Coffee prices have sky rocketed and reached the 12-year high of 180 cents or 120p a pound for the benchmark bean, Arabica Coffee, whose worth is currently thrice its 2003 price. The upsurge of tea prices were followed by cocoa prices and the day June 24, 2010 experienced a 10% increase. The causes behind have been explored and found to be speculators and supply side factors.
Speculators, after noticing the sudden upsurge in early June, built numerous short positions, expecting a slump. But the prices stayed constant for the travel cup holder as well as coffee and therefore these speculators had to cover their positions with other stocks, resulting in the 10% jump. On the supply side factors, Brazil, being the largest coffee producer, experienced crop depression in 2009. Though it recovered, the quality did not meet up.
Even the annual coffee production dropped by about 30% and the exports thus dropped by 8-10% leading to low and tight inventories. Besides, Colombia’s problems of poor weather and renovations added up. There was a prize bonanza but it did not go back to reach the growers. It is sad that the farmers get just $1.25 per pound though the coffee prices have gone up sky high.
The impact on consumers is based on the roasters. Nestle has nearly 50% market share of the soluble coffee market and the British price increased 10.9% for a coffee jar or bag. The increase of wholesale prices, however, does not affect coffee shops. The price of a coffee cup has 2% of coffee price and most of it is from the lid and sugar. Even a drop in the value of sterling is less likely to affect the price of a cup of coffee. This is good news to the coffee consumers that they need not worry over the increase in prices for Costa or Starbucks, nor cup holders.
