Marketplace - Why’s my coffee so expensive?

Episode Date: May 27, 2024

Nearly two-thirds of Americans drink coffee every day, according to the National Coffee Association. If you’re part of that 63%, you may have noticed coffee getting more expensive. Some of it has to do with the cost of the raw crop, which is at a 45-year high, partly due to climate change reducing yields. And it doesn’t help that global demand is growing. Also in this episode: Mexico City is in a water crisis, Zoom cashiers usher in a new wave of digital offshoring and machinery and other things-that-make-things purchases were up last month.

Coming up on the show today, a bright spot for manufacturing, why your morning coffee is getting more expensive, and the rise of the Zoom cashier from American public media. This is Marketplace. In Baltimore, I'm Amy Scott in for Kai Rizdal. It's Monday, May 27th. Good to have you with us. We're going to start today with some economic news you might have missed going into the Memorial Day weekend, a sign of a rebound in U.S. manufacturing. The Commerce Department said Friday that new orders for durable goods

rose 0.7% in April from the month before. That's the third increase in a row. And one particular line item caught our attention, what's known as core capital goods. Those orders were up 0.3% month to month. Economists like to look at this measure as an indication of what businesses are planning to produce in the future. Marketplace's Stephanie Hughes has more. Stephanie Hughes, Marketplace So I think that's a good sign that businesses are starting to kind of invest again. Juno says last year, with money from the inflation reduction and chips and science acts, there was a lot of investment in structures, such as factories and warehouses, but not as much on equipment. So we built these warehouses, and now maybe we're starting to see those warehouses get

stocked with machinery. You need that machinery ultimately to make those warehouses make goods. Juno points out some of the rise in spending likely reflects an increase in prices for that machinery. But John Diamond, a fellow at Rice University's Baker Institute, says this is still a positive sign for future production. And? It's also a positive for bringing inflation down.

Diamond explains if manufacturers invest more in equipment and then produce more goods. JOHN DIMOND Then consumers will have more choices. There won't be as much competition for a smaller number of goods and it'll restrain price increases. COLLEEN O'BRIEN DIMOND says that these numbers are often revised substantially. So he takes them not just with a grain of salt, but a few shakes of the salt shaker. And nationwide economist Oren Klatschkin points out high interest rates continue to make it pricey for business to borrow to buy expensive equipment. Also, the ability to access that money through the banking system

is fairly limited because bank lending standards are still relatively tight. Klatschkin points out that these purchases are some of the most expensive a company will make and they don't buy a giant machine or a truck just because they'll be able to use it next month. They buy it because they'll be able to use it for the next decade. I'm Stephanie Hughes for Marketplace. US markets were closed today, but we'll have some holiday-related numbers for you when we get there. Mexico's city is in the middle of a water crisis. After an extended drought, the largest city in North America may soon run out of water

in several key reservoirs. Some experts predict this could happen as early as June, which some have taken to calling day zero. Caroline Hauck is a senior editor of News for Vox where she wrote about water shortages in Mexico City among other places. Thanks for joining us. Caroline Hauck Thanks for having me. Excited to be here. Hosting. Caroline, can you describe the situation briefly in Mexico City? How did it get so bad? Yeah. So Mexico City right now is staring down a pretty acute water crisis. There's a couple of acute factors here. There's been abnormally low rainfall for a long time. And

some of that is exacerbated by current phenomenon like of this year, things like El Nino, the weather phenomenon that's causing droughts across the region. But in other ways, this is a much more structural kind of systemic issue. When the Spaniards arrived on the continent, they drained the lakes on which the city was built. And so all of the impervious surfaces

that have been built on top of those don't really allow for the rainwater that does fall to replenish the aquifers that provide actually the vast bulk of Mexico City's water. And then there's also some particular issues with the water infrastructure itself. Mexico City, by some estimates, loses about 40% of its water that does enter its system, whether it's through leaky pipes or being stolen. And then all of this is also being exacerbated by climate change, making these droughts worse and more unpredictable. Then you write that this isn't just happening in Mexico City. Where else are people facing

water shortages right now? I think that's like what really struck me that when I got into this and why I was interested in this piece is I remember visiting Cape Town right around when they had their own day zero water crisis back in the 2010s. And to your point, it's not just Mexico City right now. So right now we have El Nino exacerbating droughts throughout Latin America. Bogota, Colombia has been rationing water for a month now, I believe. Early on, the president, Gustavo Petro, even told people, I think semi jokingly, I hope to leave the city and drink water elsewhere just because the system was so strapped. The

