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Lets all be thankful for the rain.....

I am sure that if you are a buyer in the coffee industry, you will have had your recent focus well and truly fixed on the weather forecasts of Brasil.... a week ago it seemed that we were going to be hitting new record highs on the coffees as they approached $3.50 /lb... Brasils crop harvest sets the tone of the overall coffee market at the NYC stock exchange and so a draught in Brasil will see coffee prices sore across the market....

What would this mean to me, and will it affect my coffee shop? 

On the whole coffee roasters of any scale will buy stocks to see through a period, contract stock to last a contract or generally have enough to survive any normal fluctuation in the market price - they will consider a sensible buffer on their prices to ensure regular price changes are not necessary and to a point, absorb minor deviations in the cost - taking the good with the bad. In these instances the end user (the coffee drinker) will most likely not see the change at all (blissfully unaware of the turmoil behind the scenes)

However smaller artisan roasters who do not have the space, contracts or necessary cash flow to insure themselves against such increases will invariably be hit with price increases immediately. The cost of a metric ton of raw coffee shot through the roof during the dry spell in Brasil and saw increases of nearly £1000/ton in some instances, which lasted for a sustained period of time. In this case, it is not possible to "ride the storm" and prices of the coffee are increased to their customers accordingly - this then puts pressure on the store owner to consider changing their coffee prices - whilst the store owner makes the largest margin in the chain, there is still a need for them to maintain the profit margins they have been making - therefore it is likely that smaller independent coffee houses using artisan coffee roasters may have had to adjust their prices slightly (or at least thinking about it)..

...... but hang on - it is RAINING in Brasil... finally the rains have begun to fall in Brasil, which gives the market more confidence in the 2015/16 harvest, ultimately driving the price lower again and bringing the cost back in balance.

So lets all be thankful for the rain....

 

Til the next time folks....


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