From the newsrooms of the Sydney Morning Herald and The Age. This is the morning edition. I'm Samantha Salinger Morris. It's Tuesday, January 7th. If you're anything like me, you've been reading recent headlines about coffee prices and thinking, what fresh hell is this? One of the most aggressive suggestions my kids ever make is that I might like to cut down on my coffee consumption. I mean, can you even imagine that from someone you've given birth to? But now we're being told that by year's end, a cup of coffee could cost as much as. Wait for it. $12. Today, business reporter Jessica Young on why the beverage that so many of us rely on to cope with each day could soon become a luxury item. So, Jess, we were speaking just now before we started recording, and you said that whenever you write about coffee, the stories are so well read because people have a lot of feelings about coffee. So let's start with your feelings. First of all, when you go overseas, do you miss Australian coffee?

From the newsrooms of the Sydney Morning Herald and The Age. This is the morning edition. I'm Samantha Salinger Morris. It's Tuesday, January 7th. If you're anything like me, you've been reading recent headlines about coffee prices and thinking, what fresh hell is this? One of the most aggressive suggestions my kids ever make is that I might like to cut down on my coffee consumption. I mean, can you even imagine that from someone you've given birth to? But now we're being told that by year's end, a cup of coffee could cost as much as. Wait for it. $12. Today, business reporter Jessica Young on why the beverage that so many of us rely on to cope with each day could soon become a luxury item. So, Jess, we were speaking just now before we started recording, and you said that whenever you write about coffee, the stories are so well read because people have a lot of feelings about coffee. So let's start with your feelings. First of all, when you go overseas, do you miss Australian coffee?

Oh, it's just dire. You know, it's one of those things where, like, if I were ever to go to another country for for work or something, it would be one of the biggest things I would have to struggle with is how crap the coffee is probably going to be compared to what we're so used to here in Australia where you can get like go to any random cafe in any suburb in Australia, and you know you're going to get a decent cup of coffee wherever you are in Australia. But like, you can go to somewhere really nice in London or really nice in New York or something like that, and it might still just not be as good as a random suburban cafe in, you know, in Australia. It's just it's just not the same. I would I would struggle so much.

Oh, it's just dire. You know, it's one of those things where, like, if I were ever to go to another country for for work or something, it would be one of the biggest things I would have to struggle with is how crap the coffee is probably going to be compared to what we're so used to here in Australia where you can get like go to any random cafe in any suburb in Australia, and you know you're going to get a decent cup of coffee wherever you are in Australia. But like, you can go to somewhere really nice in London or really nice in New York or something like that, and it might still just not be as good as a random suburban cafe in, you know, in Australia. It's just it's just not the same. I would I would struggle so much.

I think let's get down to it. Tell me about the headlines that we are reading about the price of coffee. What is happening?

I think let's get down to it. Tell me about the headlines that we are reading about the price of coffee. What is happening?

Yes. So look, I mean, we've been seeing a lot being thrown around like $12 a cup.

Yes. So look, I mean, we've been seeing a lot being thrown around like $12 a cup.

Now, the saying goes, there's never a wrong time to have coffee. But that could soon change.

Now, the saying goes, there's never a wrong time to have coffee. But that could soon change.

Prices predicted to hit between 8 and $12 later this year.

Prices predicted to hit between 8 and $12 later this year.

I don't think we need to worry about that just yet unless you're getting like a triple shot, you know, iced coffee with like, all of the trimmings and stuff like that. But I think generally the sentiment is that, you know, coffee prices are increasing. And that's because basically the amount of coffee that we have globally is shrinking.

I don't think we need to worry about that just yet unless you're getting like a triple shot, you know, iced coffee with like, all of the trimmings and stuff like that. But I think generally the sentiment is that, you know, coffee prices are increasing. And that's because basically the amount of coffee that we have globally is shrinking.

And so tell us about this, because I've been reading this as unprecedented, that it looks like this is going to be the fifth year in a row that coffee consumption will likely actually outstrip coffee production. So why is this happening?

And so tell us about this, because I've been reading this as unprecedented, that it looks like this is going to be the fifth year in a row that coffee consumption will likely actually outstrip coffee production. So why is this happening?