Panama Canal, this lifeline of international commerce is having to restrict transit through because drought has brought down the canal levels too low. I'm sure you're familiar with like the Colorado River in the US is over indexed and over allocated and it's causing issues across the American Southwest. So this is not the issue of one city. This is the issue of how we treat water in the 21st century. You mentioned Cape Town, South Africa, which got dangerously close to day zero back in 2018.

How did they end up surviving that crisis? Yeah. So I think there's a little bit of hope and there's a little bit of like pessimism here and that The idea of this day zero campaign really kind of launched a lot in South Africa during the time it was launched as this kind of awareness campaign to get people to reduce consumption and that that awareness campaign helped extend the runway but as a

that awareness campaign helped extend the runway. But as an expert told my colleagues over on the Today Explained podcast, what really ultimately helped in South Africa is that it rained. And we can always count on the rain. So I think we need to make systemic changes, or at least that's what the experts I spoke to said, that we need to really rethink

how we manage water as a resource. Yeah, I mean, Mexico City is also counting on rains coming hopefully next month. But what other options does the city have? Yeah. So I think there's like the short-term ones that maybe you're already thinking of from what I said previously. You can fix these leaky pipes. Like if you're saving 40% of water, that's a big difference if you're counting the days down before there's no water at all. But ultimately, like a lot of this, what needs to happen is also rethinking not just the way we manage water, but also, some experts said, rethinking the way we grow our cities,

making it more possible for the aquifers we all rely upon to replenish and to avoid these kind of boom-bust cycles where you get an intense rainstorm and everything floods and instead of it all percolating down and being there for the long term for the for the city residents it just floods out and rushes out to the rivers and the sea. When I've reported on water issues I've heard over and over again that water is too cheap. In other words, especially for the biggest users like agriculture, the price doesn't reflect the actual cost of that water. And if we had to pay that cost, maybe we'd do a better job of conserving as a society. Are you hearing that as well?

Yeah. So I actually heard kind of an interesting discussion in the different academics I spoke to about this. I'm personally still torn. I'm not going to endorse any side, but I saw like one person told me about the good that's being done by charging industry and American cities for their wastewater, their sewage, their runoff and how that's incentivizing them to think more creatively about instead of just using water once through a system, can they reuse it multiple times? And that's not really convincing to me. I've also talked to people who say, look like this is fundamentally like a human right. And when we're talking about water and urban environments, treating it as a commodity can lead to gross inequities. I'm not sure exactly

what the answer is, but I think there is like a rich discussion there about the best ways to treat this. Yeah. And one thing I've heard is priced appropriately for people who can pay and subsidized for those who can't. So. Yeah. And I think that's one of the things that really jumps out to me also about Mexico City right now is the way this is exacerbating inequality, right? Like there's obvious tensions around who does get water, whose pipes regularly work but also when they don't work, who has the money to pay for that increasingly expensive

use of water. Caroline Halk is a senior editor at Vox and runs the morning news letter there today explained. Thank you so much. Thanks for having me. If you want to hear more about how parts of the United States are dealing with water scarcity, we have a whole season about it on the podcast I host, How We Survive. You can find it at marketplace.org or your preferred podcast app. Four years after the pandemic started, what initially looked like a COVID-related surge in people starting businesses now looks more like a long-term change. Census data shows that a

