The Cost of Coffee

Posted by:strictlycoffee onNovember 6, 2011

Coffee producing countries used to control the supply and the price of coffee, in accordance with the International Coffee Agreement.

But in 1989, coffee exporting states failed to agree on quotas.

This happened partly because countries that never used to produce coffee begun to grow the crop, thus adding to an already mature market.

Subsequently, many countries flooded the market with reserve coffee that had previously been held back to keep world prices high.

At the same time, consumers’ demand for coffee fell in many parts of the world, in part due to competition from other drinks. So world coffee prices halved and have remained volatile ever since.

From bush to supermarket some coffee beans can change hands as many as 150 times.More things go into the price of coffee than what you may think:

Coffee Value Chain

Coffee Value Chain

1. Cost of production – it costs money to fertilize, prune, and generally take care of coffee trees, let alone the costs of harvesting the coffee and processing it until it’s stable enough to send to market. These costs alone are about US$1/lb,

2. Cost of transportation – not as much as it used to be, but it’s tricky getting coffee from the mountain side where it grows over bad/nonexistent roads to a major port.

3. Cost of roasting – green coffee does not make a very tasty beverage; they need to be roasted first to turn it into the coffee we drink, which of course needs fuel. There is also weight loss in roasting process.

4. Cost of distribution – the now-fragile roasted coffee needs to be distributed to thousands of retail stores, and coffee shops each of which needs to mark up the coffee to keep the store in business.
The processing and handling of green, or raw coffee adds 50% to its price, according to estimates by the Fairtrade Foundation which works for a better deal for coffee producers. Much of this goes towards paying for transport, storage and handling costs. Then, as part of the exporting process, freight and insurance will add about 10% before an importer takes over.

 

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