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Climate Change Pushes up Coffee Prices

by Jessica

The price of coffee is on the rise, reaching its highest levels in 18 months, driven by challenges in global harvests exacerbated by climate change. According to Bloomberg, Arabica futures, a key benchmark for coffee bean prices, have surged significantly.

On Tuesday, the price of a standard contract, equivalent to a 100-piece lot of 60-kilogram bags, surpassed $300 before slightly retreating. This represents a nearly 28% increase compared to the beginning of the year and a substantial 56% rise from a year ago.

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Climate change is playing a pivotal role in shrinking coffee harvests, mirroring the challenges faced by cocoa producers. The Wall Street Journal highlighted that rising global temperatures and unpredictable rainfall patterns are straining traditional coffee-exporting nations like Vietnam, Indonesia, and Brazil, making it increasingly difficult to sustain previous harvest levels.

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Moreover, the global appetite for coffee continues to grow, extending even into regions traditionally associated with tea consumption. German broadcaster DW notes a cultural shift towards coffee consumption, particularly among latte enthusiasts in tea-drinking strongholds worldwide.

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Adding to these dynamics, a recent working paper from the National Bureau of Economic Research suggests that the presence of Starbucks in previously coffee-deprived neighborhoods has spurred local entrepreneurship by up to 12% annually. However, as climate conditions worsen, sustaining these consumption patterns may become increasingly challenging.

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The convergence of rising coffee prices and environmental pressures underscores the complex interplay between consumer habits, economic dynamics, and climate change, posing significant challenges for the global coffee industry in the years ahead.

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