Wednesday, January 12, 2011

Coffee Prices Insanity

The current coffee price crisis continues.

Everyone in the coffee industry, although some a bit more then others, is suffering from these steep prices. Let's have a look at it.

First link in the chain : the farmer.
Some could think that coffee farmers are the first to benefit because of the increase, but the contrary seems to be true.
Lots of farmers who have been rewarded with Fairtrade prices now risk to be overseen. Because of the huge increase, lots of roasters go searching for less expensive blend components and end up with the cheapest of the cheapest, meanwhile forgetting the more sustainable coffees.
This article by Jill Richardson is an interesting read on this matter.

Because of its popularity over the last year, we expected the Specialty Coffees to become much more expensive and therefor wider the gap with lower priced (budget) beans. We now notice the contrary though.
On average we see that the cheapest Brazilian beans approximately doubled in price over the last year, while an average single estate specialty bean increased the same in value, but way less percentage wise.

The reason for these higher prices?
Lots of people are telling lots of things, but one after another has to admit that's impossible to really understand.
First it was a low Brazilian crop, then it was speculation, then oil dollars, then Guatemalan tornados or Colombian tactics or the poor dollar. I heard a lot, but nothing explaining the coffee index going nuts. Look at this chart to see the evolution over the last year.

We, as a new roasting company, are a bit overwhelmed by all this happening in our start up year. The price difference between our pre orders in April and the prices now is shocking. With an average price increase of 60%, we have a hard time staying credible opposite our clients.
Last summer there were a couple of articles in the press about this matter, but lately we've seen almost nothing related to the record high prices. And when we tell our clients we have to rise prices they mostly seem to be surprised and dissapointed.

Nevertheless it's still nice to be in the coffee business.
And soon prices will go back down again. (we hope)
We stay as positive as possible and try to enjoy the drink as much now as we did before. Cheers.

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