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If you're already a patron backer, thank you for your support. Welcome to the Daily Coffee Pro by mapper forward friends. I'm your host Lee Safar and this is episode four of a five part series with just me. We are talking about what the current conflict between the US and Iran, US and Israel and Iran is going to mean for the global coffee industry.
There are a lot of people out there that are saying right now that, you know, this doesn't really affect the US, it doesn't affect Europe, it doesn't affect Latin America. It's fine, they're siloed. What we really think is the problem is that coffee shops in the Middle East are going to close and that coffee that is being, would have normally been roasted there, that's going to go somewhere else, that's going to flood the market. And when it floods the market, that means that coffee prices are going to go down again.
I hope that just from the first three episodes of the series, you come to realize that this conflict has a much, much bigger consequence on the coffee industry than what most people think it will. It is going to not just have an impact on the global coffee industry, but it is going to have economic domino effects across every sector in the world. And that's what we're going to talk about in this episode. The macroeconomic ripple effects that are going to come from this conflict that will have far reaching implications into the coffee industry all over the world.
I'm in Australia right now. I cannot get back to Dubai to my home. We in the coffee industry here in Australia, where Australia seems to be further away from everything else in the world, we will be experiencing, and we are already experiencing economic impact from that conflict right now already. So I'm wondering why the coffee industry isn't more disrupted by what's going on.
I hope that that will change because of this series. Please send this series to anyone that you know who you think is not adequately disrupted, disturbed by what's going on and is not adequately hustling to figure out solutions for what may happen. If you don't have a plan, a plan to actually navigate this when this starts to escalate in the part of the supply chain that you're in, in the country that you're in, you need to start working on that now. So it's important to understand that war isn't just going to affect our industry.
It's going to affect the industries that are all around us and the entire economic system. I cannot stress that enough. And in this episode, we're going to talk about the ways that that's going to happen and the different shocks that we're going to experience as this moves forward. I don't know about you, but I can see very clearly that this is not a conflict that's going to be over in a few days.
I think that there's a bunch of people that are playing with the lives of the rest of us and they are saying what markets need to hear. Trump is very motivated by markets. He's saying what those markets need to hear. And as a result of that, prices move up, prices move down and there's going to be consequences to that.
Now, we the average people feel that at the Bowser. And so let's talk about oil shock. That's the first one of the ecosystems that we want to talk about, the economic systems that we want to talk about. And oil really is an ecosystem from the perspective of the coffee industry because oftentimes we just think about crude oil is one price, coffee is a different price.
They're not very related, but they're very, very related. And it's not just oil, it's energy in general. If you're a coffee roser and you have a gas roast, if you use gas for your roasting machine, that price is going up because of what's happening in the Strait of Hormuz. So oil disruptions are already pushing prices higher globally.
Yesterday they hit $100 a barrel. Iran is threatening that we should not be surprised. They have every intention of pushing the price of oil to $200 a barrel. This year they have been sitting, sorry, in 2025, they were sitting somewhere around the $70 a barrel mark.
So if you think $100 a barrel is bad, imagine what's going to happen to energy prices if they double from where they are right now. And when energy prices go up, transportation prices increase everywhere. That's not just shipping. That's like the bus that your employees take to work or the train that you take home, that you, the train that you get on to get home.
Or the petrol that you put in your car. Or the air travel that you are taking to get to World of Coffee in San Diego, which people are still talking about going to, which I don't understand given that this crisis is so important. It means that food prices will increase when the oil prices go up because the cost of moving that food around, the cost of growing that food, the cost of harvesting that food, the cost of bringing in the fertilizers that need to grow that food, everything is driven by energy. And most of the world's energy is driven by oil.
And finally, the final consequence that we're going to see, or one of the other consequences that we're going to see is inflation. We should have a very, very real expectation that we're going to see significant inflation all over the world as a result of this conflict. Again, it is why I do not understand why more people are not seeing this as such a serious situation. And coffee is going to be sensitive to every element of the oil shocks.
So that's the first thing that we want to make sure that we are keeping our attention on. What is happening with oil and how much is that going to impact our businesses and our partner's businesses in the supply chain? Now, let's have a look at another economic element that's going to have a lot of impact and that is freight inflation. So as war increases, and remember, right now this war is happening in a particular part of the world, but here's the thing, one, it could spread, and two, it is not the only war that's going on.
There is a lot of conflict. And right now, there is so much tension in the world where leaders are power hungry and they are taking their cues from Trump and they are saying that if he can do it, we can do it, and Trump himself is not just relegating himself to West Asia slash Middle East. He started with Venezuela. He is, there were some leaked documents that someone had said to me and shared with me talking about, you know, some whispers about Cuba and him invading there.
