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Is coffee actually getting less expensive?

Posted by on May 29, 2013

The recent drop in raw coffee prices has caused wide-spread questioning as to what will happen to the cost of coffee to end consumers across the world. Here’s the quick and dirty of what has been going on:

  • Between 2003 and 2011 arabica coffee prices more than quadrupled
  • Last week the cost of raw (or green) coffee hit a three-year low
  • The price drop was caused by over planting in Brazil
  • 14 month lows were also seen in robusta coffee grown in Vietnam

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It’s a simple matter of economics at play – the demand for coffee has been rising, so the suppliers have increased their production.  For right now, the supply is greater than the demand. While markets continue to expand, especially in China, the demand should soon catch up to the supply.  It will take some time, and those who are in the coffee business will be able to enjoy a bit of a price break on raw materials for maybe a year before it starts to level out again.  If demand doesn’t grow, coffee farmers are going to be faced with a recurring problem.  Most agricultural commodities are harvested every year, where coffee continues to produce fruit for several years. This means that supply will be in abundance until the demand can catch up.

What does this mean in China? While end customers won’t be noticing a difference in price on their daily pour over or latte, it will bring on a wave of positive changes.  At Sumerian, we focus only on specialty grade coffee, which didn’t the price drop that the typical arabica coffee saw.  Specialty grade coffee refers to those beans that are the best of the best – coffee with little to no defects, brimming with unique flavours and create a cup unlike any other.

cupping

Dave doing some blind cupping. Follow your nose!

This price drop means that companies like us will be able to bring in a wider variety of high quality coffees.  As many of us in China know, availability is one of the biggest issues across all industries.  The slight reductions in price within specialty coffee will allow us to add an extra 10% – 15% of products, which will help us to deliver a broader range of amazing coffees to both our wholesale and end customers. While price reductions are always nice, we feel that being able to offer more at the same price is an even better situation.  We’ve been busy cupping and testing and soon will have the final list of the new coffees we will be adding to our portfolio.

 

 

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