Don't expect to pay less for latte

RACHEL BAXENDALE
January 29, 2014
The Australian
GLOBAL coffee prices may have plunged recently but that doesn’t mean you can expect to pay less for your latte.
The arabica coffee market hit a seven-year low of 110.7 US cents a pound last month, coming off 2011’s 14-year high of 246 cents.
Experts were limited in their optimism about a recovery in prices, with a Reuters poll of 23 analysts and traders this week predicting coffee would end the year at 125 cents a pound, with increased Asian demand failing to alleviate an oversupplied market fuelled by record production in Brazil and Vietnam.
Cafe owners and coffee roasters say the downturn will have little effect on the prices that their end of the market pays for beans.
Aaron Wood, production manager at North Melbourne’s Small Batch Roasting Company, said the slump would mainly affect customers who buy low-end commodity coffee from supermarkets.
“We deal in a product that doesn’t reflect that pricing structure,” he said.
Mr Wood said Small Batch sourced most of its coffee through direct relationships with farmers in Columbia, Guatemala, Costa Rica and El Salvador, negotiating with African producers through a reputable Norwegian broker.
“Countries in Central America producing a lot of the highest quality coffee have in fact experienced a drop in production due to coffee leaf rust, which is actually driving prices up at our end of the market,” Mr Wood said.
“People also need to remember that the price of green beans is a very small percentage of the total cost of a coffee.
“The majority comes from labour, rent, milk, electricity and shipping.”
Melbourne Coffee Merchants owner Fleur Studd, who co-owns boutique cafe Market Lane, agreed lower global coffee would have little impact on cafe prices.
“The way we work with farmers is that we pay them a premium to produce a quality product. The price isn’t dictated by what’s happening in the fee market,” Ms Studd said.
“The lower price will have more impact on more commercial entities, but it’s still unlikely to be passed on to the consumer.
“In my mind, the people missing out aren’t the consumers – it’s the producers, many of whom are having to sell their coffee below the cost of production.”