"Coffee prices have doubled since last year, and drinkers of the black stuff may soon start to notice."This is the result of a severe drought in Brazil, the origin of reportedly 1/3 of the world's coffee supply. The rise in price will affect cost of production and will accordingly rise the price of the end product at consumer's cost. However, this won't affect large coffee houses that lock in price a few years in advance in case situation like this happens.
The drought, on the bright side, allows coffee growers in Brazil to charge higher price for their product. And the price rise of this commodity also allows some hedge funds, traders and brokers to profit. It is not after all totally disastrous.
Feel free to leave your comments for discussion.
Source: Coffee prices skyrocket after Brazil drought
This is a very interesting article, and a good real world example of economics. My question would be about the coffee growers being able to charge higher prices. If large conglomerates have already locked in their prices so as not to pass higher charges to their customers, who exactly would be the one to buy the coffee at the higher price? Could small businesses afford the price raise?
ReplyDeleteMy question would be how long is the delay from supply shortage due to droughts in Brazil and my skinny vanilla latte?
ReplyDeleteThe rise in prices may be enough to discourage many consumers from continuing their coffee addiction. It is very likely that many coffee drinkers may switch to other caffeinated drinks such as tea or energy drinks as they are a suitable substitute.
ReplyDeleteIt would be interesting to see if Americans will start substituting coffee for caffeinated drinks.
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