick note to kick us off: coffee is traded as a commodity on the InterContinental Exchange, a for-profit, global exchange–or trading house–for financial and commodity markets. In the industry, we call it the C-Market, C for Commodity, and it directly and indirectly influences the trading price of coffee (naturally, we call this the C-price). There is an important distinction to be made here already, at the point of defining this trading structure. At Joe, we do not believe coffee is a true commodity, even if our coffee business is impacted by market prices. This is not just because we purchase and roast specialty grade coffee, though that is part of it. “Commodity” denotes a basic good that is basically interchangeable with similar goods or is uniform in quality. We know coffee to be the exact opposite of this definition. We believe in a more inclusive definition of value or quality, that accounts for the costs required for producers–and many others in these complex supply chains–to grow, process, and prosper from their coffee businesses. The fact that the C-Market doesn’t account for any of this, and was never designed to in the first place, is worth paying close attention to as we unpack the conditions of the moment we are living.
Let’s start with the market. Over the last year and a half, market prices for coffee have been steadily increasing, reaching double and triple what they were only a few months ago. We have a dynamic and sustainable approach to managing coffee supply relationships and costs, which has helped us maintain relative stability. Still, as a result of the extraordinary market increase, we are experiencing unusually significant cost increases on our green coffee.
Take a look at this graph. You can see us in April there at the far right.
Because we keep seeing the word “volatile” in the news, it’s important to point out where that sense of instability comes from. Here’s a longer look in the rearview. This is a graph of the entire history of the global exchange for coffee. We don’t have time or space to get into it here, but, even though coffee has been traded on some form of a stock exchange since 1972, ICE is a relatively new “facilitator” of this trade, taking it over from the NY Board of Traders in 2007. You can see from this image that the C-price of coffee might fluctuate ~$0.50 over 5 years, but there have been very few steep peaks and troughs over the last 53 years. Also worth noting: the C-market has not and does not account for inflation. A $3.00 price in 1975 would be about $18.00 today. It's clear that 2025 prices are much lower than they should be, even with this recent increase.
What is driving this moment of extreme market volatility and C-price crisis?
Supply and demand:
- There has been a staggering decrease in the global supply of coffee due to climate change. Coffeelands all over the world are experiencing drought, fires, out of season rainfall, and other climate events resulting in lower production and yields. This isn’t a sudden change, the impact has been felt for several harvest cycles across continents, but the challenges last year (the hottest year on record) particularly affected the highest producing countries, as well as all species (not just Arabica). The catastrophic fires in LA were also a result of unheard of pattern changes to La Niña/El Niño, affecting both North and South America.
- Global demand for coffee continues to increase. This includes growing specialty coffee consumption in producing countries.
Market uncertainty:
- Driven by fears of the ever-worsening climate, political influences on global interest rates and inflation (including the US presidential election), threat of tariffs over the last couple of months, logistical delays caused by the EU Deforestation Regulation that have been simmering for the last 2 years, and much more, market uncertainty has reached new highs.
Inflation in coffee producing economies:
- Producers are facing exponential increases in the cost to produce. Higher prices for fertilizer, fuel, labor, and interest rates, as well as disruptions to receiving payment on time, add pressures and constraints, especially at a time when the market could look from the outside like it is working in favor of producers. In fact, farmers may be experiencing the inability to meet their basic costs of production.
Who is impacted, and who is making money right now?
- At the moment, everyone is impacted, though producers continue to bear the hardest–and the first–burden. Producers are most in need of stable resources to ensure they are equipped to handle the financial impact.
- It’s unclear whether any supply stream actors are making a higher profit since supply is low. We have long known there are inequitable practices in the trade of coffee, including the market price mechanisms that don’t accurately reflect the value or cost of coffee, so we hope this is a moment we can rise to, and challenge the industry to react in sustainable and ethical ways.
We mentioned quality at the top, since we are a company that purchases specialty grade coffee. Specialty coffee is a small percentage of the whole industry, indicating a quality range of coffees that score 80 points (on the SCA scale) and higher. What is the impact of this crisis and climate change on quality?
- At Joe, we purchase coffee through a values-based strategy. Though many of our contracts are forward, or rooted in the market, we find ways to account for the cost of production. We also spend a considerable amount of time listening to what producers are saying and working with trusted suppliers in order to sustain their businesses. We do not anticipate a decline in quality as a result. We believe that as long as producers have what they need to thrive, and feel the resilience in their supply stream through committed business relationships, they will utilize their expertise to produce high quality coffee.
- We acknowledge this means our costs will increase as we prioritize the stability of the supply streams where we work. We believe this is the only way to participate in a global market, by decoupling market price from quality, and instead replacing the cost equation with producer prosperity and quality.
This is a tricky moment for the second thing which is driving more speculation and uncertainty, the announcement of tariffs.
Last week the Trump administration announced a set of tariffs. The countries listed include a high quantity of coffee producing countries, with the lowest impact of 10% for many countries, and the highest impact of 46% in Vietnam, the world’s second largest coffee producer. India, as the 7th largest coffee producer in the world, is facing a 26% tariff.
Optional: Both Vietnam and India are responsible for producing majority non-specialty coffee, and Robusta coffee specifically. Robusta is traded on a different market, since the C-market is focused on Arabica. The global players who rely on non-specialty and Robusta coffee are very price sensitive, and in fact are largely why the C-market functions the way that it does. It facilitates a race to the bottom definition of capitalism and competition. This has brought a new perspective to the price crisis problem, creating a higher price point for all coffee everywhere, and we can anticipate that companies that might have previously relied on coffee from Vietnam and India will now look elsewhere to fill their volumes. In response to the Arabica C-market, the Robust exchange has skyrocketed in price, as well, due to a surge in demand as companies diversify their offerings as a stabilizing or price management strategy. (This Exchange defines the price per kilogram, so divide by 2.2 to get the correlating C-market price per pound).
As the largest coffee consuming country in the world by volume, the US is unable to produce enough coffee domestically for our needs. (The US does grow coffee, yes, in Hawaii and Puerto Rico, but these regions together make up less than 1% of the global output, barely a drop in the bucket). There’s no way for tariffs not to affect US roasters and consumers. The tariffs won’t have an impact immediately, as it will only affect coffee that has yet to be contracted. Containers that have already left their port of origin won’t be tariffed upon entry, so the impact will start to be felt within the next few months as new containers and contracts start coming in after that. The tariff will be passed onto the roaster, as importers have already begun telling their roaster customers that they can’t afford the increase.
The administration has incorrectly noted that the tariffs affect the country of export. In fact, the cost is levied at the ports where the coffee will be unloaded and inspected, and it is paid to the US government as an incentive to keep manufacturing or business within our domestic borders. As the tariffs are a unilateral move, this will likely result in another round of increases by coffee companies before the year is out in order to balance the artificial rise in the cost of goods.
Coffee companies will also face tariffs on many other items we need to run our businesses, from paper cups to the raw packaging materials which are still manufactured at scale in other countries that are also facing high tariffs. There isn’t a clear logic for how much costs will go up because it will be dependent on individual businesses’ purchasing strategies. We can expect a minimum of 10% across the board, though it’s likely to be higher as the tariffs begin to impact the C-market, as it is in a state of high reactivity. We have already seen this begin to play out. Whether or not the US can take over those industries in enough time to benefit the average consumer is yet to be seen. The irony is that the money is not getting back to the producers’ pockets, but adding more constraints to all the businesses in the already unstable supply chains.