Velvet Sunrise bracing for double whammy of high prices, supply shortages due to Middle East conflict

A specialty coffee maker in the Greater Toronto Area warns of difficult times ahead for the sector due to continued high commodity prices and the U.S.-Israel War on Iran.

Founded in 2008 by former engineer Mark Hayward, Velvet Sunrise is a specialty coffee roastery in Whitchurch‑Stouffville, Ont. They sell single-origin and specialty coffee blends to cafes across southern Ontario.

Hayward explains that coffee prices have been 50 to 100 per cent higher than historical averages for the past two years due to climate-drive production issues in Brazil and Vietnam, the world’s largest producers of coffee.

While production stabilised this year and prices began declining in the futures market, it’ll take a while for the decrease to work itself through the system. This is due to the nature of coffee contracts, where prices are locked in anywhere from four to 18 months.

Additionally, when the price spiked up by 50 per cent, it placed a lot of financial stress on coffee importers and exporters because they rely on bank loans to buy produce in bulk. Limited lines of credit means less purchasing capacity. So, an importer is now buying 100 containers of coffee instead of 200. This has resulted in coffee shortages in North America, which also caused price spikes.

The U.S.-Israel War on Iran is complicating the situation. The War hasn’t had a direct impact on Velvet Sunrise, but Hayward explains it is putting pressure on shipping lines. Insurance companies are adding war-risk premiums, which are too high for companies to absorb or pay upfront. According to Hayward’s sources in the logistics industry, war-risk premiums can cost up to $10 million for a single trip.

Other areas of concern are the prices of fertilizers and gas. If they continue to climb and become unaffordable for major coffee producing countries like Brazil, Colombia and Central America, the next crop cycle will be impacted. Productivity will slump, causing supply chain disruptions yet again.

How Velvet is weathering the disruptions

To stay ahead of 2026’s volatility, Velvet Sunrise is boosting inventory. Hayward bought a significant amount of coffee from Brazil last fall. They upped their order by 50 per cent to ensure they have inventory to carry them through any disruptions in the supply chain. This spring, Velvet is buying coffee from Central America, which isn’t affected by the War.

“We’re casting our net a little bit wider. We’re upping our purchase quantities. We’re signing contracts early and for higher quantities than we normally would do, just as an insurance to make sure that we are going to have a supply of coffee to see us through any disruptions in shipping from the affected regions,” shares Hayward, who is concerned about African coffee supplies, which are becoming popular in the specialty coffee sector.

According to Hayward, Ethiopia, Kenya, Uganda, Tanzania, Burundi, Rwanda, and the Democratic Republic of the Congo harvest and ship coffee between March and August. He expects costs to increase on those shipments, when they start to move eventually after routes become safer. They’re typically sent through the Red Sea and the Suez Canal. Geopolitical tensions mean these shipments must go around Africa, which doubles the transit time.

At this point, Velvet Sunrise isn’t increasing prices. If the War drags on, causing supply chain disruptions, Hayward believes a conversation with buyers about prices hikes will be inevitable.