Price of Coffee Beans Falls

Selling of large quantities of Arabica coffee by Colombia and Brazil served to drive coffee commodity prices lower. Part of the issue, as the price of coffee beans falls, is that major coffee growing areas in Latin America are recovering from last year’s historic rains and flooding. Although daily prices are often based on technical factors, longer term pricing is based upon supply and demand and as supply goes up the price of coffee beans falls. How does this affect healthy organic coffee prices? Support of organic coffee prices is essential for the system that rewards coffee farmers for practicing sustainable agriculture. Higher than usual prices for organic coffee are an incentive for coffee farmers to used dedicated storage facilities, dedicated equipment for harvesting, cleaning, and sorting. As the price of coffee beans falls will it take the price of organic coffee with it?

Why Is the Price of Coffee Falling?

Harvests were historically low last year and for the last few years in Brazil, the world’s largest coffee producer and in next door Colombia, the number three ranking producer. Last year Vietnam, the world’s second ranking producer, dumped large amount of warehoused coffee on the international market in a year of historically high prices. Now, as the weather returns to normal in the Cafetero of Colombia and the coffee growing regions of Brazil it appears that production will be up, which will drives prices down. As the price of coffee beans falls market sentiment among technical commodity traders can take the price even lower, beyond what fundamentals might predict. As the price of coffee beans falls other factors may affect organic coffee prices. There is still a slowly recovering recession in North America, Europe, and Japan which are major consumers of organic coffee. Japan is slowly coming around from the worst earthquake and tsunami in their recorded history. Europe is probably going into recession again as fiscal austerity measure take their toll and nations such as Spain are suffering a twenty-five percent unemployment rate. The USA is seeing slow growth in manufacturing but unemployment is still stuck in the high 7 percent range. With less expendable income to go around, will consumption of organic coffee suffer? As the price of coffee beans falls so might consumption of organic coffee which would drive prices even lower.

What Happens to Organic Coffee Prices in the End?

It could well be that the end result as the price of coffee beans falls might be higher priced organic coffee. But, lower prices could drive organic coffee growers out of business. Then, in fact, organic coffee might become hard to find! The obvious end result would be more expensive organic coffee. The combination of social responsibility and organic coffee makes this possibility very sad. If an organic coffee producer decides to give up he will first forego organic coffee certification. Then, when he wants to certify again he may need to wait for paper work or even wait for years to demonstrate ongoing organic practices. So, as the price of coffee beans falls let’s hope the price situation does not damage to supply chain for a good cup of organic coffee.

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