Posts Tagged ‘Kopi Luwak’

What price the coffee in your espresso?

With coffee prices remaining high and stubbornly firm around 220 > 230 cent / Lb you have to wander what on earth is going on in the market place….? Coffee is quoted at a market price – This is base price. This price is used as a guideline and to buy and sell “paper coffee” contracts

To the base price a “differential” needs to be added

The differential is the +ve or –ve at which origin coffees and gourmet coffees trade vs the market price

The market price + the differential = The Free on Board Price (FOB)

Onward delivery to European port is an extra charge and can be quoted –

CIF (Cost/Insurance/Freight) FOT (CIF + Beans out of warehouse) FIF  All costs delivered to factory door

Ok so what influences coffee prices…? Well traditionally, fundamental factors were most important- but as recent intraday trading volatility and ranges show, speculative and fund driven activity is now a key driver

In general terms then most important factors are

Supply > Demand

Eg: Kopi Luwak + 6500 c/Lb bags vs Brazil 45 m  60 kg bags pa -5 c/ Lb

Increasingly accredited coffees are seeing differentials firm due to supply > demand concerns

As a result of higher terminal market prices many farmers are leaving accredited systems such as Utz / Fair Trade and Rain Forest Alliance. This at a time when demand from Northern Europe is growing strongly…the net effect we now see RFA Brazils with CIF differentials at an aboard +50 whilst Centrals can be had at + 20…

Elasticity

Traditionally, elasticity was also a major influencer of differential price…by this we mean the ability to find an alternative coffee within the flavour family. Colombian is a good example…..if you want / need and specify Colombian Coffee nothing else will do….! Hence Colombian differentials (+45 > 60)

Screen size

The size and beauty of the beans you want! Brazil Grinder   (-15c / Lb) Mexican Maragogype (+ 250 c /Lb) (Measured in sizes < 12 > 19 – 23)

Altitude of Plantation

Altitude is all to the coffee snob…..although South Africa (now growing Arabica at sea level ) and Thailand where fabulous Arabica is grown at or less than  600 metres seem to blow this rule away…

Other good examples:

Central American Coffees Honduras HG / SHG c 30c > 50 Lb

Guatemala HB / SHB c 20 > 35 c Lb

Defects

How many funny bits per 100 beans or 300g

Flavour characteristics (Within the family)

Brazil Good Cup vs Fine Cup (+ 5 c Lb)

Kenyan   A > AAA (Size) FAQ > TOP TOP (Taste) = + 250 c / Lb range

Fundamentals

Frost – Drought – Earthquake – Meteorological phenomena

Speculators

Lower equities encourage speculators to look for a return elsewhere

Supply & Demand – Fundamentals

Coffee consumption is growing – New /Emerging Markets – China New Consumption – In Origin New Consumers – European Café Culture Improved agricultural techniques & replanting programmes

So ! Coffee pricing is complicated… and has grown ever more complicated in the current volatile economic climate where commodities seem a safe investment bet! Rest assured, you don’t need to worry about any of this with our fab ESE espresso pods…  we keep a strict eye on consistent quality… Guru’s old friend has over 50 years expertise …he spits and slurps and gives us the nod before we pack and send our finest espresso to you to savour and enjoy in the comfort of your own home…lucky you!

Image via Wikipedia