So the short answer to this is basically climate change. So a lot of the focus has been around Brazil and Vietnam. And that's because Brazil produces about half of the world's arabica beans, and Vietnam is the world's biggest exporter of robusta coffee. Brazil has been going through one of the worst droughts. This is in 2020 for basically ever on record. So that's well over 70 years is what we've been seeing and hearing about. Now, some of those growers have had to deal with wildfires and that's burnt down thousands and thousands of trees. And obviously that's where a lot of that shortfall in production is, you know, coming from. So that's the fifth year in a row that production has lagged demand. Now to talk about Vietnam, we're kind of seeing the opposite story there. Right. Vietnam lately has been seeing very heavy rainfall. And what that's done has been to delay the harvest of robusta coffee. So again, that means production there is down. And before all of this rain that Vietnam has seen, they also saw drought as well. And so for the 20 2324 crop year, production was down 20%. And that was the smallest crop in four years. So essentially we're in a backlog like we've been in this global coffee production shortfall for the last few years now.

So the short answer to this is basically climate change. So a lot of the focus has been around Brazil and Vietnam. And that's because Brazil produces about half of the world's arabica beans, and Vietnam is the world's biggest exporter of robusta coffee. Brazil has been going through one of the worst droughts. This is in 2020 for basically ever on record. So that's well over 70 years is what we've been seeing and hearing about. Now, some of those growers have had to deal with wildfires and that's burnt down thousands and thousands of trees. And obviously that's where a lot of that shortfall in production is, you know, coming from. So that's the fifth year in a row that production has lagged demand. Now to talk about Vietnam, we're kind of seeing the opposite story there. Right. Vietnam lately has been seeing very heavy rainfall. And what that's done has been to delay the harvest of robusta coffee. So again, that means production there is down. And before all of this rain that Vietnam has seen, they also saw drought as well. And so for the 20 2324 crop year, production was down 20%. And that was the smallest crop in four years. So essentially we're in a backlog like we've been in this global coffee production shortfall for the last few years now.

Tell us, like, how bad are the prices in terms of what cafe owners are now having to pay per pound for for coffee beans, because I know they have absolutely skyrocketed.

Tell us, like, how bad are the prices in terms of what cafe owners are now having to pay per pound for for coffee beans, because I know they have absolutely skyrocketed.

What we saw was in mid-December, quite a sharp spike in the commodity price for coffee. And so that hit around 350 US cents a pound. And that was its highest level since 1972. That's something like record highs in about 50 years. And I think the prices have since come down from those peaks, but are pretty much hovering around those record levels. Right. So we're also seeing some predictions that if Brazil's harvest doesn't recover, prices could potentially go even further to 400 or 500 US cents per pound. Um, and it just basically means that, you know, it's a trickle down effect, right? Like, our cafes are paying more for a bag of coffee. And that's got to come back to the consumer somehow, because the cafes can't carry all of that.

What we saw was in mid-December, quite a sharp spike in the commodity price for coffee. And so that hit around 350 US cents a pound. And that was its highest level since 1972. That's something like record highs in about 50 years. And I think the prices have since come down from those peaks, but are pretty much hovering around those record levels. Right. So we're also seeing some predictions that if Brazil's harvest doesn't recover, prices could potentially go even further to 400 or 500 US cents per pound. Um, and it just basically means that, you know, it's a trickle down effect, right? Like, our cafes are paying more for a bag of coffee. And that's got to come back to the consumer somehow, because the cafes can't carry all of that.

Yeah. And my understanding is experts have said that they're actually not expecting Brazil's harvest to to bounce back sort of right away or in any time in the near future. Are they because of because of these, these horrible droughts and wildfires?

Yeah. And my understanding is experts have said that they're actually not expecting Brazil's harvest to to bounce back sort of right away or in any time in the near future. Are they because of because of these, these horrible droughts and wildfires?

Yeah, that's exactly right. I mean, I think either way, like even let's say if we saw a really, really good crop this year, we're still globally in a shortfall. Like, um, the other thing that I haven't mentioned yet is that in the backdrop of all of this, in the backdrop of, you know, production falling, falling behind where it should be, the global demand and consumption of coffee is increasing. So we're seeing consumers in Asia, consumers in the Middle East, you know, all around the world, we're seeing that the younger generation of drinkers, it's really interesting, the trend of iced coffee and cold drinks like you think your typical. Yeah, Starbucks. You got the whipped cream and the and the. You know what I mean? All the frat beers and all that going on. I think among younger consumers, Gen Z are really, um, preferencing those drinks. And basically we're sort of seeing demand really spike in a time where production is falling behind. And, and so that's really what's causing this crunch and this bottleneck.

