I first started drinking coffee as an exchange student to Japan. It was late last century and being a generally law-abiding type, I eschewed the opportunity to buy cans of Sapporo from vending machines in favour of the thirst-quenching goodness of Pocari Sweat and the sweet fuel known as iced coffee (at that time, still a rarity in North America). And a decent cup of coffee — which canned Japanese iced coffee isn’t, really — is something I fantasize about a lot these days, as I’m on a strict decaf-til-the-baby-comes diet.
After reading recent news reports, though, I wonder: when I’m “allowed” to imbibe that magic exilir once again — possibly as early as next week — will I be able to afford it?
This past weekend the Globe and Mail ran an excellent piece on the current “coffee crisis, which has seen commodity prices for coffee “more than double in the past year, using Brazilian coffee as a benchmark.” (Full article: Peak coffee: A cup of trouble)
Three distinct problems were cited as potential causes:
Changing weather patterns
For coffee producers like Mr. Villota, (the last) three years have been a constant battle. Without enough sun, coffee plants don’t grow the berries that are harvested for their beans. And too much humidity creates ideal conditions for coffee rust, a disease that stunts berry production. Some farmers have seen a 70-per-cent drop in yield, although his San Alberto estate has limited the damage to a 20-per-cent decline.
“It has been a disaster,” said Mr. Villota.
Growing demand, dwindling supply
Brazil and Colombia are the top two producers of Arabica, but experts say the crops are not keeping up with skyrocketing demand in emerging markets like China, India and South America, as well as among consumers in Europe and North America.
In the face of strong demand, coffee inventories have fallen to their lowest levels on record. A decade ago, coffee-making countries had stored some 55.1 million 60-kilogram bags. Last year, stocks fell to 13 million bags. The industry’s supply-demand balance is so bleak, in fact, that a scientist rocked trade forums last year by warning that the world is veering toward “peak coffee” – the point at which producers can no longer increase production to meet the world’s rising taste for the drink.
Market speculation
(S)ome are blaming the rising cost of coffee on speculators – institutional investors who are pouring money into commodities such as coffee, oil and sugar in search of big returns. Starbucks president Howard Schultz has blamed speculation, rather than supply shortages, for the doubling of coffee commodity prices since last May.
… Coffee prices – which went through a prolonged slump between 2000 and 2006 – have doubled since the middle of last year, with Arabica topping a 34-year high of $3.08 (U.S.) a pound earlier this month before selling off with the rest of the commodity market. Arabica now sells on future markets for $2.65 a pound, compared to less than 50 cents a pound at its nadir a decade ago.
What does all this mean for Canadian coffee drinkers and the restaurants and cafes that serve them?
Faced with skyrocketing product costs, few have been able to swallow the price increases without passing along some of the costs to customers — a trend that is true for both chains and independents:
- From The Canadian Press: Higher prices are percolating through the food chain (Tim Hortons, McDonald’s)
- From The Calgary Herald: Commodity costs continue to push coffee prices (Starbucks, packaged coffee vendors)
- From The Globe and Mail: Second Cup revenue slips slightly in first quarter (Second Cup)
- From The Calgary Herald: Calgarians undaunted by rising coffee prices (deVille Luxury Coffee & Pastries, Caffe Rosso)
Order Up 