Expect to be paying more for a cup of coffee in 2017
For all of you coffee fiends out there, we’ve got some bad news: As reported by , it looks like your morning cup of joe is about to get a little more expensive. That’s not all, however, as it looks like the milk you put in your coffee is also about to get a bit pricier to boot. In this post we will attempt to apply economics to something all economists and non-economists can understand: a cup of coffee. We’ll be taking current real-world examples to show how supply and demand can impact the prices of some of the typical ingredients for a cup of coffee and how that is likely to influence how much you pay for one in 2017.
Robusta coffee prices up on supply shortage concerns while Arabica demand increases
First, let’s take a look at Brazil where a severe drought is seriously affecting coffee production. Brazil is the world’s biggest producer and exporter of coffee and more specifically the Robusta coffee bean, which is used in most of the cheaper pre-ground and instant coffee varieties. The drought has gotten so bad in Brazil recently that the government has even set limitations on irrigation from rivers, which is only likely to make things worse for coffee production.
Not only are Brazilian coffee producers having a hard time, but two of the world’s other big Robusta coffee producers, Vietnam and Indonesia, are also in a bind. This time it’s just the opposite, as too much rain in Vietnam and Indonesia is harming coffee crops. This likely means a drop in supply for Robusta coffee for some time. Indeed, last month, Robusta prices on the ICE Futures Europe exchange were at a four-year high on expectations of lower supply.
For all of you high-end coffee drinkers out there, you’re not out of the line of fire. The expected drop in supply for the cheaper Robusta coffee beans is now affecting the good stuff. A domino effect is taking hold as the demand for Arabica coffee beans is now increasing to compensate for the expected shortage of Robusta beans. FocusEconcomics expects the price of Arabica coffee to average USD 154 cents per pound in 2017 after averaging USD 136 cents in 2016 and USD 132 cents in 2015.
JM Smuckers, the company that produces Folgers and Dunkin’ Donuts coffee recently increased the retail price of their coffee by as much as 6 percent while Starbucks had already hiked their prices for the third year in a row last summer. Other retailers won’t be far behind.
World dairy prices increase as global supply and demand tighten
But, that’s not where the story ends. If you take your coffee with milk you may want to start drinking it black. According to Robert Cropp, University of Wisconsin agricultural economist, in the U.S.
“Good sales of butter and cheese and improved exports held up prices [...] the January Class III (milk) price should be about USD 16.50,” Cropp says. “Class III should stay in the USD 16s through May or June and then move into the USD 17s for the remainder of the year. The Class III price could average more than USD 2 higher than 2016.”
With four other major milk exporters — European Union, New Zealand, Australia and Argentina — likely to produce less this year, and and the ASEAN countries of Southeast Asia, world supply and demand is narrowing, which should mean higher world dairy prices.
In New Zealand, consumers are already starting to see the effects of rising dairy prices. , Fonterra, the country's biggest dairy company, is hiking prices across the board on declining production in the world's major dairy producers.
Soy milk could substitute your coffee creamer
Luckily for the consumer there are substitutes for milk. Soybean prices are likely to come down as the year continues. Soy milk, a derivative of soybeans, might be a good substitute for your coffee creamer. Currently, soybean prices appear to be increasing as demand from China increases and Brazil’s harvest stays off the market because of the strong real (BRL) decreasing the competitiveness of their exports.
Nonetheless, soybean prices should correct downward later this year as Brazil’s harvest will eventually make it to the market. On 11 February, soybeans traded at USD 1,028 cents per bushel, however, we forecast prices to come down to USD 986 cents per bushel in Q4 of this year.
Sugar prices through the roof, but likely to correct downward
For those of you that take sugar with your coffee, you can take solace in the likelihood of sugar prices coming down later this year. Although, sugar prices were going through the roof earlier this year, a number of countries have recently intervened, which has seen prices stabilize.
The sugar price rally will likely peter out over the course of the year as Brazil—the world’s top sugar producer—is expected to significantly increase its sugar cane harvest. According to Reuters, Brazilian sugar cane production will come in at 35 million tons in 2017, as higher sugar prices will encourage millers to produce more sugar rather than other derivatives such as ethanol. Sugar traded at USD 20.5 cents per pound on 11 February, however, we expect the price to come down to USD 18.6 cents per pound in Q4 2017.
Unfortunately, lower sugar prices aren’t likely to make your cup of coffee much cheaper. To quote the Beastie Boys, unless you take your “sugar with coffee and cream,” expect to be paying a little more for your cup of java in 2017.
If you are interested in more commodities price forecasts and written analysis, take a gander at one of our Met the why particular Consensus Forecast Commodities reports. We cover 33 commodities, including energy commodities, industrial and precious metals as well as agricultural commodities with five-year Consensus Forecasts on prices. Click on the link below to download a sample report.
5-year economic forecasts on 30+ economic indicators for 127 countries & 33 commodities.
