Back in September and October there were stories in the local media claiming surging coffee prices and the weak dollar would soon take the price of a cup of coffee (flat white etc) to $5 or more (that’s an average — there are plenty of places in inner Sydney where that level is the norm). I notice Rupert Murdoch missed that big yarn.
Since then world coffee prices have fallen 25%, and while the Aussie dollar has weakened as well, the slump in prices has been greater — and curiously, The Australian, Daily Mail and MailOnline and other scaremongers from October have failed to follow up on the slide.
And the slide in prices is going to accelerate with the current Brazilian crop larger than expected, according to Swiss trader Volcafe (owned by the big commodities group, ED&F Man). Volcafe forecasts that prices for arabica-type coffee (the key global price indicator) fall 3.4% to US$1.715 a pound, compared to the peak of US$2.2910 a pound hit in October due to fears drought would cut the 2015 Brazilian crop. In fact there’s every chance coffee could join cotton, sugar, grains and oil seeds in oversupply next year, with weaker prices as a result.
“Upon completion of an extensive crop tour, our first estimate for the 2015 Brazilian crop is 49.5 million [of 60kg] bags,” Volcafe said. That’s at the high end of forecasts, which ranged from 40 million to 50 million bags. Volcafe’s forecast indicates the crop hasn’t been as badly damaged as previously thought, with recent good rains across Brazil’s coffee-growing areas helping to ease concerns. Volcafe’s forecast was after a month-long survey through the growing areas of Brazil by its experts, who travelled 13,000 kilometres.
The United States Department of Agriculture has added to the increased confidence with an upward revision in 2015 Brazilian output of 1.7 million bags to 51.2 million. Helping the coffee supply/demand balance has been a fall in net imports of coffee into Europe in the first six months of this year of 1.1%. Europe is a big processor and exporter of finished beans to other parts of the world. The fall in net imports means fewer beans (mostly green and unroasted) were imported. That indicates weak demand from consumers for coffee of all types, which fits with the sluggish level of economic activity across the continent, but especially in Italy, Spain, Greece, France, Holland and Germany.
So don’t panic. Your latte is going to be just fine.
I love the hysterical overreaction to coffee price rises… Since the actual retail “coffee” input costs accounts for 20-30c at most per cup (and even less at a wholesale level where international prices are set), then even a dramatic doubling of international coffee bean prices should only add perhaps 10-20c to the per cup cost.
For a $3.50 coffee to jump to $5 based on coffee bean costs alone, we’d need to see 1000% or so coffee bean price increase (very rough estimates only!)
Fair suck of the sav, Glenn, Murdoch’s minions have been ultra busy marketing a gunman as a terr0rist. But ‘coffee price threat!’ could be their front page exclusive after this weekend.
Hang on zut…he was a terrorist.
Check section 100 of the Criminal Code Act 1995. The Act gives a definition of a terrorist act.
His actions fall straight into that definition. It’s not semantics or marketing.
As for coffee…its a competitive business with plenty of product substitutions (tea, energy drinks, colas, instant coffee). Hence Price elastic. You up the price too much, and your volumes disappear.
No coffee shop owner is ever going to price themselves out of the market and give up their quality margins on bacon and egg rolls and muffins.
Thanks, Scott, I checked the Act & stand corrected. Hence I’ll amend the earlier post to :
Fair suck of the sav, Glenn, Murdoch’s minions have been ultra busy marketing & commercialising a terr0rist. But ‘coffee price threat!’ could be their front page exclusive after this weekend.