- Coffee prices are soaring and will likely remain on the high end for some time
- US coffee import prices jumped 65% from 2021 to 2023
- To maintain quality, the industry must step up incentives for farmers
QUALITY is increasingly under pressure as farmers weigh short-term gains against long-term standards.
The inflation-adjusted average price of the C market from 1990 to 2019 held steady around $1.70 per pound, but by September, prices surged to $2.74 – a spike reflecting over 40% price volatility.
For coffee producers, who routinely contend with tight margins and cyclical price instability, these peaks offer a chance for immediate profit. However, the economic pressures that come with price surges can lead producers to prioritise immediate cash over quality, a trend that challenges the core principles of the specialty coffee sector.
Coffee prices have been experiencing a significant surge, and will likely remain on the high end for the foreseeable future. According to Cobank, “prices of U.S. imported coffee shot up 65% between 2021-23 and have remained volatile well into 2024.”
This period of sustained high prices has implications both for coffee quality and availability. For coffee producers and buyers alike, the incentive landscape is shifting as both parties evaluate trade-offs between quality and cost.
“When the price of regular-quality coffee is relatively high, and the price of high-quality coffee – which is far more costly, difficult, and risky to produce – is only slightly higher or even the same, all the extra ‘investment’ for little to no return doesn’t make sense,” says Karl Wienhold, Researcher at the University of Lisbon and author of “Cheap Coffee: Behind the Curtain of the Global Coffee Trade.”
Since the collapse of the International Coffee Agreement (ICA) of 1989, prices for coffee have followed a pattern of low valleys and short price spikes.
In the past few decades, coffee producers have had to navigate a series of market disruptions – from Brazil’s 1994 frost-driven price hikes to the devastating Roya outbreak in 2014, and more recent climatic and supply-chain pressures.
During these peaks, producers are often forced to consider short-term financial stability over the longer-term investments required to produce high-quality coffees.
High prices offer immediate profits for coffee producers who consistently face challenges of low liquidity, and with pressure mounting to stabilise cash flow, may respond by focusing on delivering quantity over quality, knowing high prices will not last for long.
For green coffee buyers, meanwhile, price sensitivity kicks in, and shifts to lower-quality options due to budget constraints – a trend that only accelerates the pivot toward cheaper production standards.
While a high price might typically signal a premium product, for many coffee producers it can drive the opposite response: A reduction in quality offerings.
Green coffee buyers are left with fewer options for specialty coffee that will meet their budgets as producers increasingly adopt practices like less selective picking or delivering cherry instead of parchment. These approaches prioritise immediate returns but make it more challenging to produce high-quality coffee.
For the specialty coffee sector, which relies on meticulous quality standards, this supply-side shift introduces a complicated dynamic that challenges the very foundation of specialty coffee’s mission.
Specialty coffee’s core stance on quality
The specialty coffee movement, which gained momentum after the 1989 end of the ICA, was founded on the belief that quality drives positive outcomes across the entire value chain. However, as demand surged, specialty coffee companies faced increasing concerns over their ability to consistently secure the high-quality beans they rely on.
Nonprofits like the Alliance for Coffee Excellence and Cup of Excellence set out to incentivise coffee producers by offering significantly higher returns for their dedication to quality.
The goal was for higher-quality coffees to not only fetch premium prices but also foster greater economic stability for farmers, improved labour conditions, and a richer array of choices for consumers.
The dissolution of the ICA led to the “C price” – the market rate for coffee – to plummet by 50%, causing Colombia to lose 400 million USD in revenue and creating economic hardships for producing countries. Low prices made room for the procurement of specialty coffees to become more accessible to small and medium sizes specialty roasters.
Simultaneously, demand for specialty coffee was being actively encouraged. The International Coffee Organization (ICO) awarded a $1.6 million grant to the Specialty Coffee Association of America (SCAA) to establish specialty cafes on university campuses, aiming to revive coffee consumption amid a decline in American coffee drinking.
This initiative helped spark a new coffee culture that celebrated distinctive, region-specific flavours. Consumers, motivated by a growing appreciation for quality and a cultural shift toward individual expression, showed a willingness to pay a premium for coffee that embodied both values.
However, periods of high market prices pose a distinct challenge for the specialty coffee sector.
“In most of the world, for actual smallholders who do not deal directly with roasters or specialty importers, farm gate prices are tightly tied to the international market price,” says Karl.
“Even when roasters pay 2-3 times more for quality, farmers may only receive 10-20% over the base price. So when the commodity market rises by 30%, yes, it “values” their coffee more than a specialty-focused supply chain does.”
When coffee prices exceed production costs, producers are less incentivised to prioritise quality. In these times, some may shift away from selective picking, delivering parchment, or investing in unique cultivars, recognising they can still turn a profit without the intensive, quality-driven practices that distinguish specialty coffee.
The result is a paradox: the very foundation of specialty coffee’s mission – offering a better product with greater value to all stakeholders – is compromised when prices spike, and producers no longer need premium quality to remain profitable.
Reevaluating and ensuring quality incentives
As coffee prices remain high, the specialty coffee industry must reevaluate its approach to incentivizing quality. This is not merely a question of meeting consumer expectations, but also one of ensuring fair and sustained rewards for producers who invest in producing high-quality coffees.
The question becomes one of balance: Are high prices encouraging producers to abandon quality, or can they be structured in a way that reinforces the specialty coffee sector’s commitment to excellence?
“It’s perfectly rational, and perhaps necessary for farmers, to weigh the cost-benefit of market spikes and uncertain quality premiums as long as they get no assurances from buyers and have to sell based on market price,” says Karl.
“If they have guaranteed sales at guaranteed prices that correspond to what consumers are willing to pay for their coffee – and those are high enough – then C market spikes would pose no threat to their investment in sensory quality.”
Producers, accustomed to navigating unpredictable markets, are often willing to take a gamble on artisan sectors like specialty coffee. However, they need a clear, long-term vision of rewards to stay committed to quality production.
Without this assurance, the motivation to maintain labour-intensive, quality-focused practices wanes, leading producers to pursue quicker, easier returns – a shift seen recently in the cocoa sector. In a market where rapid profits are increasingly accessible, specialty coffee risks losing its distinct identity if quality standards are not actively upheld.
To sustain growth and preserve quality in times of high prices, the specialty coffee industry must explore strategies that align with these financial realities.
This might involve rethinking pre-financing models to secure lower-interest loans for high-quality coffee, adjusting profit-sharing structures to better support premium production, encouraging farmer ownership in roasting companies, or establishing multi-year commitments that recognise and reward quality, regardless of short-term market fluctuations.
Ensuring a stable, high-quality supply when prices are high may be a formidable challenge, but it is a necessary one if specialty coffee is to remain true to its foundational mission – delivering quality that benefits everyone in the value chain.
Coffee Intelligence
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