All of a sudden! International coffee bean prices plummeted by 40%

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Instead of a massive reduction in coffee production and an increase in prices, Arabica coffee beans, which account for about 70% of the world's coffee bean production, have plummeted by 40% due to inflation. Should they be able to drink more favorable coffee?

Recently, according to the Nippon Keizai Shimbun, the international price of high-quality coffee Arabica beans plummeted, down nearly 40% from its high in February to the lowest range in one year and five months, as business confidence in Europe, the main consumer market, is deteriorating rapidly because of inflation.

ICE New York futures Arabica beans closed at 151.3 cents a pound on Nov. 18. The price is 38 per cent below its recent high of 258.35 cents in early February. The decline has accelerated since October, with prices falling to 150.45 cents on Nov. 21, the lowest level since July 2021, and hardly rising after that. In recent days, the price has fluctuated around 165 cents, in sharp contrast to last year's price trend. Starting from the 2020 production season, international coffee futures prices have been affected by the weather, labor harvested under the epidemic, and freight costs. There has been a big rise.

According to the United States Department of Agriculture, the European Union accounts for 26 percent of the world's coffee consumption, and now the crisis in Ukraine has led to rapid inflation. According to the European Union, the euro zone's consumer price index rose 10 percent in November from a year earlier, two consecutive months of double-digit growth.

As a result of inflation, coffee consumption as a hobby is also declining, and coffee stocks in many bases are virtually unchanged from the end of October. As of December 2, inventories at the European base in Antwerp, Belgium, rose 70 per cent to about 550000 bags (one bag weighs 60 kilograms). Traders can't find a buyer, so they can only ship the coffee beans to the base and expect to sell them through physical delivery.

It is reported that in Antwerp, about 430000 bags of Arabica beans are waiting for certification, more than four times the number at the end of October. Industry related person Takano said: "the certification inventory of more than 1 million bags is just around the corner. Due to the easing of supply and demand, it will be difficult for prices to rise in the future."

Some media reported that in the past two months, the spot price of coffee beans in India, mainly Robusta, has also fallen seriously, which makes local coffee farmers are no longer willing to sell their coffee beans easily. Instead, they choose to wait and see the price trend further.

A local farmer said that were it not for the urgent need for money, many farmers would not be willing to easily sell coffee beans at current prices. At present, the sharp drop in spot prices is not due to a problem with the quality of coffee beans, but more because of a sharp drop in international futures prices, so this has upset farmers. In the first week of October, the spot price of Arabica coffee in India was about 16000 rupees per bag (50 kilograms per bag). Now it has fallen to 13000 rupees per bag. Similarly, the price of fresh Arabica coffee fell from 9100-9400 rupees to 64-6700 rupees.

Going back to the beginning of the question, the price of coffee beans as a raw material has fallen so badly, can consumers get cheaper coffee? This is obviously not directly reflected in the end-consumer market. The international coffee futures price directly reflects the price of commercial coffee beans in Brazil and the daily price of commercial coffee beans in Yunnan. Compared with commercial coffee beans, boutique coffee beans have long been at a premium and will not be affected by short-term fluctuations in international futures prices. On the contrary, because coffee beans are hoarded at high levels, roasters or raw bean sellers dominated by commercial blending will be affected by the increase in inventory at high prices. The cost of coffee beans accounts for only a small part of the cost of coffee shops. On the contrary, coffee drinkers do need to spend more money than in previous years. Take Starbucks in China as an example, the prices of some Starbucks products also increased slightly at the end of last year. Starbucks' response to this was made after careful evaluation and comprehensive consideration of rent, logistics, store facilities, manpower, product development and customer experience innovation. So maybe we don't spend more money on coffee itself, so even if the international price of Arabica caffeine futures falls sharply, it has nothing to do with whether we can get a cup of coffee more cheaply. The price reduction of coffee is too far away, but according to this trend, if the price of coffee beans in the international market is falling further, the rising trend of coffee product prices is likely to stop.