Sunday, September 5, 2010
Why Coffee Is Getting More Expensive.
This is simple economics. Supply decreases, demand increases and you experience a price increase. Columbia is such a huge supplier of the worlds coffee that a couple slow grow seasons can seriously effect the market. It can be interesting to see a market price shift due to increment weather.
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It is also interesting that companies like Folgers have been raising their prices as a result of the global price increase of coffee, but retailers like Starbucks have not - they have chosen to absorb the cost instead. This is because the percentage of the selling price derived from the coffee itself is much higher in a container of Folgers coffee than a frappuccino at Starbucks.
I assume that coffee production in other areas of the world will increase because it is more profitable to produce coffee now. That would allow for the world price to come back down.
Fortunately, the same article says that Brazil has been having a bumper coffee harvest, so as supply increases again, the prices should fall again.
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