Coffee cost threat as bean prices jump
Fears that cups of coffee could become more expensive grew today after bean prices soared to a fresh seven-year high.
The price of robusta beans used to make instant coffee jumped 3% to $1,668 (€1,300) a tonne for delivery in September.
The prices were the highest for seven years and came amid dwindling global supplies and lower exports from Vietnam, the world’s biggest producer of robusta coffee, where heavy rain has disrupted operations.
There is also the threat of falling production in India next year because of damage to crops by heavy rain and pests.
The price of robusta coffee has lifted around 50% in the last 12 months. There has also been a smaller increase in the cost of the milder and more aromatic arabica coffee due to a drought in Brazil. Arabica accounts for around 65% of global production while the more caffeine-rich robusta beans make up 35%.
The price rises could lead to more expensive coffee in supermarkets and coffee shops, according to the International Coffee Organisation (ICO) in London.
ICO head of operations Pablo Dubois said: “It will eventually put up the price a little but not by very much.”
He said the raw material only accounted for 20% of the price of coffee in supermarkets and around 5% in coffee shops – meaning other factors such as packaging and staff wages had more of a bearing on retail prices than the cost of the coffee itself.
Global demand for robusta coffee outstripped supply this year after production fell from 114 million bags to 106.32 million bags.
Mr Dubois said: “There is a very immediate shortage of coffee from Vietnam because of very heavy rain and the new crop is only due in October.
“There is a shortage of robusta coffee from the largest producer in the world and at the same time there is generally a tight supply and market situation with some reductions in stocks in other major producers.”
He said the tightness in the market meant robusta coffee would continue to rise in price for the next few weeks although it could fall again once the harvest of next year’s crop starts this October, so long as it is not damaged by drought or floods.
The ICO said it expected production to hit 120 million bags next year while demand would be 118 million bags.
Mr Dubois said: “While it is at that sort of level it is quite a tight balance and climatic and market matters will exert quite an influence over price.”