record 5.5 million people filed applications for new businesses last year. So what's it like to be on the ground in those early days of a new business? Marketplace's Maria Hollenhorst spent a day with one entrepreneur in Phoenix, Arizona. Picture this. It's 10 a.m. on a Sunday in late February, and about a dozen or so wedding vendors, that's florists, photographers, even musicians, are setting up booths and tables in an outdoor picnic area. There are trees, balloons, and lacy tablecloths. I'm doing a booth just with hand-painted wine glasses. I own a photo booth company. This is one of my booths. And we're a home

studio florist at a surprise Arizona. That's Susie Mae, Iona Brown, and Wendy Harris. And then, just minutes before the event's official start time, one more vendor showed up. I'm so sorry, I took this so long. Taylor Nasaya Jenkins, who goes by Nessie, launched a vintage boutique a few months ago called House of Vestige. We're just setting up, so we decided that we're just gonna do a clothing,

like a rack today instead of a whole table. Nessie is wearing a white satin dress, pink lip gloss, and shiny gold earrings. Her boyfriend is helping her hang skirts and dresses on mismatched hangers. Most cost her less than $80. So it's all secondhand and tin. I use eBay a lot, Poshmark.

I go to thrift stores. And most of the stuff is, I've only brought my bridal stuff today because this is a bridal show. Nessie is 24 years old. I first spoke to her two years ago, not long after she'd left the Bay Area, where she grew up in search of more affordable housing.

Like, I knew nothing about Arizona, but I just knew, like, what I wanted. I wouldn't be able to get in California. She's moved around a lot and is still trying to find her place in the economy. And by place, I mean the right job. Three restaurant jobs. I was an office manager for an acupuncture office.

I worked for the Maricopa County School District. I was a substitute. I've been a nanny. I've been a lot. So a lot of different. Yeah, a lot of jobs. While we wait for the first customers to arrive, Nessie tells me about her reasons

for trying to start something of her own. Being in the workforce as a young black woman has been, I don't even know, to say like hard. That's not even like fitting enough. Every black woman that I know, their struggle with the workforce is literally exhausting. If someone is in a disagreement with you or you say something that someone doesn't like, you'll be called aggressive or you may not be an aggressor. So you literally go about the world in such a different way. Black business ownership right now is growing faster than it has in 30 years. According to the Small Business Administration, the share of black households that own a business

more than doubled between 2019 and 2022. But reality check, government data shows that roughly one in five new businesses do not survive their first year. Nessie's still just getting started, but dreams of eventually opening a physical store. Honestly, if I never make a million dollars off of it, I'm okay with that because it's what I'm passionate about. She spent about $1,500 and countless hours trying to get this boutique off the ground, sourcing inventory, setting up a website, coordinating photo shoots. I've had a photo shoot where literally all the models said they couldn't come the same day. I thought it was a shoot where the photographer said the same day, like, she couldn't come.

Like, it's just, it's been hard. And she's been to a handful of events like this one, where two and a half hours in, there are still no customers. It's a lot harder than I thought it would be. Entrepreneurship is hard. Nessie said the only reason she's even able to try is because her boyfriend helped support her financially. If my partner wasn't making as much as he does at his job, I wouldn't be able to.

So it is a privilege to be able to say that. This event lasted for four hours and not a single customer came. Nessie bought something though. I'll just take this out and I'll give you the 20. A few champagne glasses to use for photo shoots. Thank you so much. That was a few months ago.

In the time since, she's gone to a couple more events, even attempted a fashion show, but reframed it as a photo shoot when not enough people came. Nessie wants to make this business work, but for now at least, she's keeping her day job as a nanny. I'm Maria Hollenhorst for Marketplace. So, where is she? But first, let's do the numbers. U.S. markets were closed for the Memorial Day holiday.

