Tuesday, March 15, 2005

about those coffee prices. . .

the upward trend in coffee prices is definitely more than a mere blip, i think we can finally all agree on that. after nearly 5 years of the so-called "coffee crisis," whereby too-low prices bankrupted farmers, caused others to turn to growing illegal drugs to stay afloat, forced coffee workers north to cross the border illegally, and resulted in lower-quality coffee in our cups: it's about time.

but we are still months away from seeing these increases work back through the industry chain to return to farmers. in the meantime, these shocked news stories -- omigod, coffee up 12%! -- are going to keep coming.

that's because they ignore the fact that seemingly cheap coffee is really quite expensive, as i've always said, in terms of increased drug interdiction, border patrols, the need for more foreign-aid, etc. etc.

but the prices do seem set right now to waaay overcompensate. what's important to remember is that a too-high price is just as bad for us coffee lovers as a too-low price.

not only do our favorite, beautiful specialty coffees increase in price -- already we are used to paying US$10 to 15 a pound, and we need to brace ourselves for US$15 to 18 -- but many of our most beloved coffeehouses, roasters, and retailers may not be able to make their budgets work in this new up-market world.

because it's tough to increase already high-end prices when the gas station down the street keeps selling the same trash coffee at their usual price. even tho' lovely specialty coffees are so much better than that junk, many people will take a step back to economize, forcing many retailers to make some painful decisions.

also, if the price rushes too high too quickly, farmers not in coffee will be tempted to jump in and try to sell any quality coffee they can rustle up. this kind of over-production not only ironically further lowers quality, but leads to the next crash.

in this way it's easy to see that actually the coffee crisis is continuing -- we are still in an unstable and unsustainable market structure. as scaa chief ted lingle has long argued, coffee shouldn't be a commodity at all, because it's not really fungible, but has a strong hedonic component.

i mean, when you buy oil, you buy oil; all "light sweet crude" is the basically the same. no one buys light sweet crude for it's distinctive blueberry notes, or because it comes from ethiopia or guatemala, and you don't get more pleasure from mexican oil as opposed to russian oil.

the gas pump just says "regular" or "premium." you've never seen a sign saying "venezuelan superpremium, a medium-bodied fuel with a charateristic chocolate-y note" -- nor will you ever.

there are many other ways in a market-oriented fashion to sell coffee. the only way to achieve real sustainability -- decent prices on which farmers can live and which encourages them to grow high-quality, delicious coffee, decent prices on which roasters and retailers can prosper, decent prices that we coffee drinkers find acceptable -- is to reform or regulate the market we have now, if not to work towards new models altogether. . .

another thing that's going to make life more painful for our retailer friends is that, of course, the "big four" -- sara lee, nestle, kraft, p&g -- have finally seen the handwriting on the wall. they will soon be ready to outbid specialty roasters for the same shrinking pool of high-quality, specialty coffee.

this is also a real threat to us as consumers, because the big four have zero, zero, zero commitment to delivering truly fresh coffee. thus i encourage you, dear readers, to continue buying your whole beans from your local independent retailer: they need you now more than ever.

posted by fortune | 8:25 AM | top | link to this | email this: | links to this post | | 0 comments

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