Bloomberg reported this past Tuesday that arabica, the type of coffee bean used by Starbucks, had surged to a 20-month high amid growing global demand and export cuts by Brazil’s largest producer.
Another variety of coffee, robusta, reached its highest level since October 2014 this week on export cuts from Vietnam’s bad weather. Uganda’s coffee exports have also dropped for a third year because of unfavorable weather.
The recent string of bad weather has sent bean prices on a steady rise and left many wondering how much the price of their morning latte will go up.
A recent report from the U.S. Department of Agriculture found that, on average, a $0.10 rise in bean prices per pound would send manufacturer prices—and prices at the register at your favorite coffee shop—up by $0.02.
But coffee isn’t like gasoline. Coffee purveyors don’t adjust their prices daily on the fluctuation of the commodity because unlike gas—which has a small profit margin for the gas station,—coffee is marked up and the fluctuations in the price of beans is already factored in. For a company like Starbucks, there’s a big margin on your $3 cup of coffee.
The coffee leaders of the world, including Starbucks, are already publicly acknowledging the risks to the world’s coffee supply posed by climate change, and recognize that the supply shortages will not only impact the flavor and aroma of your favorite blend but will also send prices rising.
And while strategies are being developed to help coffee farmers adapt to changing weather and to help preserve the diversity of the world’s coffee beans, the reality is that temperatures will continue to rise and coffee prices at your favorite shops will rise right along with them.
I read that the CEO has made huge purchases this month. Prices ranged between 35 and 41 cents. It's about 100% higher than the 20-23 range that Food Empire traded at for a good 6 months between Oct 15 and March 16. What can you infer? That even the insiders did not have the visibility regarding the ruble fluctuation. Any other inferences?