If you're traveling this weekend, you may have noticed gas prices held steady according U.S. markets were closed for the Memorial Day holiday. If you're traveling this weekend, you may have noticed gas prices held steady. According to AAA, the average cost for a gallon of gas nationally was $3.61. Anyone traveling by air could find long security lines. The Transportation Security Administration screened a record 2,951,163 people on Friday at the start of the holiday weekend. Memorial Day of course marks the unofficial start of summer and the time when many teenagers look for jobs. The outplacement firm Challenger Gray and Christmas is predicting teens will pick up 1.3 million jobs between May and July, the largest number in four years, thanks to consumer

demand and teens' desire to work. You're listening to Marketplace. Seasons change. Why not your tech? Upgrade now during the Dell Technologies summer sale event and save on select PCs like the XPS 16 powered by Intel Core processors. You'll be able to bring your most intensive projects to life with built-in AI, minimalistic design, immersive visuals, and cinematic audio.

When you shop online at Dell.com slash deals, you'll have access to exceptional tech and electronics plus free shipping on everything. Amazing prices await you for a limited time only at Dell.com slash deals. That's Dell.com slash deals. My name is Lee Hawkins. I've been a journalist for over 25 years. On my new podcast, What Happened in Alabama,

I get answers to some of the hardest questions about how things came to be for many black Americans and the truth that must come before any reconciliation can happen. I investigate my family history, my upbringing in Minnesota, and my father's painful nightmares about growing up in Alabama. What Happened in Alabama is a new series confronting the cycles of trauma for myself, my family, and for many Black Americans.

Listen now. My family and for many black Americans listen now This is marketplace I'm Amy Scott, okay be honest how many cups of coffee have you had today? I mean, I'm barely functional until at least one cup in the National Coffee Association I'm barely functional until at least one cup in. The National Coffee Association says more Americans drink coffee each day, almost two-thirds of us, than any other beverage, even plain old water. And that habit, you've probably noticed, is getting more expensive. The cost of a popular variety of coffee bean recently touched its highest level since the 1970s. Marketplace's Lily Jamali hit her local coffee shop in Los Angeles to find out why. My go-to coffee order is a 16 ounce soy latte. Can I get an extra shot? What? I'm working the holiday. My order cost $7.20, not cheap. Far from here, way higher up

the supply chain, the price of coffee benchmark Robusta hasn't been this high in 45 years. The raw commodity, the crop has been coming in very weak. Professor Chris Barnett at Cornell says climate change has a lot to do with that. Robusta is the basis for espresso and instant coffee. Vietnam and Brazil are its top growers and right now now both are experiencing drought. There's just much less available so roasters have been bidding up the price. That shortage comes as coffee consumption is growing around

the world says Spencer Tour of the consultancy coffee enterprises. It's not just the North American consumer it's not just the North American consumer. It's not just the European consumer. Take China, where major coffee retailers have expanded in recent years, and discounts and coupons have helped that market grow. This squeeze in supply and growing demand has helped push the price of beans 20% higher so far this year, says Michael Hallen of Bloomberg Intelligence. But that's not going to show up at the store level right away. A company buying big volumes like Starbucks locks in purchase prices ahead of time.

They're securing pretty significant amounts of coffee 12 to 18 months in advance. Even when higher costs are passed on to the consumer, you might not notice. It turns out that makes up just a small fraction of what your local coffee shop charges. My seven bucks is mostly going to processors, wholesalers, retailers, and transporting those beans. It's enough to make you want to switch to tea. In Los Angeles, I'm Lily Giamale for Marketplace. The idea of offshoring, moving parts of a company's business overseas to take advantage of lower costs, might make you think of assembly lines in China or manufacturers in Vietnam. And that still happens, obviously. But thanks to AI and other tech, we may be entering a new age of digital offshoring. Wizzy Kim wrote about it at Vox,

where she's a senior reporter. Welcome to the program. Thank you for having me. Okay, we got to start with this chicken shop that you visited in the East Village in New York City. Sansan Chicken, am I saying it right? Yeah, I believe so. Yeah. So tell us about the customer experience there.

So I walked in on a Wednesday afternoon. The shop wasn't super busy. And the first thing that I see when I walk in is there isn't a physical cashier. It's a screen with a cashier over Zoom. She's wearing a headset. She looks like any cashier you might see, but she's just not physically there. She's potentially thousands of miles away. Wow. And I mean, the first question I ask, of course, is why?

