Crisis in the coffee market: Price hikes will be reflected to consumers in 1 year
While there has been a major increase in green coffee prices due to poor weather conditions, a new report published by the FAO indicates that it can take up to a year for these price increases to be reflected to consumers.
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According to a report published by the Food and Agriculture Organization of the United Nations (FAO), it takes approximately one year for increases in green coffee prices to be reflected to consumers, while the remaining impact is expected to persist for at least four years.
Green coffee prices have risen as adverse weather conditions have limited supply and depleted global stocks. Arabica coffee gained 70 percent on the ICE exchange last year and has gained more than 20 percent so far this year.
According to the FAO, approximately 80 percent of these price increases will be reflected to consumers in the European Union over 11 months, while in the United States, this rate will be 80 percent and the increases will continue for eight months.
HIGHEST CONSUMPTION IN THE US AND EUROPE
The US and the European Union are by far among the world's largest coffee-consuming regions.
For consumers, price increases are expected to be much lower than the rise in raw coffee bean costs. This is because other factors that affect retail coffee prices, such as shipping, roasting, packaging, and certification, also contribute to price increases.
According to the FAO report, a 1 percent increase in the cost of raw coffee beans in the European Union leads to only a 0.24 percent increase in retail prices after 19 months, and this "shock" continues for several years.
Regarding producer countries, the UN agency reported that coffee bean growers' prices increased by 17.8 percent in Ethiopia, 12.3 percent in Kenya, 13.6 percent in Brazil, and 11.9 percent in Colombia.
It is emphasized that this is much lower compared to the gains seen in international trading markets such as the ICE.