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Coffee: costs and price

April 08, 2012

Before I continue writing about the coffee growers, please allow me to divert a little to talk about the price of coffee.

A few days ago, there was a blog here, which reflected concern about the relatively high current price of coffee.

Let me give you a glimpse of how the price of coffee has developed, from the exporter’s point of view. Then you find the price of coffee in the shelves and draw your own conclusions.

First, let me make clear that the prices in the NY and Germany markets are negotiated between brokers and exporters. These prices are not what the growers receive, which normally is somewhere between 60% and 65% of the market price.

With very few exceptions, the grower sells to either the thresher (the guys who buy green coffee and thresh it to obtain parchment) or to the exporter who also owns a threshing machine.

Keep in mind that the grower begins with preparing the land and keeping a nursery to select seedlings, then plants, fertilizes, controls plagues, harvests, selects, de-pulps, selects, washes, selects, dries and selects again. Most of these chores are hand-made.

The thresher needs to maintain his machines in working condition, select after threshing and bag the parchment.

The exporter needs to fill papers, comply with red tape and with the bank’s requirements.

In short, the process goes from heavy-labor to heavy checkbooks.

Now to prices.

Here is a list of average market prices taken from the ICO (International Coffee Organization) website and are expressed in USD/lb paid to the exporter for the coffee FOB port of origin (meaning Free On Board = coffee bagged and stuffed in container, already on board the ship, all costs included).

I leave you guys two homeworks.

One is to compare these prices with the retail price of roasted coffee.

The other is to review the prices of a few other items, such as steel for making machetes, fertilizers, vehicles, other foodstuff, paper to make books and notebooks for schoolchildren, etc.

1998 1.09
1999 0.86
2000 0.64
2001 0.46
2002 0.48
2003 0.52
2004 0.62
2005 0.89
2006 0.96
2007 1.08
2008 1.24
2009 1.16
2010 1.47
2011 2.10
January 1.89
February 1.82

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