Cheap Pound Expensive Coffee

Who would have thought that one of the immediate effects of Britain voting to leave the European Union would be a pricier cup of coffee? Bloomberg reports that a plummeting British Pound has made a cup of Java more expensive in Great Britain.

U.K. coffee drinkers should brace to pay more for their morning fix as domestic roasters start to pass on increased import costs after Britain’s Brexit vote.

London’s small-scale producers, who help supply the capital’s taste for a quality roast, are facing a steep rise in the price of coffee beans after the pound slumped to the lowest in 30 years against the dollar. As with most imported commodities, U.K. roasters pay for the raw product in U.S. currency, and the foreign-exchange reaction to Britain’s vote to leave the European Union has jolted the market.

Not only is the British pound worth twenty cents less than it was a year ago but coffee has gone up 20% during the same time frame. And as we noted in our article Americans Are Drinking More Coffee, coffee may go a lot higher.

Over the decades the price of coffee has risen above $3 a pound and fallen as low as 50 cents a pound. Speculators such as readers of Seeking Alpha are anticipating as high as $3 a pound as stock piles fall and Americans as well as everyone else drink more coffee.

Coffee may go up in price for everyone but the cheap pound due to the Brexit vote will mean more expensive coffee in Britain than in the USA.

Tea Anyone?

You may be thinking that the Brits drink tea so what is the big deal about coffee. However, there are seven Starbucks in downtown London alone. And for that matter the Brits used to drink coffee when Ceylon (now Sri Lanka) was a coffee producer. That was in the days before coffee leaf rust. In our article, Is Coffee Leaf Rust Due to Climate Change we mentioned the start of this fungal disease.

Coffee leaf rust is a fungal disease. It wiped out coffee plantations in Asia in the middle of the 19 th century. The country of Ceylon (Sri Lanka) was a coffee producer before the leaf rust drove planters to grow tea! The disease spread from the East Indies to South Asia and Africa and eventually arrived in the new world, almost a century later around 1970. Today coffee leaf rust threatens the livelihoods of coffee growers and workers throughout Central America.

When their colonies switched from growing coffee to producing tea the British public drank what showed up on the boat from Asia. Today Britain drinks a fair amount of coffee. The cheap pound expensive coffee dilemma will not necessarily drive more Brits back to tea because tea is also imported so its price in pounds went up also!

How about Organic Coffee?

If the Brits are hurting over the higher price of regular coffee they will feel deeper pain as the prices of shade grown and organic coffee rise even higher. One can only hope that the British pound regains ground and that coffee does prices do not reach the stratosphere.

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