An opinion piece on global coffee prices.
It’s on everyone’s lips at the moment and coffee is not immune; inflation. It's undeniable that your morning coffee routine has increased in price alongside everything else, but is it enough?
Global consumer coffee prices have fluctuated significantly over the last decade. In 2011, a cup of coffee reached a peak of $6.46 per dollar, before dropping to a low of $2.42 per dollar in 2015. Since then, prices have been relatively stable, hovering around the $4.00 per pound mark. However there's been a significant increase in cost of business for café owners in the last 12 months - Energy costs have increased by +107%, milk has gone up by +36% and coffee beans themselves have also risen +17% - All of these will contribute to the cost of your morning flat white. But why are business owners bearing the brunt of these costs while consumers expectations of a $5 Americano continue as strong as the brew itself.
The cost of your coffee needs to cover more than the 30 seconds it takes to extract the espresso shot.
In reality, what you pay for your coffee needs to cover over five years of growing the trees to maturity, harvesting, shipping, roasting, and then the café's costs - rent, wages, milk, power, water and (compostable) packaging - in a nutshell.
We’d argue that any café where you can find an underpriced cup of joe for your much-needed caffeine fix is doing a disservice to the entire industry.
Continuing to cement a prehistoric price of coffee in consumers minds.
All the while, green bean material coffee prices are continuing to rise - paying coffee farmers fairly, rising oil prices, shipping delays and limited availability.
Coffee producers can use a variety of strategies to manage price volatility, including hedging and forward contracts. However low supply coupled with high demand, especially driven by large corporations creating low quality blends focused on margins, doesn't help matters. Global coffee production levels have increased significantly over the last decade. In 2011, it was estimated at around 9.5 million metric tons and by 2019, this figure had risen to 11.2 million metric tons, an increase of 17.4%.
Climate change has also played a significant impact on global coffee prices. As temperatures rise, coffee crops are more susceptible to pests and diseases. Additionally, extreme weather events such as droughts and floods can damage crops and reduce yields, leading to higher prices.
According to a 2019 survey, the average price of a cup of coffee in New Zealand was $4.50, which is significantly higher than the global average of $2.90. Compared to the United Kingdom which has some of the lowest retail coffee prices in the world at £2.50.
In our opinion the price of retail coffees should be high enough to support ethically run, sustainable coffee growing industries, providing a reasonable profit for farmers, enough to incentivise them to use sustainable practices, such as organic farming and shade-grown coffee.
It’s difficult to predict the future price of green coffee beans, as it is influenced by a variety of factors, it is likely that prices will continue to fluctuate in the future, as supply and demand, weather conditions, political and economic stability, currency exchange rates, and speculation all have an impact on prices.
While a few cents extra for a cup of coffee might not sound immediately frightening, making a collective change will reduce the risk of consumers turning to lower-quality, less ethical and cheaper competitors for their daily fix.
(Picture: Closed coffee shop that sold $3.00 NZD Double Shots, Auckland CBD)