Why your morning cup of coffee may get more expensive

Market Trends & Dynamics - Coffee prices spiked 145% in July year-over-year, with average retail price for a pound of ground coffee hitting $841 [1] - Coffee futures are at their highest level in two months and having their best month since January [15] - The US gets more than a third of its unroasted coffee imports from Brazil, the world's top coffee producer [1] - The US coffee industry imports most of its coffee from Latin America, including Brazil, but there are options to import more coffee from places like Vietnam, Indonesia, and Ethiopia [5] Impact of Tariffs - President Trump's 50% tariffs on imports from Brazil are about to worsen coffee prices [1] - Tariffs will likely have noticeable impacts on food prices in the coming weeks and months [3] - The brunt of these tariffs will be borne by a combination of firms, typically manufacturers, retailers, and mostly consumers [12] - Steel and aluminum tariffs on places like China will further impact the coffee supply chain in terms of packaging and capital inputs [19] Supply Chain & Production - The supply of coffee is inelastic, meaning there are limited stores of coffee available for immediate purchase [5][6] - Domestic coffee production in the US (Hawaii and Puerto Rico) accounts for approximately 1% of the coffee consumed [8][9] - There is effectively no capacity to ramp up domestic coffee production to substitute imports [9] Pricing & Inflation - Coffee price inflation is already one of the fastest-moving categories in terms of the CPI and is expected to continue to climb in the next 3 to 5 months [14][15] - Food companies operate on very thin margins, limiting their capacity to absorb tariff costs [12][13] - Producer Price Index (PPI) for coffee beans has been increasing more dramatically than retail prices, indicating further price increases to come [18]