pRICing & markets: 1)From small farms to your cup: What it takes to make that one cup of fresh coffee; 2)Will gold still drive TSX gains next year? Fund managers weigh in

1)From small farms to your cup: What it takes to make that one cup of fresh coffee

Courtesy Barrie360.com and Canadian Press

By Ritika Dubey, Dec. 29, 2025.

As a stream of roasted coffee beans drops into a barrel, it fills an Oakville, Ont., roastery with a smell practically strong enough to caffeinate you. 

The roasted beans, now a rich, deep brown, were once small and green, bagged in large burlap sacks and shipped to Canadian ports from the coffee-producing countries of Ethiopia, Colombia and Brazil. 

It’s at Reunion Coffee Roasters where they find their defining character. The strength of your brew and whether it will taste fruity or earthy is methodically decided at the roastery’s lab, where they sample various beans and perfect the taste.

Walking through his roughly 50,000 sq. ft. roastery, Reunion president Adam Pesce points out industry-scale machines where the green beans are washed, weighed and roasted to get the preferred colour, flavour and aroma. 

“Coffee roasting is a lot like baking,” said Pesce, a second-generation coffee roaster. It’s all about perfecting the temperature, roast time and airflow.

Each batch of beans, weighing about 460 pounds, is roasted at 450 degrees in a rotating drum for a period of time, usually a little more than 10 minutes, before being dumped into a cooling chamber to preserve their flavour. The roastery processes 37,500 pounds of coffee a week. 

While the roasting process hasn’t changed drastically over the years, the coffee industry has.

Import prices for unroasted coffee beans have more than doubled over the past three years, according to an analysis from KPMG, as a combination of factors led to supply shortages. The rising cost is forcing importers, roasters, retailers and consumers to adapt. 

Statistics Canada data shows shoppers paid 27.8 per cent more for coffee at the grocery store in November compared with a year earlier — greatly outpacing overall food inflation, which was 4.7 per cent year-over-year.

“This is by far the most difficult time that the industry has ever seen,” said Pesce, who said that 20 years ago when he got into the business, a seven or eight per cent price fluctuation would have been considered meaningful.

Put another way, he said, a pack of mediocre coffee today sells for more than the best quality coffee did two years ago. 

“Think about how disruptive that can be.”

Coffee is grown in rainforests and hand-picked primarily by small-scale farmers. Often, farmers who don’t have an export license sell to collectors by the roadside in small batches, which are then bundled for international buyers.

Beans are sold by smaller operators to processors, importers, roasters and other intermediaries before reaching the consumer, said Ted Salter, executive director of supply chain at KPMG in Canada.

But climate change, drought and crop disease have disrupted the global supply at the source, hurting many small farmers, Salter said.

With limited crops, global demand for coffee has outpaced supply. The trend is expected to continue unless the highly fragmented global farmers’ community is able to implement costly irrigation solutions.

While climate change is a big factor in coffee price increases, importer Jeff Fleming said farmers are dealing with an affordability crisis alongside the high costs of operating small coffee farms. Often, changing government policies on exports in the origin countries also push the prices higher for coffee — something an importer can’t control.

Fleming, founder of Calgary-based Apex Coffee Imports, works directly with farmers and exporters across 11 countries to buy their coffee, which is then shipped to Canada.

The tug-of-war between lower crop yields and higher prices is straining many relationships in the supply chain.

Fleming, who deals in specialty coffee from micro-farms, saw demand for specialized beans fade as prices went up.

“Any time there’s a price shock through the market that we saw, it’s (been) bad for everybody,” he said.

For example, if a pound of coffee went up from five dollars to eight dollars, a roastery may be hesitant to pass such a significant cost on to its customers immediately. Instead, it might reduce its overall purchase or pivot away from pricier options, which trickles back to the farmer.

Meanwhile, Fleming said demand for less expensive coffee blends has gone up. He said he is constantly communicating with farmers about the demand and whether there are margins that can be adjusted on his end to continue importing the best-quality beans.

“It’s caused us to have to pivot and re-evaluate and get a bit more creative than we used to,” he said.

When someone questions Pesce about coffee prices, he pulls up commodities exchange data on his phone and shows where prices are at — and how little control he has over the fluctuations.

It takes about 13-18 weeks for coffee beans to get from a farm to grocery store shelves. The price of that packaged coffee was set weeks ago on the publicly traded commodity market for coffee futures, which is a way of measuring prices based on contracts for future delivery. Other resources are also traded this way, including oil, gold and wheat.

Futures trading means a surge in coffee prices today won’t be felt by consumers for at least another three months.

The market has been volatile amid ongoing geopolitical tensions, changing government policies in coffee-producing countries and tariffs that make the commodity market more uncertain, Salter said.

“The market, especially when you’re trading on a commodity, doesn’t like that unpredictability,” Salter said. So, the high prices compensate for that uncertainty, he added.

As prices went up drastically over the last two years, it became harder to manage.

“Exporters, importers, roasters, retailers — everybody’s shrinking their margin because there’s just so much price pressure on everything,” Pesce said. “The industry as a whole has gotten less profitable.”

Add to that shipping costs, roasting and packaging costs, all of which factor into the cost of coffee served to consumers.

The cost of getting green beans into Canada alone makes up more than 70 per cent of the production costs, according to KPMG.

Pesce said he has been absorbing some costs while passing the rest on to his private label clients. So far, he has raised prices by more than 30 per cent in the past year. 

But that often opens a floodgate of questions about why it’s happening.

Reunion started sending out reports or newsletters to its clients explaining price surges, hoping to establish transparency about what can and cannot be controlled.

Many relationships in the coffee supply chain are generations old, Salter said.

