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Are Coffee Prices Going Up or Down?

December 12, 2013

It may be Friday the 13th, but we’re lucky enough to have great coffee – we’re drinking Monte Verde - Carmo De Minas - Brazil, brewed in the moka pot and watching the snow fall while we peruse the coffee news. Here’s what’s caught our eye in the news this week.  

 

Prices Are Going UP… or Down. Coffee Is in Short Supply or Oversupplied…

  Are you confused by the different headlines you read about coffee shortages and rising prices one week and prices tumbling on news of a coffee glut the next? The two scenarios actually exist concurrently, and here’s why. Specialty coffee roasters, especially those who focus on sustainable coffee, are facing shortages of high-quality Central American coffee because of la roya, coffee rust, a fungus that has devastated this year’s coffee crops in most Central American countries. Meanwhile, farmers in South America anticipated a difficult growing season this year, but overshot their estimates, in part because of warmer, wetter weather at lower elevations that usually produce less coffee.  

Rusty Coffee Shorts Specialty Roasters

  Coffee rust affects the leaves of the coffee tree, compromising the tree’s ability to provide nutrients necessary to develop high quality coffee beans – which are the seeds of the coffee cherry. As a result, the harvest is smaller than expected, and the beans lack the character and flavor expected from the best farms in countries like Panama, Costa Rica and Nicaragua.   Those countries supply about a third of the coffees roasted by most specialty/artisan coffee roasters and more than 85 percent of the farmers in those countries have been affected by the coffee fungus. Because of that, it’s looking like a lean year for high quality Central American coffee.  

Coffee Cherries Oversupply on World MarketOversupply on World Coffee Market

  At the same time, coffee prices for Arabica beans are falling in other areas because of an oversupply of coffee beans from South American countries, in particular, Brazil. When you see the headlines about coffee prices falling, they’re often talking about commodity coffee – lesser quality beans that are bought by larger roasters who are going to blend it all together anyway. For those companies, it doesn’t matter if some of the beans are of lower quality than expected. They’ll be blended with a larger proportion of South American coffee – and since that’s in good supply this year, the prices are lower than they have been in years.   The bigger difference is the difference between the smaller specialty coffee market, where terroir – the combination of factors that give a coffee its special qualities– is expected to shine, and the larger world coffee market where coffee is a commodity that has one flavor: coffee. Artisan roasters will pay more for coffee from a specific region when it’s in short supply. Commodity roasters will simply substitute a more plentiful coffee.   So if you notice that coffee prices – especially for the beautiful Central American lots we’ve been seeing this season – are a little higher than they were in the past, you can blame la roya. We still think quality coffee – even at this year’s slightly higher prices – is one of the most affordable luxuries in which you can indulge.  



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