It has been a rollercoaster year for the coffee industry. Early in 2008, the global market was worth more than $26bn and was strongly influenced by the hike in food commodity prices and speculators' confidence. Rising plantation costs - in particular labour costs, which rose by 30% in South America - also pushed prices up.
However, in today's economic climate, traders and speculators are finding it more difficult to trade, which has forced prices down.
The price of coffee traded on the New York and London exchanges has been dropping sharply over the past couple of months. In March this year, arabica was trading at more than $3.60 per kilo, but this has now fallen to around $2.50 per kilo. The question is: what impact will this have on prices in the UK?
Although on the global stage price falls are expected to be passed on to the consumer, here in the UK the picture is a little more complicated.
At the moment, retail prices continue to rise. Figures from The Grocer 33 database show the big four have increased the price of a leading retail brand from £4.13 to £4.25 over the past month. Other leading brands have also seen similar increases.
The key issue is sterling's weakness against the dollar, which has broadly cancelled out the fall in prices and highlighted the effect that currency fluctuations can have on internationally traded food commodities.
There are two types of coffee used to make the vast spectrum of types and blends: arabica and robusta. Traditionally, arabica has been seen as the best-quality bean and has commanded an appropriate price premium, but over the past year the price difference has started to narrow.
The worldwide popularity of coffee is growing strongly, as is the demand for coffee-flavoured products including ice cream and sweets. Robusta tends to be used to make such products and rising demand has pushed up its price.
The industry has also been successful at improving the quality of robusta and people's perception of it. For example, the Vietnamese government has been promoting good growing practices among its farmers, improving irrigation, quality and supply. The rising price of robusta has also encouraged farmers to increase supply.
Quality also plays a major role in determining the price of coffee. A frost at the wrong time of year can damage the quality of the bean, though this has not been an issue in 2008 as the weather has generally been good for coffee growing.
Also, with the price of crude oil a third of what it was a few months ago, production and transportation costs have fallen for many of the European companies that do most of the final production.
Perversely, the economic crisis could be good news for coffee lovers. Though the stock market is falling, so are coffee prices - at least in the global market.
Hopefully, in the UK too, the threat of further price rises will start to recede.
However, in today's economic climate, traders and speculators are finding it more difficult to trade, which has forced prices down.
The price of coffee traded on the New York and London exchanges has been dropping sharply over the past couple of months. In March this year, arabica was trading at more than $3.60 per kilo, but this has now fallen to around $2.50 per kilo. The question is: what impact will this have on prices in the UK?
Although on the global stage price falls are expected to be passed on to the consumer, here in the UK the picture is a little more complicated.
At the moment, retail prices continue to rise. Figures from The Grocer 33 database show the big four have increased the price of a leading retail brand from £4.13 to £4.25 over the past month. Other leading brands have also seen similar increases.
The key issue is sterling's weakness against the dollar, which has broadly cancelled out the fall in prices and highlighted the effect that currency fluctuations can have on internationally traded food commodities.
There are two types of coffee used to make the vast spectrum of types and blends: arabica and robusta. Traditionally, arabica has been seen as the best-quality bean and has commanded an appropriate price premium, but over the past year the price difference has started to narrow.
The worldwide popularity of coffee is growing strongly, as is the demand for coffee-flavoured products including ice cream and sweets. Robusta tends to be used to make such products and rising demand has pushed up its price.
The industry has also been successful at improving the quality of robusta and people's perception of it. For example, the Vietnamese government has been promoting good growing practices among its farmers, improving irrigation, quality and supply. The rising price of robusta has also encouraged farmers to increase supply.
Quality also plays a major role in determining the price of coffee. A frost at the wrong time of year can damage the quality of the bean, though this has not been an issue in 2008 as the weather has generally been good for coffee growing.
Also, with the price of crude oil a third of what it was a few months ago, production and transportation costs have fallen for many of the European companies that do most of the final production.
Perversely, the economic crisis could be good news for coffee lovers. Though the stock market is falling, so are coffee prices - at least in the global market.
Hopefully, in the UK too, the threat of further price rises will start to recede.
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