No let-up in coffee prices as bean supplies stabilise

If you think you’re paying too much for a cup of coffee, we have good and bad news.

On the positive side, the extraordinary increase in the cost of beans, which caused cafes and supermarkets to increase their prices in the last two years, has stabilized.

Rabobank commodity analyst Paul Joules says drought in Brazil, the world’s leading coffee producer, has led to an 86 percent increase in Arabica bean futures (the reference price for wholesale importers) since the beginning of 2024.

As conditions have slowly improved, prices have fallen to around $3.70 per pound from record highs of around $4.20 per pound in February 2025, and Mr. Joules expects further declines by the end of 2026.

The bad news is that this doesn’t mean consumers will pay less for a cup of java in the near future.

Ben White, national sales manager for specialty roasters Padre Coffee, warns that coffee drinkers should expect café prices to rise another $1 to $1.50 this year.

Commodity prices are still well above the pre-2024 average, and that average has rarely risen above $2 per pound.

Even if they return to these levels, other cost pressures remain.

For Padre, which operates five cafes and one roasting business across Australia, raw beans account for about two-thirds of the cost of producing a bag of roasted coffee; The rest is made up of other inputs such as rent, electricity, wages and packaging.

There’s also the cost of turning roasted beans into a cup of coffee; This means more variable costs, such as milk and disposable cups, and overhead costs, such as electricity, rent and capital expenses.

“Profits for cafe operators have definitely decreased,” Mr White says.

Coffee prices have undoubtedly risen as a result, but despite Australians’ doomsday warnings that it will soon be difficult to buy coffee in single figures, they have failed to keep up with costs.

The cost of an average flat white has risen by nearly 10 per cent nationally between 2023 and 2025, according to digital payment data from cafes across Australia by point-of-sale software provider Square.

The cost of a flat white in Sydney increased from $4.61 in 2023 to an average of $5.04 in 2025.

Australian Restaurant and Cafe Association chief executive Wes Lambert said cafes were pushing price increases amid weak demand and high competition, with profit margins falling from around 3.5 per cent to less than 2.5 per cent.

“This is putting huge pressure on the industry and the cafe segment in particular, leading us to see one in nine cafes and restaurants go into liquidation in the last 12 months, according to CreditorWatch,” he says.

“Ultimately, unless demand increases or prices increase, the industry will remain stagnant in terms of profitability.”

Mr White says consumers will essentially have to make a choice between low prices and quality of products and services.

“There will always be a price-conscious customer base, but ultimately we determined that quality is a really big factor as well as customer experience,” he says.

It’s a similar story for chocolate makers, but relief for the industry may come sooner.

Cocoa futures rose in early 2024 due to similar weather conditions in West Africa, where most of the beans are produced.

Rabobank’s Mr Joules says wholesale prices, after peaking at around US$12,000 per tonne, have returned to around US$6,000 per tonne following an aggressive supply response from growers, including increasing fertilizers and pruning to increase yields.

Because cocoa and coffee trees take relatively longer to grow compared to other agricultural crops such as wheat, supply chains are particularly vulnerable to harsh weather conditions and shortages take some time to resolve.

Mr Joules does not expect the cocoa market to return to surplus until the 2026/27 season.

Prices are currently hovering around two to three times the long-term average.

Independent chocolate makers such as Li Peng Monroe and Peter Channells of Canberra-based chocolatier Jasper and Myrtle are particularly sensitive to price fluctuations.

The pair was relatively lucky to have missed the worst of the price rally.

They ordered their last large shipment of 150 tonnes of cocoa beans from Bougainville in Papua New Guinea for 2023, when prices were about half what they are now.

However, the sustainability of the business will be at risk if prices remain at current levels when stocks need to be replenished at the end of this year.

“Obviously, I have to find the capital for shipping, and it could be hundreds of thousands (of dollars), not tens of thousands, so a lot of small businesses don’t have that kind of money lying around,” Ms. Monroe says.

Given that chocolate makers face the same inflationary pressure on overheads as cafes, Mr Channells says he cannot imagine any manufacturer cutting prices

Growth must at least stabilize, the worst of the supply problem is now behind us.

“But the chocolate system is very much dependent on what’s going on in West Africa, and that could turn on a dime at any time,” he says.

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