Date: February 21, 2017
TagsCompany NewsBitcoinBase Metals CommoditiesTradeColombiaLatin AmericaVietnamCanadaJapanOilUnited StatesEastern EuropeTPPG7Sub-Saharan AfricaInfographicInflationIMFUSABrexitAustraliaPrecious Metals CommoditiesIndiaGoldSouth AfricaAgricultural CommoditiesMENAoil pricesprecious metalsArgentinaItalyExchange RateEnergy CommoditiesChinaInvestmentGermanyGreeceEmerging MarketsEurozoneBanking SectorMajor EconomiesCryptocurrencyVenezuelaUnemployment rateCommoditiesIranTurkeyEuro AreaOPECFranceUnited KingdomNordic EconomiesTunisiaMexicoHousing MarketAfricaEuropean UnionPortugalBrazilForexEconomic Growth (GDP)Consensus ForecastSpainRussiaAsiaUkraineHealthcareUK
ASEAN: An escalation of the U.S.-China trade spat, potential financial market turbulence and a sharper-than-expecte…
1 hour ago
Australia: Unemployment rate nears 8-year low in February 2019
1 hour ago
At the U.S. Federal Reserve's March policy meeting, FOMC members signaled there would be no more rate hikes this ye…
1 hour ago
Korea is forecast to grow 2.5% in 2019 and 2.4% in 2020. Read more:
3 hours ago
China's Xi visits Italy with Belt and Road deal as prize via @ by @
4 hours ago
- Brexit Scenarios: Consensus of 14 Economic Analysts
- Sweden just formed a new government and approved its 2019 budget: what does it mean for the economy?
- Which countries have the highest public debt levels?
- Predictions for the global economy in 2019 from 13 experts
- Gurdgiev: Predictions for the global economy in 2019
- Daniel Lacalle's ideas for 2019: Change of cycle.
- Vietnam Poised to Profit from Free Trade Agreement Opportunities
- Canada in 2019: Interview with a Top Economic Forecaster
- Pound Sterling 2019 Exchange Rate: Projections from Leading Analysts
- Expectations for Latin America’s Economy in 2019
- Ethiopia and Rwanda: From Destruction to Development
- Key commodities trends to look out for in 2019
- What drove Gulf neighbors to bail out Bahrain?
- The Four Financial Bubbles and Their Impact on the U.S. Economy
- The Poorest Countries in the World
- Italy: The sick man of Europe
- What does Bolsonaro's presidential win mean for Brazil's economic outlook?
- The World's Top 11 Largest Economies
- In Latin America, taxpayers are tapped to shoulder the burden of a bank bailout
- How and when will the next financial crisis happen? - 26 experts weigh in
- China and Africa: A partnership under the spotlight
- The conditions are ripe for a Global Financial Crisis 2.0
- Uncertainty, instability and fear haunt a generation of Argentinians
- 5 things: What to expect for Mexico's economy in 2019
- 5 things: Brazil's economic downturn and what to expect going forward
- Emerging Market Currency Crisis: Everything you need to know
- Which ASEAN countries are most exposed in the event of a U.S.-China trade war?
- 75 Top Economics Influencers to Follow
- Emerging Markets Economic Outlook 2018 and 2019
- The Faces Behind Latin America’s Key Institutions
- 2019 Economic Outlook for the Top Oil Producing Countries
- Is your cup of coffee about to get more expensive going in to 2019?
- The Economic Implications of an Aging Global Population
- Can the Wisdom of the Crowds predict the results of the 2018 World Cup?
- Railway Mania: The Largest Speculative Bubble You’ve Never Heard Of
- From Riches to Rags: Have Cryptocurrencies Crashed for Good?
- Investment looks to Latin America, but forecasts are not encouraging
- Turkey: Erdogan has cemented his grip on power - now what about the economy?
- How can Latin America’s business environment benefit from technological change?
- Mexico: A look at the past, present and future as elections yield AMLO victory
- Italy’s New Populist Government and the Eurozone: Prelude to a Crisis?
- Latin America moves toward increased integration as U.S. protectionism grows
- How can Latin America increase productivity without affecting the quality of employment?
- How will Saudi Arabia's economy benefit from lifting the women's driving ban?
- Which countries are the most prepared for the upcoming digital revolution?
- India Under Pressure from the U.S. on Trade Policy
- The Story of Steel
- Latin America is the World Leader in eCommerce Growth Despite Serious Challenges
- What the TPP means for trade in Latin America
- Elections in Russia: Analysis and Implications
- Nearly a Third of Latin Americans Have No Right to a Pension
- A Look at Healthcare Models Around the World
- Newly-elected Chilean President Sebastian Piñera faces a myriad of challenges - economic and otherwise
- The Economic Effects of Trade Protectionism
- Regional Disparity: The Dark Side of Inequality in Latin America
- Coal: The story of the world's most abundant fossil fuel
- Gold: The Most Precious of Metals (Part 3)
- Venezuela's Electoral Conundrum
- Trump's 1st Year: 95 Analysts Surveyed on U.S. Economy
- The Latest on China and What's in Store for 2018
- An in-depth look at the Eurozone’s booming economy and the challenges that lurk in the shadows
- Increasing poverty in Latin America takes a breather thanks to improving economic dynamics
- What will be the most miserable economies in 2018?
