Reflecting: coffee prices, environment and relationships
Coming back from South America I have been reflecting a little on what we do, how we do it and why out direct trade approach is so important to us. I have also returned with a lot of new information running around my head with regards to how climate change is dramatically affecting coffee, and how the current perfect storm of global crises is forcing unprecedented upward pressure on coffee prices. I alluded to this in the previous origin reports but here is a little more depth to what is going on.
Just search ‘coffee supply problems’ online and you will get plenty of results from the past year explaining the myriad of reasons from climate change and low yields, to logistics and the fuel crisis. Let alone the war in Ukraine and massive inflation globally affecting everything from packaging, gas for roasting, delivery costs and of course wages.
The start of the issue at origin is summed up by the BBC News article published 25/07/2022:
The problem for Brazil, and world coffee supplies in general, is that last year the country’s annual crop plummeted by almost a quarter due to a drought across its main coffee growing region . . .
The knock-on affect has been a global reduction in coffee beans supplies, and a subsequent doubling in wholesale prices since this time last year.
Coffee demand, supply and prices
Obviously here in the UK we hear the news from our perspective and how it will affect us – whether we will be able to get a cup of coffee and how much will it cost – but seeing and hearing first-hand what is happening from the other end of the supply chain, from the farmers perspective, has left us pondering the next 18 months.
Harvest is down, there is potential of more frost (or other issues brought about by climate change), the coffee market is up, fertilizer comes from Russia and has jumped in price, pickers wages are up, and all that before you get the challenges we face overseas since container freight prices have skyrocketed, and fuel prices here are affecting roasting and delivery costs.
Conversely, will global demand be down because of the war in Europe, or because of the inflationary pressures on our disposable income? As with most of the cost and price challenges coming about in our lives right now, it is all somewhat unknown.
Oh the complexities of our globally connected world, and the precariousness of our environment right now!
How are EA dealing with this?
As in all things we promise to be transparent and honest with what we know; and the reasons for any changes we make.
Thankfully, given the way we buy coffee, we’ve secured most of our coffee for the next six months or more, which gives us some protection from the current instability in the market and inflated prices, but it’ll be interesting to see how things develop.
We expect prices to remain high for all the reasons discussed here, and so our prices are inevitably going to have to go up too. If coffee remains high, logistics remain complicated and expensive, fuel for roasting is insane, then add packaging, delivery costs and wages – there’s only one realistic outcome.
We are always reluctant to do so, and we will resist until we have to, but we won’t compromise on coffee quality, looking after our farmers, or ensuring we provide excellent customer service.
Reflecting . . .
Business in itself can be done by email, but relationships just need to be in-person, so it was so good to be with our friends in Colombia and Brazil.
Certain facts and knowledge can’t be gained without seeing it for ourselves, and there are conversations and learning that simply can’t happen by phone or email.
As we discovered meeting Angela in Bogota, some opportunities just come in the moment. And again in Minas Gerais the new opportunities for working with small sitios just wouldn’t happen without us walking the land and talking with different farmers.
It reminded us and reinforced our passion for people, for doing business well and that high value that we place on true and honest relationships, from farmers in coffee origins through to great customers in the UK.