Yeah, that's exactly right. I mean, I think either way, like even let's say if we saw a really, really good crop this year, we're still globally in a shortfall. Like, um, the other thing that I haven't mentioned yet is that in the backdrop of all of this, in the backdrop of, you know, production falling, falling behind where it should be, the global demand and consumption of coffee is increasing. So we're seeing consumers in Asia, consumers in the Middle East, you know, all around the world, we're seeing that the younger generation of drinkers, it's really interesting, the trend of iced coffee and cold drinks like you think your typical. Yeah, Starbucks. You got the whipped cream and the and the. You know what I mean? All the frat beers and all that going on. I think among younger consumers, Gen Z are really, um, preferencing those drinks. And basically we're sort of seeing demand really spike in a time where production is falling behind. And, and so that's really what's causing this crunch and this bottleneck.

And so when do we think these, you know, really high prices are actually going to start hitting our hip pocket because, you know, like you said we started seeing these headlines mid-December. They're predicting, you know, horrible prices coming up this year. When is this likely to hit us. When we sort of, you know, rock up at our cafe. When is it going to sort of when is it going to give us that shock?

And so when do we think these, you know, really high prices are actually going to start hitting our hip pocket because, you know, like you said we started seeing these headlines mid-December. They're predicting, you know, horrible prices coming up this year. When is this likely to hit us. When we sort of, you know, rock up at our cafe. When is it going to sort of when is it going to give us that shock?

So the thing is it's it's already happened like these, these prices have already increased. We have all already noticed. Oh, you know, my cappuccino used to be $4. It's 450 now. Yeah. The CEO of Pablo and Rusty's a coffee roaster. They're based in Sydney. Abdullah told me that. Yeah, he thinks, you know a price of a regular cappuccino should be about $7. Australians pretty much pay the lowest price for a cup of coffee, compared to some of our counterparts in the US. In the UK, in Canada, I was in Hong Kong a couple of months ago and I just went to Starbucks and it was, yeah, the equivalent of like 7 or $8 or something. Just just for a typical, you know, like a tall cappuccino or something. And this is one of the points here that that was being made by Abdullah, I think, is that we are already paying lower prices than the rest of the world. And that's because coffee is so ubiquitous as a beverage, you know, here in Australia that I think competition is so high, right? It's such an essential that for many, many years, cafes have not increased the price for us. You know, they have not increased the price because you can get a cup of coffee literally anywhere, anywhere. So like when competition is so high, the impetus to increase those prices, it's not there, right? So we've actually had had it really good for many, many years. And maybe it's just that things are getting so unsustainable for cafes that we are actually playing a little bit of a game of catch up, where we're sort of lagging behind when it comes to, you know, maybe some of that natural inflation that should have been coming through. Um, it's just that we're probably seeing it all come through at once.

So the thing is it's it's already happened like these, these prices have already increased. We have all already noticed. Oh, you know, my cappuccino used to be $4. It's 450 now. Yeah. The CEO of Pablo and Rusty's a coffee roaster. They're based in Sydney. Abdullah told me that. Yeah, he thinks, you know a price of a regular cappuccino should be about $7. Australians pretty much pay the lowest price for a cup of coffee, compared to some of our counterparts in the US. In the UK, in Canada, I was in Hong Kong a couple of months ago and I just went to Starbucks and it was, yeah, the equivalent of like 7 or $8 or something. Just just for a typical, you know, like a tall cappuccino or something. And this is one of the points here that that was being made by Abdullah, I think, is that we are already paying lower prices than the rest of the world. And that's because coffee is so ubiquitous as a beverage, you know, here in Australia that I think competition is so high, right? It's such an essential that for many, many years, cafes have not increased the price for us. You know, they have not increased the price because you can get a cup of coffee literally anywhere, anywhere. So like when competition is so high, the impetus to increase those prices, it's not there, right? So we've actually had had it really good for many, many years. And maybe it's just that things are getting so unsustainable for cafes that we are actually playing a little bit of a game of catch up, where we're sort of lagging behind when it comes to, you know, maybe some of that natural inflation that should have been coming through. Um, it's just that we're probably seeing it all come through at once.

