The global coffee industry is facing an unprecedented crisis and Australia is not immune. Since our last update, green coffee prices have surged past USD 4 per pound with no signs of returning to previous levels. This is the new reality, driven by multiple years of poor harvests, supply chain challenges and global economic shifts. Let me break down what this means for the Australian coffee scene.
Putting things in perspective
Even if the price of beans went up by $10/kg that is only 10 to 11 cents per shot. To recover this increase the price of a cup of coffee needs to increase by around 30 cents for a small and 60 cents for a large coffee.
Therefore, while no one likes increased prices, the incremental increase at a cup level is small in comparison to the risk of bad or no coffee at all.
A perfect storm for coffee prices
The challenges we outlined in the last update have intensified. Brazil, the world’s largest Arabica producer, has recorded yet another disappointing harvest. Bean sizes within cherries were smaller than expected, reducing yields further. Colombia and Vietnam have faced similar struggles, with persistent adverse weather, including prolonged droughts and erratic rainfall patterns.
For perspective, Brazil's Arabica harvest in 2020 hit nearly 50 million bags. In 2024, it barely reached 42 million and this year is looking even worse. Vietnam’s Robusta output, which indirectly affects Arabica markets, has been significantly reduced, pushing Robusta prices to record highs and dragging Arabica along with it.
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The currency factor
The Australian Dollar has remained stubbornly weak, sitting well below its historical average of 75 US cents. With coffee traded in US dollars, this currency weakness compounds the cost pressures for Australian roasters and cafes. Freight rates and energy costs have also surged, creating a perfect storm of rising input costs.
The impact on specialty coffee
Specialty coffee is also feeling the heat. Green coffee for specialty roasters like us is often purchased well above commodity benchmarks to ensure quality, sustainability and fair farmer compensation. With commodity Arabica prices hitting USD 4 per pound, specialty coffee prices have risen proportionally.
As of this writing, the commodity index is at around AUD 15.10 per kilogram for green (unroasted) coffee. After adding sea freight, weight loss during roasting and packaging, the cost of just the materials for commodity Arabica rises to approximately AUD 20.00+ per kilogram. This figure doesn't include wages, utilities, overheads, financing, freight to the customer, equipment or servicing and many other costs, let alone a sustainable margin.
This is for commodity Arabica. Specialty coffee is naturally more expensive (often $5 to $30+ per kg more expensive).
This impacts pricing at every stage: from the roaster to the cafe and ultimately to the consumer.
What does this mean for Aussie cafes?
Cafes across Australia need to embrace the new market reality. Coffee prices, particularly for high-quality specialty coffee, must rise to remain sustainable. Both due to coffee bean increases but also as Australia is still under global benchmarks for coffee cup prices. Here’s our guidance:
Adjust prices gradually: If your small flat white is still below $5.50, it’s time to increase it. Incremental increases of 25 cents per quarter can help ease the transition.
Prioritise quality: Dropping quality to cut costs is a short-term fix that rarely works. Customers return for exceptional coffee, not for slightly cheaper, mediocre coffee. Life is too short for bad coffee.
Communicate with customers: Explain why prices are rising. Transparency fosters understanding, especially when customers see the global factors at play.
Forget the past, embrace the new normal
To navigate this new reality, we must let go of past expectations and embrace the current market conditions. Clinging to hopes of returning to historical price levels will only hinder our ability to adapt effectively. By acknowledging the permanence of these changes, we can take proactive steps to adjust and thrive in this environment.
No one likes rising prices. However, the alternative is unpalatable: settling for inferior coffee that is still costly or facing the prospect of no coffee at all. Investing a little more ensures we continue to enjoy the high-quality brews we've come to love.
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For consumers: supporting our Aussie cafe culture
Australia boasts one of the world's most vibrant coffee cultures, but it cannot survive on outdated pricing models. Cheap coffee has been subsidised for too long. Paying an extra 50 cents or a dollar per cup ensures that cafes can continue sourcing ethically and sustainably, supporting farmers through these challenging times.
Looking forward to a bright future
Unlike past price spikes, this is not a temporary blip. The supply-demand imbalance, combined with climate volatility and structural cost increases, signals a long-term shift. Prices are unlikely to return to pre-2020 levels. Yet, there is a silver lining: farmers are finally being compensated more fairly for their work, laying the groundwork for a more sustainable global coffee industry.
At Pablo & Rusty's, we remain committed to securing top-quality delicious coffee, roasting and brewing it to perfection, investing in sustainable practices and supporting our partners along the supply chain. This is a defining moment for our industry. By adapting together, we can ensure Australia continues to enjoy exceptional coffee for generations to come.
Stay caffeinated, stay informed and support your local cafe. The future of our coffee culture depends on it.