Why is there a Zoom cashier? I think that's a great question. So these cashiers are hired by a company called Happy Cashier. And the founder of the company has sort of said, well, first of all, you know, we're trying to just experiment with it and see how it goes. But also, I can't deny that it is much cheaper to hire someone in the Philippines to be a cashier than it would be to hire a cashier in New York City. Right.

So this is another form of offshoring. I mean, we're familiar with a lot of customer service being, you know, offshore and call centers. But how is this the sign of what you think of as a new era of digital offshoring? Well, I think that technology and specifically the adoption of technology within an industry has for a long time come with this sort of outsourcing or offshoring. So this often happens because the technology can sort of be used to enable some of the geographical constraints of work to disappear. So people all over the world

can do it. And if given the chance, a lot of companies do do that. Can you give some other examples of newer forms this is taking? Sure, so for example, Amazon's grocery stores used to have, up until very recently, a technology called Just Walk Out, where you don't have to go to the till and check out your items. You could just walk out with whatever you wanted to buy, and it would just automatically know which items you had. But then it turned out that oftentimes,

those transactions needed to be verified or validated by a whole mass of human workers, many of them in India, very far away from the Amazon grocery stores physically located in the US. Right, and you talk about the emergence of so-called digital sweatshops. I mean, these jobs tend to be pretty low paid. What do we know about the emergence of so-called digital sweatshops. I mean, these jobs tend to be pretty low paid.

What do we know about the working conditions for these tech workers who are doing the behind-the-scenes work that we attribute to automation? It's an industry that we now call click work, because a lot of it is done through the computer. But it's also very low paying in that each individual task might not take too long. So they pay, you know, like literal pennies for each task. And you're supposed to amass as many of these tasks as you can. But you work a full day doing all

these digital tasks, and you might still be making less than minimum wage in that country. And sometimes the nature of the work might be just traumatic as with content moderation. The workers have talked about just being really mentally disturbed, understandably so, by the nature of the work that they have to do. In your piece, you talk about how workers have responded to technological disruption in the past, going back to the Luddites destroying machines that they thought threatened their textile jobs. How are workers generally responding to these new technologies now? I think that there is more wariness over how things like AI could be used against workers,

especially among creative jobs. So for example, with the Writers Guild of America last year during the Hollywood strike, AI was one of the central components of what they were bargaining for. They didn't want AI to be credited as a writer. They didn't want AI-created writing to be used as source materials. And in the case of click work and AI training,

a lot of the jobs are sort of what's considered gig work today. They're not considered employees. They don't get all of the labor protections that employees of a more traditional employment model would get. Often automation and the degradation of labor comes for work that is already pretty vulnerable to this sort of worsening. All right.

Wizzy Kim wrote about the future of work and digital offshoring at Vox. Thank you so much for your reporting. Thank you so much for having me. This final note on the way out today. The first cruise ships to set sail here in Baltimore since the collapse of the Francis Scott Key Bridge left the port this weekend. Royal Caribbean's vision of the seas departed Saturday for a five-night voyage to Bermuda, followed by Carnival Pride, which started a trip to Canada and Greenland yesterday. More than 400,000 cruise passengers came through the Port of Baltimore last year. The Army Corps of Engineers now expects to restore the port's main channel for normal

shipping traffic by June 10. Our daily production team includes Andy Corbin, Elise Hassan, Maria Hollenhorst, Sarah Leeson, Sean McHenry, and Sophia Terenzio. I'm Amy Scott. We'll be back tomorrow. This is APM. My name is Lee Hawkins. I've been a journalist for over 25 years. On my new podcast, What Happened in Alabama, I get answers to some of the hardest questions about how things came to be for many Black Americans

and the truth that must come before any reconciliation can happen. I investigate my family history, my upbringing in Minnesota, and my father's painful nightmares about growing up in Alabama. history, my upbringing in Minnesota, and my father's painful nightmares about growing up in Alabama. What Happened in Alabama is a new series confronting the cycles of trauma for myself, my family, and for many black Americans. Listen now.