We'll be right back. And so I believe some experts are actually predicting that more cafes are going to close as a result of these prices skyrocketing.

We'll be right back. And so I believe some experts are actually predicting that more cafes are going to close as a result of these prices skyrocketing.

Yeah, that's absolutely right. So, you know, I spoke to the CEO of Creditorwatch and he was saying that through his contacts, you know, he's seeing across the industry that cafes that are doing okay. Right. Cafes that are not sort of in the red, they're not going insolvent. They're going all right. But even they're closing their doors because it's just too tough and too difficult and too much work, especially with all of the costs that they have to deal with as a small business. And so I think a lot of those predictions is that more cafes, you know, as the commodity price of coffee continues to increase, it's only going to be more pressure for for these cafe operators. So we're already seeing I think we saw some of the highest rates of business failure on record. We already saw that towards the tail end of last year. I think a lot of that is going to continue into the first half of 2025.

Yeah, that's absolutely right. So, you know, I spoke to the CEO of Creditorwatch and he was saying that through his contacts, you know, he's seeing across the industry that cafes that are doing okay. Right. Cafes that are not sort of in the red, they're not going insolvent. They're going all right. But even they're closing their doors because it's just too tough and too difficult and too much work, especially with all of the costs that they have to deal with as a small business. And so I think a lot of those predictions is that more cafes, you know, as the commodity price of coffee continues to increase, it's only going to be more pressure for for these cafe operators. So we're already seeing I think we saw some of the highest rates of business failure on record. We already saw that towards the tail end of last year. I think a lot of that is going to continue into the first half of 2025.

Obviously that's really sad because we are talking about people's livelihoods here, but it's also an erosion too, isn't it, of our really unique coffee culture? It is a cut above. I mean, we're known overseas for it, aren't we just top notch baristas?

Obviously that's really sad because we are talking about people's livelihoods here, but it's also an erosion too, isn't it, of our really unique coffee culture? It is a cut above. I mean, we're known overseas for it, aren't we just top notch baristas?

Oh, absolutely. Believe that. And like, this is the thing you've just reminded me. Marks and Spencer. Right? Marks and Spencer, they're over in the in the UK. They. Because they've got like a little cafe component to their shops. They've got like a.

Oh, absolutely. Believe that. And like, this is the thing you've just reminded me. Marks and Spencer. Right? Marks and Spencer, they're over in the in the UK. They. Because they've got like a little cafe component to their shops. They've got like a.

Famous food hall I think. Yeah. So.

Famous food hall I think. Yeah. So.

So what they did a couple of years ago is that they had like heaps of their baristas specifically trained by Melbourne baristas to make, um, I think not just to make coffee, but like specifically to make a magic, which is a very Melbourne thing. Right? Yes. So they I guess in order to maybe inject a little bit of a little bit of like coffee culture and a bit of life to their food halls or something, received Australian barista training, but we'll put it like that. That's incredible. To raise their standards. So like we it's one of those really interesting things where like we really, as a country are punch above our weight when it comes to all sorts of stuff, but especially coffee, you know, we're so like renowned around the world.

So what they did a couple of years ago is that they had like heaps of their baristas specifically trained by Melbourne baristas to make, um, I think not just to make coffee, but like specifically to make a magic, which is a very Melbourne thing. Right? Yes. So they I guess in order to maybe inject a little bit of a little bit of like coffee culture and a bit of life to their food halls or something, received Australian barista training, but we'll put it like that. That's incredible. To raise their standards. So like we it's one of those really interesting things where like we really, as a country are punch above our weight when it comes to all sorts of stuff, but especially coffee, you know, we're so like renowned around the world.

So, Jess, I would love to wrap up just by asking you about what sort of cultural shift this maybe will spur, because I wonder, you know, are we going to maybe see a slowing down of this, like super luxe espresso culture that we love? You know, we go to these cafes that have these beautiful, you know, Scandinavian looking outfits. Like, do you think we might become less judgy about what coffee we consume, what coffee other people consume? Like, are we going to be happier to go to our servo and get coffee and not and not sort of rely on that, like really sort of, you know, judgy ritual.

