By May Angel
LONDON (Reuters) – Raw coffee price shocks take about a year to feed through to consumers while the residual impact lasts at least four years, according to a report published on Friday by the United Nation’s Food and Agriculture Organisation (FAO).
Thanks to persistent adverse weather crimping supplies and eating into global stockpiles, raw coffee prices have been on a tear, with arabica gaining 70% on the ICE exchange last year and more than 20% so far this year.
According to the FAO, about 80% of these price rises will feed through to consumers over the course of 11 months in the European Union, while in the United States 80% of the rises will feed through over 8 months.
The U.S. and the European Union are by far the world’s largest coffee consuming regions.
Price rises for consumers are likely to be much lower than the rise in the cost of raw beans as there are other factors that contribute to retail coffee prices, such as transport, roasting, packaging, certification and retail mark ups.
According to the FAO report, a 1% increase in the cost of raw beans in the EU translates into a 0.24% increase in the retail price after 19 months, “with the shock persisting for several years”.
In terms of producing countries, the UN body said prices for coffee bean growers rose 17.8% in Ethiopia, 12.3% in Kenya, 13.6% in Brazil, and 11.9% in Colombia – a far cry from gains seen on internationally traded markets like ICE.
(Reporting by May Angel; Editing by Elaine Hardcastle and David Evans)
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