why the price of coffee is soaring
The cost of your average store is rising, with a new Eurostat estimate suggesting consumer prices here rose 8.2% on the year to the end of May.
This translates into much larger shopping bills – according to Kantar, this means the average household will pay €330 more each year.
But not all price increases are created equal, and a myriad of factors affect different products in different ways.
To help understand what’s going on, we’ve taken a closer look at a selection of everyday grocery items.
Each has seen significant price increases, but each has a different story to tell as to why.
In this article, we will look at coffee prices.
What drives up coffee prices?
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Adam Maguire talks about the cost of coffee on RTÉ Radio 1’s Today with Claire Byrne
Brexit has significantly disrupted the Irish supply chain, but that’s not the only problem. The pandemic is the other big one.
Indeed, at the start of the pandemic, all but the largest factories in the world closed and the world’s ports also closed.
This resulted in massive shipments queuing up at ports with nowhere to go – and empty shipping containers piling up because there was no way to store them and put them on ships.
And it’s not the case that everything starts to work properly once the ports reopen – those backlogs take a long time to clear up.
The fact that we also had the blocking of the Suez Canal and the gradual closing of ports in China only made the situation worse.
So what impact does this have?
Before the pandemic, the global supply chain meant it was easy, and often cheap, for businesses to source from halfway around the world.
According to the International Monetary Fund, approximately 80% of goods traded worldwide are transported by sea. And it pretty much worked like clockwork too; businesses knew they could order goods now and they would arrive within a predictable amount of days.
As a result, many companies have operated on what is called a “just in time” model. The idea is that they order parts and products as they are needed, instead of building up a small inventory that needs to be processed.
The advantage is that companies don’t tie up a lot of money in goods that sit there in storage – but the disadvantage is that when there’s a major blockage on the other side of the world – as was the case with Covid – they don’t have their own stock to fall back on.
And when the pandemic hit, it led to bidding wars for space over the few containers coming out of ports. The longer the shipping distance, the more companies had to pay.
But shipments have also become much slower and less predictable, as ports seem to prioritize high-end goods, and those deemed less valuable end up having to wait longer for space on a ship. .
The disruption was such that you also have this weird phenomenon of empty shipping containers piling up in some parts of the world, waiting to be filled, while at the same time you have goods in other parts of the world waiting for a container to be put on a ship.
It’s even led to some companies paying top dollar to ship empty boxes from one part of the world to another, just to try to get their supply chain back on track.
What does it have to do with coffee?
Obviously, there is no possible local supply of coffee – you have to travel to very distant places like Brazil, Vietnam, Colombia or India to get it.
You therefore have no choice but to pay the shipping costs, whatever they may be.
And they’ve really increased since the pandemic.
According to the IMF, the cost of shipping a container across oceans has increased sevenfold in the 18 months since March 2020.
But other factors beyond shipping also affect coffee prices.
Higher energy prices mean it costs more to roast beans and transport the finished product to stores, for example.
And the price of the coffee itself is also rising.
The US Coffee C Futures is a commodity market that tracks the price of specialty coffee, and it is used as a benchmark when pricing orders.
It rose by around 50% last year – and it has more than doubled in the past two years – in part because of weather warnings from Brazil that traders feared would impact the harvest.
And it hurts big players as much as small players.
Starbucks raised prices in October, then January — and said more hikes are coming — all because supply chain costs, as well as labor costs, were reaching their peak. net profit.
According to the CSO, coffee prices jumped almost 3% between March and April – so in just one month – and are around 4% higher over the year, which follows just above the global rise in food prices.