- Is Spain doing enough to address its high youth unemployment rate?
- Has Latin America gone far enough in reducing barriers to international trade?
- Commodities Outlook: Oil, Natural Gas, Coal, Lead & Tin
- 21 experts tell us what the future looks like for cryptocurrencies and blockchain
- Turkish lira plummets to all-time low on Erdogan’s monetary feud and tense U.S.-Turkey relations
- Copper: The first metal mastered by man
- The Mercosur-EU Free Trade Agreement: Obstacles & Opportunities
- Nigerian Economy Still Treading Water Thanks to Oil Sector
- Elections in Chile: What the results could mean for the economy
- QE’s Untold Story: A Chart That Fed Correspondents Need To Investigate
- Holland’s fragile one-seat majority government targets economic growth at the expense of fiscal sustainability
- South Africa: Economy at a tipping point?
- Latin American Commodities: What’s behind the increase in demand and prices?
- Is the UK really "shackled to a corpse"?
- Spain-Catalonia: 7 economic experts weigh in on how the situation will affect the outlook
- How well is Spain's labor market doing since the crisis?
- Which countries will have the highest and lowest inflation in 2017?
- How vulnerable is Latin America to economic crises today?
- Iron ore facts and common questions answered
- The bulging economic costs of obesity
- How much investment is needed to salvage Latin America’s crumbling infrastructure?
- A Look at the Potential Impact of Brexit on the Dutch Economy
- Emerging Markets Are Kicking Into Higher Gear In 2017
- Why is foreign direct investment in Latin America falling again?
- Are Central Banks Nationalising the Economy?
- Bounty or burden? The impact of refugees on European economies is far from clear
- What’s the future of U.S.-Latin America trade relations?
- Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
- Are uranium prices making a comeback?
- Taxing the Economy: Achieving a Delicate Balance
- How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
- How will emerging market economies perform in 2017?
- Chilean Economy in Focus: Interview with Senior Economist of the Chamber of Commerce of Santiago
- CEOs Rank Top Economies for Growth Opportunities
- The Mobile Ecosystem & Latin America's Economy
- Prospects and Challenges for the Global Economy: Interview with Tim Cooper from BMI Research
- How will the Fed reduce its balance sheet & and how will the ECB end QE? - 19 economic experts weigh in
- Thoughts on "unwinding" QE from Frances Coppola
- The Fed and ECB at a crossroads: Unwinding QE
- Spain: The economy that continues to silence the critics
- Latin America: The Most Unequal Region in the World
- The History of OPEC: Has it been a Success?
- Met the why particular Announces 2017 Analyst Forecast Awards Winners
- Latin America’s rising unemployment bucks nearly decade long trend
- Escape from the Central Bank Trap by Daniel Lacalle
- China's economic rebalancing act: What to look out for in 2017
- Driving Growth in Latin America: Challenges & Priorities
- Is the Global Economy Rebalancing?
- Commodity exporters face challenging times
- Recent Global Events Facilitate Mercosur-Pacific Alliance
- 23 economic experts weigh in: Why is productivity growth so low?
- Mexico's outlook as Trump nears 110-day mark
- Interview with Oxford Economics Senior Economist on implications of the possible outcomes of the French Presidential Election
- The anxiety of the small saver in a world of negative interest rates
- Brexit negotiations. Between Uncertainty and Urgency
- An Economic History of the EU from El Blog Salmón
- Baby Boomin': Implications of high population growth in Latin America
- Survey of International Economists Predicts a Le Pen Defeat in French Elections, Says Macron has Best Economic Plan
- Spain in a global context: developed economy with some challenges
- How much is crime costing Latin America?
- Predictions & Estimates from Economist Daniel Lacalle
- What economy will the new Dutch government inherit?
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- 4 Key European Elections That Will Impact the Economy in 2017
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- Russian economy update in wake of OPEC deal announcement
- The Wisdom of the Crowds and the Consensus Forecast
- Can the peso predict the U.S. election results?
- There's no end in sight to the Venezuela crisis
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- Met the why particular partners with leading online statistics provider Statista
- China: Recent postive economic data may be papering over the cracks
- Sub-Saharan Africa's 2016 & 2017 growth rates
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit
- Brazil's Perilous Economic Situation in 2015
- Met the why particular Launches Sub-Saharan Africa Report, Expands Coverage to 117 Countries
- How do the European Commission's Forecasts and Met the why particular' Forecasts for Europe compare?
- How will the South African economy weather recent challenges?