FIFI PETERS: If you are a coffee lover like me, you will be interested to know that the era of paying more for your coffee is not about to end any time soon. Notwithstanding the pricing pressures that the pandemic has had on the food baskets all over the world, there are new developments in the coffee bean market that are applying even more pressure on prices.
Here to tell us exactly what they are is Dylan Cumming, the director of Beaver Creek Coffee Estate and Roastery. Dylan, thanks so much for your time. I read a story earlier this morning that inventories at some of the major coffee-producing countries or stockpiles are set to reach their lowest levels in decades. This is as a result of more demand for coffee struggling to keep up with existing supply. Just tell us what’s going on in your world.
DYLAN CUMMING: The availability of coffee I think is more of a logistical issue, with issues around containers being available – these [sort of] logistical issues. In terms of supply, there are also concerns because of frost and droughts last year in Brazil on the potential outlook for this year’s crop, and this will be one of the biggest producers that affects that supply quite a lot.
But I’ve even heard in South Africa, with our local green coffee supplies, that raw material stocks are low. Another factor is that the prices have also increased quite drastically over the last year, pretty much doubling year to date.
FIFI PETERS: Just on the logistical issues, I imagine that you’re referring to some of the shipping costs that many producers are having to pay just to get these beans in, probably because of Covid-19 and the disruptions there. Can you give us a sense of that pricing? By how much have shipping costs increased?
DYLAN CUMMING: For the shipping costs I have heard of figures of multiples of three and four – from producer countries to consuming countries. What has also affected us, which we haven’t seen fully yet on the shelf, I believe, is the price of coffee has risen from just over a dollar last year this time up to $2.40/pound, and the exchange rate is also quite high.
The last time we had this sort of increase in price on the world market was back in 2011, when we reached $3/pound. At that stage the exchange rate was much lower and probably half of what it is today.
So we are probably due to see some increases on the shelf in the near future.
FIFI PETERS: How has this affected your business?
DYLAN CUMMING: We are both a producer of coffee in South Africa – we have our own coffee farm – and we are also an importer. We work with brokers for coffee, which we then roast and blend, so that part of the business has been affected. But we are working a lot with local growers in South Africa to get more people farming coffee, and this highlights the global shortages where a forecast of somewhere in the region of two million tons extra is going to be needed within the next 10 years to reach 2032.
There’s a lot more interest in farming coffee in South Africa, and one of our long-term strategies is to develop a local supplier.
FIFI PETERS: So kind of positive for your business and the other local coffee farmers in the sense that they could stand to benefit from this higher pricing via the exports that they deliver to the global market.
But for me and other south Africans who love their coffee on a daily basis, you spoke about the fact that we haven’t yet quite seen the pricing pressures – a shift from the producer to the consumer or the shelf. When do you see that happening? On the tail end of that question, when do you see prices starting to ease for consumers?
DYLAN CUMMING: Kind of what happened back in 2011; there were big increases on the shelf. There is a slight lag because everyone is kind of waiting to see what everyone else does. But once that price has moved, often we see that a lot of people don’t change their pricing because the consumer kind of gets used to that pricing. So probably what’s going to happen or what has happened is that with those 2011 prices, though they’ve increased slowly over the years, it’ll be the first time since then that we’ll see a drastic change. I’ve heard of slight increases from here to there. Probably in the next couple of months you’ll see that. It depends on what sort of pricing strategies the larger companies take.
FIFI PETERS: Dylan, thanks so much for your time. I sure will be preparing my finances to stomach that increase. I’m very happy to take from elsewhere to ensure that I continue having my cup of coffee on a daily basis.
Dylan Cumming is the director of Beaver Creek Coffee Estate and Roastery.