Global coffee trade grinding to a halt, hit hard by brutal price hikes
Global coffee trade grinding to a halt, hit hard by brutal price hikes
63 comments
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Logistics cost money
Shucking and processing the beans costs money
Roasting the beans costs money
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Exactly. And all of those stay the exact same price even if raw coffee price increases, meaning the price of a ready made cup of coffee hardly changes as the actual raw bulk coffee is only 1/60th of the total price of a starbucks latte.
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How about this explanation:
There is a reduced supply of coffee beans. Let's say 30%. This requires that 30% of customers have to be priced out of the market.
If the coffee shop owners only increase the price by several cents then the demand stays the same. They have to fight for coffee beans which drives up their costs step by step.
However, if they increase the price in advance, and far more than necessary right from the start, then the reduced demand matches the available supply and the value of the coffee beans roughly remains the same which allows them to profit from most of the price hike.
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There is a reduced supply of coffee beans. Let’s say 30%. This requires that 30% of customers have to be priced out of the market.
this is fiction writing. you are literally making that up
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What do you mean? There are globally less coffee beans available. Or do you mean the 30%? That's just an arbitrary number, as I tried to make clear by writing "Let's say ...".
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the price doesn't need to change at all. if it does, it is a decision someone makes.
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Then you have more demand than supply because there is not enough coffee for everybody. This leads to people queueing and some people leaving without coffee.
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maybe. but you're making up the story so you can tell any story you want.
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You'd be right in theory - the cost of logistics should scale with weight or volume, not price - but we've already seen from the price shocks over the last few years that in reality corporations will always take the opportunity to price gouge on any upstream change, even when it has no impact on their costs.
But even putting aside the fact that capitalism will take it's cut, you're citing the potential impact of 700% price increases, but I'm not ruling out the possibility of 7,000% increases or higher. With the potential scale of impact that we could see from climate change, and how it affects delicate ecosystems like those in which coffee grows well, that's not outside the realm of possibility.
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Oh yeah, even a tiny increase in bulk price is a fantastic excuse to bump the profit margins for corporations, I'm not even pretending that wouldn't happen in real life. Just look at the US egg prices and the massively increased profits of the companies selling them.
As for what's the upper limit on the price increase in the long run, that's quite hard to estimate, because the more expensive coffee becomes, the more options there will be for growing it in sub-optimal conditions. At some point, somewhere, growing coffee in a greenhouse becomes profitable to do.
Is that at $10/kg, $30/kg? $100? Over 9000? I don't have a clue.But for quite a lot of people the coffee they currently drink is so ridiculously overpriced that even an absolutely massive increase wouldn't have to mean they actually need to stop drinking coffee - to make a latte at home that was expensive as the one from Starbucks, the coffee itself could cost $350/kg - 15 grams of it would be $5.25, plus the milk. It would just completely kill coffee shops as a concept.
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You're forgetting the most obvious factor: charge the most people are willing to pay.
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63 comments