According to a recent report by the Food and Agriculture Organization (FAO) of the United Nations, the impact of raw coffee price increases on consumers takes about a year, with the remaining effect lasting at least four years. Continuous adverse weather conditions limiting supply and depleting global stocks have led to rising raw coffee prices, with arabica gaining over 70% on the ICE exchange last year and more than 20% so far this year. FAO estimates that about 80% of these price increases will be reflected onto consumers in the European Union over 11 months, while in the United States, 80% of the increases will impact consumers over eight months.

THE BIGGEST CONSUMERS: US AND EUROPE EU and the United States are by far the largest coffee-consuming regions in the world. It is noted that price increases for consumers are likely to be much lower than the increase in raw bean cost due to other factors such as shipping, roasting, packaging, certification, and retail price increases contributing to retail coffee prices.

LASTING FOR SEVERAL YEARS

According to the FAO report, a 1% increase in raw bean cost results in a 0.24% increase in retail price after 19 months in the EU, and this “shock” continues for several years. From the perspective of producing countries, the UN agency reported price increases for coffee bean growers in Ethiopia by 17.8%, Kenya by 12.3%, Brazil by 13.6%, and Colombia by 11.9%.

It is emphasized that this is far from the gains seen on international trading markets like ICE.