As most of us do, we know someone who’s emphatically obsessed with coffee. Mine is a childhood friend and has had a love affair with it since a decade ago. And no, it hasn’t stunt her growth.
The reason I documented my successful coffee accomplishment into this article is because this was certainly no easy task and easily one of the most painful annoying challenges I’ve ever done.
As a personal finance enthusiast, I should typically ban myself from coffee since we despise tiny expenses that don’t generate cash flow. This can be an annoying mindset when enjoying life. For those who preach the “latte is the problem” or “the small expenses add up” I’m all with you. I even wrote an article stating how compounding is speedy and why ditching the coffee can save you millions. Read here.
There’s no doubt that it does especially since it is one of the worst investments. It goes straight down the esophagus into the stomach and out. It doesn’t grow, considering it only as a few calories anyway and the rest of it is thrown away, not great for the environment which costs us more at the end of the ay anyway with a boiling planet.
Over the years coffee has not only grown in popularity for it’s physical and mental benefits most predominantly for keeping us awake, stimulated, motivated and jittery but also to boost attention, reduce certain types of cancers which lead to pre-mature death. Overrated brands from Blue Bottle to Starbucks have capitalized on this trend of iced coffee and expressos to become an experience. I’m not going to lie, it has gotten folks hooked. Experiences are investments as well, especially vacations when you need them. But the “coffee stop or morning ritual” has lead brewers to gauge prices and they’ve gotten now to levels that are unimaginable.
Why Not Enough Brew?
Brazil, the world’s largest producer of coffee beans is having a shortage. With severe weather and bad harvests coupled with insatiable demand, prices are rising. A rational person would look at the prices and give themselves a limit when it gets too high. As a frugal minimalist, making 60 cent iced coffee is my jam yet for my friend, $6 for NYC deluxe coffee is no biggie until it drains them.
During this past year with people stuck at home, folks like myself have tried new alternative beverages and now come to enjoy coffee, something I was always disgusted by until I poured 3 packs of sugar and creamy oat milk into with no coffee left to taste.
As global consumption is set to exceed production this year, Brazil is hit with the worst drought-driven in almost 30 years. This is climbing costs and Brazil’s farmers are grinding, no pun intended, for their biggest slumps in output in almost 20 years after months of drought left plants to wither.
“I’ve been growing coffee more than 50 years, and I’ve never seen as bad a drought as the one last year and this year,” said Christina Valle, a third-generation coffee grower in Minas Gerais, Brazil’s biggest coffee-growing state. “I normally take three months to harvest my coffee; this year it took me a month,” she said.
Down the Drain
Lately as prices have been shooting upwards, I would think my pal would look at the prices and put a cap on it. Sadly for her finances, she’s been ignoring them assuming her experience and the warm first sip when it hits the stomach will magically compensate for the price. As the compassionate and loving financial nerd friend as I am, I consulted her about these prices and boy oh boy, she is trying to get around them pretending they aren’t happening.
After viewing her expenses on coffee last month, yes I actually did that, prior to the shortage that is currently happening in July, her daily 3x coffee runs were averaging $13 per cup! To me this is beyond outrageous, to her no big deal until she gets into debt. Some people are stubborn and enjoy the pleasure of going out for coffee but not investing in a machine equivalent to one week of coffee is an unwise move to say the least.
Long story short, I was able to successfully get my friend to buy a Keurig, with no coffee experience under my belt and she can’t get enough of it. Literally, she is having 6 cups per day now! At least she is getting more brew for her buck.
The pandemic undoubtedly reveled how much consumers love their coffee. The demand for it only rose and at-home machines and instant brews are having their hottest moment yet. There are so many synonyms for coffee, it was a blast writing this article with no real point besides alerting fellow coffee addicts that making it at home still provides a warm and satisfactory feeling to your wallet, heart and time.
So now that my friend has combated her $13 coffee kick, when is it time to quit coffee at home?
Maybe too bold.
Realistically this is virtually impossible for most coffee drinkers as they rely on it and cannot functions without it. Literally, they will get migraines and ironically, insomnia if they don’t but as with everything except iPhones there is a limit on how much one can pay for a cup of Joe. This isn’t caviar after all.
Warm Investor
Commodities, coffee being the largest, will benefit the most from rising prices and pick up demand by two-fold from here. Investors are biding up the price of coffee putting more in commodity index funds that track broader basket of commodities in futures and forwards.
With a mix of shortage of shipping containers to bad weather, will the price only get higher?
Luckily, Brazil’s spring rains which fall in September are crucial to determine whether damaged coffee plants can recover and produce enough beans for next year’s harvest. Yet, coffee plants take about 2 /12 years to develop and if farmers don’t act quickly enough, this deficit will lead prices to skyrocket big time.
But for now, while supplies and rationality last, enjoy your cup of Joe. You’re a grown adult and can set your limits. Hopefully.