The origin and development of coffee prices

Die Entstehung und Entwicklung von Kaffeepreisen

The cThe prices paid by consumers depend on many factors: Crop yields, climate influences, political stability in the growing countries, social and environmental standards, distribution costs, trade margins and interests of the international financial markets. From this point of view, the price of coffee evolves just like the price of other foodstuffs that are grown somewhere in the world and then reach the consumer. In this article, I will explain to you the origin and evolution of coffee prices, as well as why, especially at the moment, such high prices are being called.

The origin and development of the coffee price

The price of coffee
There is no general price for coffee. As with wine, chocolate or other foodstuffs, coffee is assessed individually according to its quality and priced accordingly. What is referred to as the world market price is merely an average price from the most frequently traded varieties. This price, which is also called the Composite Indicator Price, is set by the ICO (International Coffee Organization). This serves as a basis or guideline to which the trading partners orient themselves. As described above, it is the different qualities, processing methods, countries of origin, but also the influence of climate or politics that make coffee an individual product.

The price of specialty coffee
This type of price calculation does not apply to specialty coffees, layers or plantation coffees, as these are not available in such large quantities that trading them on the world market is worthwhile. Small specialty roasters, like us, have the opportunity to maintain a close relationship with our farmers and pay the producers more money for the green coffees they want. Labels such as Fair Trade are of no use here, as they only cost the consumer more money, but the producers get little, if anything, out of it. Nevertheless, the CIP (Composite Indicator Price) also has a slight influence on the price here, as the traders are guided by it. So if the world market price rises, so does the speciality price.

The value chain
Coffee increases in value from step to step. Starting with the cultivation up to the roasting plant, where the coffee is offered for sale to the consumer. In the growing countries, costs are already incurred for transport, processing, sorting, packaging and storage, as well as financing. In addition, there are also national levies and export taxes. These are all to be paid and this also increases the price of coffee. In order to export the coffee to the various countries, there are further costs for transport and port fees. Once there, there are costs for storage, quality control, duties, sample management and finally transportation to the roasters which again increase the value. Finally, after the roasters have paid for processing, packaging, transportation, distribution, advertising, storage and financing, the government still contributes to the final price. For each kilo of roasted coffee, the roaster pays a proud € 2.19 per kilo .

The development of the coffee price in the last year

It has been known for years that the climatic changes would place great demands on coffee growers and farmers.
Since last year, the price of coffee has been rising steadily. In the middle of this year in July there was a sharp increase. This has to do with severe climatic conditions, such as the frost wave in Brazil and the lack of rain. This year there will be a shortage of millions of bags of 60 KG from the Brazilian harvest alone. We are talking about a loss 12 times greater than usual. The consequences of these damages in the biggest coffee producing country lead to a massive price increase of green coffee. (See chart coffee price development below)

The coffee price development October 2020 - October 2021

Why is the consumer paying more now?

Raw material prices and transport costs
Since the beginning of the corona pandemic, we have been struggling with ever increasing costs. Commodity prices - in our case coffee - are rising, especially due to climate change, but also with higher freight costs. Containers are scarce, fuel prices are rising and more is being shipped than we have resources for. This price impact also has a direct effect on our selling prices. Since our success is based on the sustainable partnerships of our coffee farmers, we already pay significantly higher prices than the market norm. We want to keep it that way.