“You’ve set up your roasting equipment, you’ve set up your production processes in a certain way that it’s very difficult to switch over from one to another,” he said. 

“So, what you tend to do is to try to improve the situation you’re in, rather than change the situation you’re in.” 

A pound of coffee can brew about 40 cups. If the cost of coffee goes up by a dollar, it barely adds a few cents to a cup.

But the surge in prices has been consistent enough that it’s now dripped into the cups at local cafés and even big chains, such as Tim Hortons, which raised prices by an average of three cents per cup earlier this year.

Still, most consumers notice sticker shock when they buy bulk coffee at a grocery store or their local roastery, and experts say this is likely to continue. 

“There’s very little actual price gouging going on that I can see at grocery, at cafés,” Pesce said. 

“It’s just expensive.”

2) Will gold still drive TSX gains next year? Fund managers weigh in

Courtesy Barrie360.com and Canadian Press

By Daniel Johnson, December 28, 2025

Trade turmoil and worries about a possible recession in Canada in the first half of the year were no match for the S&P/TSX composite index as surging gold prices swooped in to carry the benchmark index to new heights.

Fund managers still think gold will help the TSX notch new gains in 2026 — to a lesser extent, considering its big run up. But they’re also eyeing other sectors that could rise along with potential risks on the horizon, like the upcoming review of the Canada-U.S.-Mexico trade agreement.

Philip Petursson, chief investment strategist at IG Wealth Management, said soaring gold prices sent stocks in that area of the market up “over 100 per cent or more in some cases.”

Gold kicked off 2025 trading around US$2,600 an ounce, and was hovering around the US$4,500 mark in late December.

Petursson said there’s still likely some further upside for gold next year, but investors should have more realistic expectations.

“We don’t think gold will be up another 50 per cent, but we think given the deficits, given the projected interest rate environment and given the continued demand for the yellow metal itself, these are positives to see the price of gold continue to move up,” he said in an interview.

Petursson said he thinks the “big money’s been made,” but that gold companies will still benefit from any incremental moves higher in the commodity price.

In contrast to the TSX, U.S. indexes have been mainly pushed higher by large-cap technology companies in 2025. However, with some concerns around the dominance of AI stocks, Petursson said exposure to the TSX is a “fantastic hedge against an AI index like the S&P 500.”

Going into next year, Petursson said he is overweight in equities and underweight fixed income. Since he sees a lower risk of recession in Canada and the U.S., a shock to equity markets is unlikely.

Brent Joyce, chief investment strategist at BMO Private Wealth, said other areas of the market, including energy and industrials, could see some positive catalysts and “maybe take a bit of that baton from the gold sector” next year.

“The notion that the world is awash in oil, you can certainly make an argument and look at that as being true, but that supply-demand is narrowing a little bit,” Joyce said.

He added that if there is stronger-than-expected global growth next year, that could put upward pressure on oil prices, which could in turn benefit the Canadian energy sector.

Oil prices experienced volatility throughout 2025, starting the year slightly above the US$70 per barrel level, and finishing it below US$60.

Within the industrials segment, Joyce said that while major rail companies are facing some level of trade uncertainty, they could benefit from the outcome of trade negotiations between the U.S., Canada and Mexico.

With North American trade officials preparing for a review of the Canada-U.S.-Mexico agreement, or CUSMA, next year, Joyce said railway companies are “heavyweights” in the TSX industrial segment.

A better-than-expected outcome in U.S.-Canada-Mexico trade negotiations would mean “there’s room for upside” for industrials on the TSX, he added.

Nation-building infrastructure projects have been a key focus for Prime Minister Mark Carney’s government. Some initiatives being referred to the new major projects office for an expedited review include an LNG export terminal in British Columbia and critical mineral mines in Ontario, Quebec and New Brunswick.

Going into next year, Brianne Gardner, senior wealth manager of Velocity Investment Partners at Raymond James, said she expects “moderate growth” on the TSX supported by the materials sector.

She said she also thinks Canadian banks will maintain their “solid performance.”

In 2025, Canada’s big banks proved their ability to withstand a variety of challenges once again. Earlier in December, the Big Six banks reported profits totalling $16.45 billion for the fourth quarter alone, up from $14.73 billion last year as they largely shrugged off the effects of immense trade uncertainty with the United States.

“Lending has increased even though we are expected to continue to see rates go down. I think we have that consistent loan demand as well. For us, we still expect to see the Canadian market do well,” Gardner said, adding she anticipates the Canadian market to slightly underperform its U.S. counterpart.

She highlighted recession risks and sluggish economic growth as potential headwinds for the TSX next year.

“That is reflecting softer consumer spending and weak business investment,” Gardner said.

Canada’s economy saw muted growth in 2025, but avoided a technical recession, or two consecutive quarters of declining gross domestic product, based on third-quarter GDP figures released in November.

Statistics Canada reported real GDP rose 2.6 per cent on an annualized basis in the third quarter, rebounding from a contraction of 1.8 per cent in the second quarter.

Going forward, she said she expects slower growth in Canada and a “shallow soft patch scenario, not necessarily a recession.”

“I think the risk to Canadian investors right now is potentially weaker economic growth. If we see slower domestic growth, (it) could weigh on equity performance,” Gardner said.

Other risks to Canada’s benchmark index include the possibility of more tariffs as the CUSMA review kicks off, she said.

“If we do get additional tariffs on the goods that are up for renewal next year, I do think it will have an impact on the stock market, at least short term, until it flows through the economy,” Gardner said.

She added that increased tariffs would have an impact on the balance sheets of Canadian firms and “it certainly could cause some volatility in the markets.”