A few months ago when Starbucks raised their prices, several of the coffeehouse owners I know breathed a sigh of relief – not because it makes their own prices seem like more of a bargain, but rather it allows them the leeway to offset their own increasing costs. Even in this down economy, bean prices have risen by over 50% in the past year.
From NPR’s All Things Considered
Brazil, the world’s largest coffee grower, is soon expected to consume more coffee than the U.S. Then there are new coffee drinkers in India and China whose expanding economies have already pushed up prices for raw materials like corn and cotton. Now, it’s coffee.
“As China becomes more and more middle class, they want to emulate European and American ways, and that means drinking coffee,” Schoenholt says.
More coffee drinkers mean more pressure on prices at a time when coffee supplies, especially of higher-grade Arabica beans, are shrinking.
“In Colombia, Costa Rica, Guatemala and several other coffee-producing nations, there have been smaller crops coming out,” he says.
Bad weather is one reason. But even when you look back over the past several years, overall coffee production hasn’t increased much. Simply planting more coffee trees won’t lower prices because it can take up to five years before they start producing beans.
The soaring prices of coffee have also attracted the attention of investors — and speculators — betting on higher prices. Schoenholt tracks prices at the Intercontinental Exchange, where coffee futures are bought and sold.
Soaring prices my tailpipe. Coffee prices are at a 13-year high, which is equivalent to saying “The same price you paid for coffee in 1997″. How many things can make you say that about it?
This may be a sigh of relief for coffee shops to the extent that they seem more in line with places like Starbucks, but for small family diners like mine, the soaring cost of coffee is a real financial problem. We have a bottomless cup, of course, & we used to be able to charge $1 for that cup! We were taking such a loss on that cup of coffee, however, that we had to raise that to $1.50. Mind you, we pour Boyd’s, and people don’t come here for the coffee, but they do want lots of it with their food. We may have to raise our prices again, & that won’t go over well with our guests. People expect “cheap, bottomless” coffee in diners like ours, & with the price of beans going up, we won’t be able to offer it.
Green beans cost twice as much per pound this year as they did last year. Most of this is due to speculation. Hopefully, the speculators driving up the prices will turn their eyes toward another commodity soon. As for how tough this is on people who sell coffee, whether we’re talking beans or cups? Tough. Prices are inching up; they have to; there’s no way for the purveyor to pay twice as much for his or her commodity and charge the same retail or wholesale.
Beyond speculators there are many market issues causing the rise. Our weak dollar is causing all coffees from afar to be elevated. In speaking with friends in the bay area their pricing contracts from a year ago are not being honored. Indonesia in particular is holding containers of coffee because they can sell for more than they contracted last year. December was to be the month that speculators were to dump but that is not looking like it is going to be. Consumption in countries like Brazil, China, India…for quality coffee is up as their economies continue. There are alot of issues.
For a soap box comment…for those that research the pricing please remember the “C” market is not the price paid by your local specialty roaster! We pay much more and don’t contract that long. For the unsolicited advice comment…Fat Milo get a great coffee in there and charge for each cup or bill for each thermos on the table. Your customers will thank you after a week of bitchin!
While it seems to be true that speculators lately are affecting the market and the prices of the coffee we drink, it must be admitted that climate changes are very much in charge of this.
In Colombia, which is the second largest producer of high-quality Arabica coffee beans, growing temperatures and rainfall have badly affected coffee production. Read this article about shortage and soaring prices of Arabica coffee beans in New York.
The Arabica beans are vulnerable to climate conditions and the changing climates led to declined production of Colombia coffee beans and export, which in turn drove prices up dramatically.
So, factors of demand and supply are of course much in play here.