So, Jess, I would love to wrap up just by asking you about what sort of cultural shift this maybe will spur, because I wonder, you know, are we going to maybe see a slowing down of this, like super luxe espresso culture that we love? You know, we go to these cafes that have these beautiful, you know, Scandinavian looking outfits. Like, do you think we might become less judgy about what coffee we consume, what coffee other people consume? Like, are we going to be happier to go to our servo and get coffee and not and not sort of rely on that, like really sort of, you know, judgy ritual.

That's really, really interesting. And I think why we are so like as a country. Right. Why we as Australians are so attached to the price of coffee is because coffee is so ubiquitously consumed by Australians. It's one of those things where, you know, you might be doing it really tough or you might be a high flying, you know, multi-million dollar CEO or whatever. We are so used to in this society, being able to just be able to access, you know, a cup of coffee, no matter how much money you make, how much money you've got in the bank. Right. So this idea that coffee, you know, should be sort of very easily accessible, very easily affordable. Just one of those little, small, little daily luxuries that we should be able to afford. What's happened now is that that is kind of coming under threat with the increase in coffee prices. Right? I think what we're going to see now is that people are going to have to make a choice, essentially. Right. And we're already seeing that. We're already seeing a lot of those responses coming through where you get your coffee. Is that going to become some sort of class signifier, you know, have you got the money to spend $7 or whatever, you know, on a really good cup of like of specialty coffee or, you know, are you going to have to go to Maccas to get your coffee or are you going to have to go to like, 7-Eleven to get your coffee? So it is going to be really interesting to sort of see if eventually, you know, this, this becomes something that, you know, divides people from a, from a like, I don't know, income point of view.

That's really, really interesting. And I think why we are so like as a country. Right. Why we as Australians are so attached to the price of coffee is because coffee is so ubiquitously consumed by Australians. It's one of those things where, you know, you might be doing it really tough or you might be a high flying, you know, multi-million dollar CEO or whatever. We are so used to in this society, being able to just be able to access, you know, a cup of coffee, no matter how much money you make, how much money you've got in the bank. Right. So this idea that coffee, you know, should be sort of very easily accessible, very easily affordable. Just one of those little, small, little daily luxuries that we should be able to afford. What's happened now is that that is kind of coming under threat with the increase in coffee prices. Right? I think what we're going to see now is that people are going to have to make a choice, essentially. Right. And we're already seeing that. We're already seeing a lot of those responses coming through where you get your coffee. Is that going to become some sort of class signifier, you know, have you got the money to spend $7 or whatever, you know, on a really good cup of like of specialty coffee or, you know, are you going to have to go to Maccas to get your coffee or are you going to have to go to like, 7-Eleven to get your coffee? So it is going to be really interesting to sort of see if eventually, you know, this, this becomes something that, you know, divides people from a, from a like, I don't know, income point of view.

Well, like you said, this is a.

Well, like you said, this is a.

Topic that's certainly going to provoke a lot of feelings. Coffee. It gets us. So thank you so much, Jess, for your time.

Topic that's certainly going to provoke a lot of feelings. Coffee. It gets us. So thank you so much, Jess, for your time.

Thank you so much for having me.

Thank you so much for having me.

Today's episode of The Morning Edition was produced by Kai Wong. Our executive producer is Tammy Mills. Our head of audio is Tom McKendrick. The Morning Edition is a production of The Age and The Sydney Morning Herald. If you enjoy the show and want more of our journalism, subscribe to our newspapers today. It's the best way to support what we do. Search the age or Smh.com.au forward slash. Subscribe and sign up for our Morning Edition newsletter to receive a comprehensive summary of the day's most important news, analysis and insights in your inbox every day. Links are in the show. Notes. I'm Samantha Salinger Morris. This is the morning edition. Thanks for listening.

Today's episode of The Morning Edition was produced by Kai Wong. Our executive producer is Tammy Mills. Our head of audio is Tom McKendrick. The Morning Edition is a production of The Age and The Sydney Morning Herald. If you enjoy the show and want more of our journalism, subscribe to our newspapers today. It's the best way to support what we do. Search the age or Smh.com.au forward slash. Subscribe and sign up for our Morning Edition newsletter to receive a comprehensive summary of the day's most important news, analysis and insights in your inbox every day. Links are in the show. Notes. I'm Samantha Salinger Morris. This is the morning edition. Thanks for listening.