We are not talking about something that is just relegated to a specific part of the world. The interests that lie in oil are all over the world. So as war increases, we will see insurance costs go up. We will see freight costs go up.
We will see financing costs go up. This is a part of freight inflation. And as all of those things go up, we will start to see a weird negative feedback loop that happens where the cost of production is continuing to increase. So the price of the green coffee coming out of origin is gonna increase, but that's also being fed by, so oil inflation, and then we have freight inflation, which is going to increase, which will push the price of production up even further because we need freight going into origin countries as well.
And then as the coffee heads into the destination country, into consuming countries, all of those inflationary environments with regards to the freight are going to push the price up further and further and further. So war risk insurance premiums, they call it. So war risk insurance premiums for ships have surged dramatically. And many of the freighting companies have simply decided that they cannot risk shipping or logistical endeavors in those regions because their insurance companies will not cover them.
So what you'll eventually see is that those prices have to get shared somewhere. So as producing countries are starting to feel the weight of freight inflation for fertilizers and other inputs that are coming into their country so that they can produce coffee, you will start to see the price of green coffee go up. As the price of freight inflation affects the transit of green coffee to the countries that are going to roast it, you will see the price of roasted coffee go up. That will then get passed on to either the consumer or the cafe that's going to buy that roasted coffee.
So freight inflation is really, really important for us to understand. The third and final thing I want us to talk about is currency and finance. Now this is imperative for you to understand. So this crisis is going to affect pretty much every currency.
Why? Because the US dollar is going to be impacted by this. Oil is traded in US dollars. Coffee is traded in US dollars.
There are a few nations around the world that have tried to unhook their oil from the US dollar. A lot of the BRICS nations are trying to unhook that. There have been some theories out there that this whole conflict has been constructed to threaten the survival of BRICS. B-R-I-B-B-R-I-C-S.
Go and look it up, it's an acronym for the countries that were the founding members of BRICS. And one of their main endeavours was to unhook oil from the US dollar. This destabilises that intention. Currencies will be impacted by this.
So an example of that is as the US dollar gets more volatile, for those who have been saying on social media to me that this is just going to impact cafes and roasteries that are in the Middle East, this is where that breaks down. With the volatility of the US dollar, you will start to see volatility in the Brazilian real. It will continue to get more volatile and that will have a direct impact at origin. Same with the Colombian peso.
Number one and number three, largest coffee producers in the world. This will weaken emerging markets. Most coffee producing regions are emerging markets, not Brazil, but most of the rest of them. So what will be impacted the most is producer income, export prices and hedging strategies.
People's ability to be agile in these ecosystems will be compromised. But how you participated before this is going to have defined your ability to be agile. And this is where I think about the end of 2025. And when people were asking, Lee, what's 2026 going to look like?
And my response was, I don't really know. But the way that I'm looking at 2026 is that we will all have, we are all getting a different bill this year in 2026. And that bill will look different based on how you participated previous to now. Did you build resilience supply chains?
Did you have great partnerships? Did you build values driven businesses? Did you reduce your debt? Did you reduce your risk?
Did you remove toxic work environments? Did you make sure that you have an understanding of what your business fundamentals are, whether they were your financial statements, whether they were your values vision, your mission, your core strategies, did you build all of that? Well, were you just reacting to everything? Well, for people who built in strategies and took the time to do that, they built relationships, they have support networks.
This is going to be easier to weather. They will be more agile during this. And money is not going to be the only determinant factor. But it is going to be one of the important factors, your ability to get access to financing, your ability to understand how financing is going to shift through this, your ability to understand what new forms of currency are going to do.
All of that is in play now. And so as these global systems become unstable, coffee prices will stop behaving like agricultural pricing, right? They will start behaving like financial assets. Why?
Because people are going to be looking to find safe havens for their money. And this is where what we will start to see is finance companies start to kick into all of this. And they're looking for places to put their money. What results of this?
More volatility. And so as we look at all of the economic domino effects that are just the three that we've spoken about, we are going to see flow and effects from those three economic dominoes that we talked about. One of the very real ones of those is what we have previously been talking about as the cost of living crisis. This is about to accelerate, in my opinion.
Everything that we've talked about is inflationary. People were already out of its end before this. Do you have room in your business to increase your prices? Do your customers, whether your customers are coffee roasters or your customers are the end consumers.
Do your cost customers have the ability to absorb the initial impact of that inflation? Or are they going to go under? And if they go under, how can you adapt to that? This is going to reorganize the coffee industry guys.
I don't know how to make that more. I don't know how to beat that drum any louder because it seems that people don't really believe me at this point. But again, the dragon is coming, the dragon is coming, the dragon is coming. Prepare now, so that you don't have to panic later.
We have one episode to go. And in that, we're going to talk about what the coffee industry should be paying attention to. So join us for the final episode of this series. Peace of and peanut butter.
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