According to a new report from the Food and Agriculture Organization (FAO) of the United Nations, the reflection of price increases in green coffee to consumers takes about a year, with the remaining effect lasting at least four years. Continuous adverse weather conditions limiting supply and depleting global stocks have caused green coffee prices to rise, with arabica gaining over 70% on the ICE exchange last year and over 20% so far this year. The report indicates that approximately 80% of these price increases will be reflected to consumers in the European Union for 11 months, while in the United States, 80% of the increases will be reflected to consumers for eight months.

MOSTLY CONSUMED IN THE US AND EUROPE The United States and the European Union are by far the world’s largest coffee-consuming regions. It is suggested that price increases for consumers are likely to be much lower than the increase in raw bean costs because other factors contributing to retail coffee prices such as transportation, roasting, packaging, certification, and retail price increases also exist.

LASTING FOR A FEW YEARS

According to the FAO report, a 1% increase in raw bean costs in the EU results in a 0.24% increase in retail price after 19 months, and the “shock” continues for a few years. From the perspective of producer countries, the UN agency reported price increases for coffee bean growers in Ethiopia at 17.8%, Kenya at 12.3%, Brazil at 13.6%, and Colombia at 11.9%.

It is noted that this is far from the gains seen in international trading markets like the ICE exchange.