Coffee prices keep going up.
This year world coffee prices are at a 13 year high. World market coffee prices have risen 80 percent or more since June of 2010. Even conventional, non-organic coffee is fetching prices 75 percent higher than the usual fairtrade minimums. The high prices have impacts from the coffee farms to the cafes of Europe. The high prices also affects fair trade coffee- both the grower cooperatives, and importers in Europe and other parts of the world.
To be more specific, in January 2010 world market prices of arabica coffee were at $1.54 per pound (NY “C” price). In January 2011 this price was $2.63 per pound. That is a BIG difference, and there is almost no way this price spike won't be felt by coffee drinkers in the form of higher prices at the consumer level.
How does this relate to fair trade prices?
While the circumstances to this years high prices may be unique, price fluctations are also a part of coffees history. Fair trade minimum prices are an attempt to stabilize historical fluctuations in coffee prices. Minimum fair trade prices generally are higher than world market prices. If world market prices rise, then fair trade prices always rise with and slightly above market prices.
The average price per pound paid to farmers for Fair Trade Certified coffee in 2009 was $1.69 per pound, while the average market price was $1.25 (Source: Fairtrade USA). The situation this year is different. Some fair trade cooperatives are getting more than $3.00 per pound. This is almost double the fair trade prices from 2009.
Here at Just Coffee Denmark we are directly experiencing what this means. We will be buying coffee from the COMUCAP cooperative in Honduras which the cooperative received $3.17 per pound. And we agreed on a price with the La FEM cooperative in Nicaragua which will be $3.28 per pound.
We will be raising prices so that we continue to earn enough to stay in business.
It will be interesting how high prices will impact the cooperatives. Of course there will be some good results. The minimum fair trade price is actually not really that impressive. In other words, fair trade helps farmers survive, it doesn't directly cause them to come out of poverty in most cases. So in the short term the higher prices will be a benefit to cooperatives. But many cooperatives and their individual members are living below or close to the poverty level, so a little extra money this year will be welcome, but may not go that far. A lot depends on how long the high prices continue.
What is causing the high prices?
One reason may be climate change. An example of this is Colombia. The second biggest coffee producer in the world, Colombia produced around 12 million 70 kg sacks of coffee in 2006. (yes that is 840.000 TONS of coffee!) Colombian coffee producers hoped to increase production, but in 2010 they produces less- “only” around 9 million sacks. Many in colombia are saying this is the result of global warming.
Another reason is the lingering effects of the coffee crises- or multiple coffee crises, where market prices have dropped to $0.40 per pound. In periods of low prices (like from 2000 to 2005), some coffee farmers replaced their coffee plants with other crops. Generally yields go down after periods of low prices. So fewer farmers are producing coffee when prices eventually go up again.
A third reason for the high prices is growing demand. Coffee is increasingly popular throughout the world. Some estimate the demand for coffee grows by 2,5 percent per year.
If production goes down because of climate warming, bad weather or other reasons, prices rise.
Commodity speculation has also driven prices up. Stock traders buy and sell coffee futures for profit. This speculation can drive prices up.
That's all for now on coffee prices! Feel free to contact us with your thoughts.