Breaking! International Coffee Bean Prices Plummet 40%

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Why Aren't Coffee Prices Dropping Despite Arabica's 40% Plunge?

Instead of increasing due to significant coffee bean production reductions, prices have actually plummeted by 40% due to inflation. Arabica coffee beans, which account for approximately 70% of global coffee production, have seen a severe decline. Does this mean we'll be able to enjoy more affordable coffee?

Recently, according to Nikkei News, the international price of premium Arabica coffee beans has plummeted, falling nearly 40% from February's high point to its lowest price range in the past year and five months, as business confidence in the main consumer market of Europe is rapidly deteriorating due to inflation.

On November 18th, the New York Futures Arabica beans at the U.S. Intercontinental Exchange (ICE) closed at 151.3 cents per pound. This price is 38% lower than the 258.35 cents in early February (the recent high point). The decline has accelerated since October, with prices falling to 150.45 cents on November 21st, the lowest level since July 2021, and have struggled to rise since. In recent days, prices have been fluctuating around 165 cents, creating a stark contrast to last year's price trend. Starting from the 2020 production season, international coffee futures prices have experienced significant increases due to multiple factors including weather, harvesting labor during the pandemic, and shipping costs.

According to statistics from the U.S. Department of Agriculture, the EU accounts for 26% of global coffee consumption. Currently, the Ukraine crisis has led to rapid inflation. According to EU statistics, the consumer price index in the Eurozone rose by 10% year-on-year in November, marking the second consecutive month of double-digit growth.

Inflation has led to declining coffee consumption as a luxury item, with coffee inventories at many bases showing almost no change compared to the end of October. As of December 2nd, inventory at European bases in Antwerp, Belgium, increased by 70% to approximately 550,000 bags (each bag weighing 60 kg). When unable to find buyers, traders can only transport coffee beans to these bases, hoping to sell them through physical delivery.

It is reported that in Antwerp, approximately 430,000 bags of Arabica beans are awaiting certification, a figure more than four times higher than at the end of October. Industry expert Takano stated: "Certified inventory breaking through 1 million bags is just around the corner. Due to the easing of supply-demand relations, prices will struggle to rise in the future."

Media reports indicate that over the past two months, spot prices of coffee beans in India, dominated by Robusta, have also fallen significantly. This has led local coffee farmers to become reluctant to sell their coffee beans easily, instead choosing to wait and observe price trends.

A local coffee farmer expressed that if it weren't for urgent need for money, many farmers would not be willing to sell their coffee beans at current prices. The current significant decline in spot prices is not due to quality issues with the coffee beans, but rather due to the sharp drop in international futures prices, which has left farmers feeling dissatisfied. In the first week of October, the spot price of Indian Arabica coffee was approximately 16,000 rupees per bag (50kg per bag), but has now fallen to 13,000 rupees per bag. Similarly, the price of fresh Arabica coffee cherries has also dropped from 9,100-9,400 rupees to 6,400-6,700 rupees.

Will Lower Bean Prices Translate to Cheaper Coffee?

Returning to our initial question: with coffee bean prices as raw materials falling so severely, can consumers expect to drink more affordable coffee? This clearly will not be directly reflected in the end consumer market. International coffee futures prices directly reflect commodity coffee bean prices from Brazilian production regions, as well as daily prices of commodity coffee beans from Yunnan production regions that are linked to them. Compared to commodity coffee beans, specialty coffee beans already carry a premium and are not affected by short-term fluctuations in international futures prices.

On the contrary, roasters or green bean dealers who mainly focus on commercial blends will be impacted because they increased their inventory positions at high prices. In coffee shop costs, the cost of coffee beans accounts for only a small portion. Instead, coffee drinkers indeed need to spend more money than in previous years. Taking domestic Starbucks as an example, some of Starbucks' products also saw small price increases at the end of last year. In response, Starbucks explained that these prices were set after careful evaluation and comprehensive consideration of various aspects including rent, logistics, store facilities, labor, product development, and customer experience innovation.

Therefore, perhaps more of the money we spend on coffee is not actually spent on the coffee itself. Consequently, even if international Arabica coffee bean prices fall sharply due to futures, this has no direct relationship with whether we can drink a cup of coffee more cheaply. Coffee price reductions seem too distant for now. However, following this trend, if international coffee bean market prices continue to decline further, the upward trend in coffee product prices may potentially stop.

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