8 Factors That Can Influence The Price Of Coffee

Posted on February 10, 2015 ยท Posted in Coffee Break

Coffee is a commodity that can be traded since, in most cases, the farmers will grow the crops for commercial purposes. The consumers in most cases will not be that same farmer alone as there are other buyers. The intermediaries will link the farmers with the merchants who will buy their products in bulk. The coffee price rarely stays constant.

There are some instances where the prices of such commodities are very high, and this will be advantageous to the farmers. When the prices are very low, the consumers are the ones that are favored. There are many factors that can lead to fluctuation in such prices in the market. Certain factors can be controlled whilst many others certainly cannot.

For instance, when there is a great harvest of such products, the prices will be very low as many farmers will be selling their products in the market. There is nothing that can be done to increase the prices unless a farmer keeps his/her products to wait for the period when there is no coffee. The fluctuation in prices has influences on the farmers, the government, the merchants and the final consumers. Here are some of the reasons as to why their prices keep fluctuating:

Coffee and the Consumer

1.Changes In Taste And Preferences Of The Consumers

This is one of the factors that can lead to fluctuation in the price of coffee. There are some regular customers who have been consuming coffee for a longer period, and they have been stable customers for the farmers. If such stable customers change their preferences, the price of the coffee will change. The farmers will be forced to hire brokers to look to market their finished products again and the price will not be the same as before.

2.Social Factors

There are some social factors that will affect the prices of coffee. For instance, there are some religions that do not allow consumption of coffee. In the case, such a religion spreads to the regions that happen to be the leading consumers of such products; it will affect the price. There will be a reduction in the number of people who will be consuming the product and the unit price will automatically reduce. This is because the products will be there, but the demand will diminish.

3.The Price Of A Close Substitute

Since coffee is a stimulant, there are other stimulants such as tea that can serve the same purpose. When such products are available, it will affect the prices of coffee. Should the price of coffee be distinctly higher and the price of tea considerably lower, people will shift to the cheaper option, which is tea. This will force the distributors of coffee to lower their prices.

4.Stiff Competition

It is true that there are many places where coffee beans are grown. The seasons vary but there are sometimes where all the coffee is harvested at the same time. The quality of the coffee in different regions will vary due to climatic conditions and other factors.

The coffee of higher quality will be sold at a higher price than those of lower quality. The buyers and other online merchants will be competing for the best products. This will render the prices of the coffee of lower quality lower. A positive fluctuation will be evidenced when the coffee from different regions are not harvested at the same time as there will then be a higher demand.

The Politics Of Coffee

5.Political Instability

This is another factor that will influence the price of coffee. No market in the world likes volatility. When the government is not stable politically, consumer confidence is hit. International and domestic trade will suffer. The income of all members of the supply chain will be hit and stable prices, a thing of the past.

6.Government Policies

The government also has a crucial role to play as far as the price of coffee are concerned. There are instances where they dictate the price range of the coffee prices. In such a situation, depending on the state of the economy, they government may decide to raise the prices or even lower. They will do this so as to balance the flow of income within the economy.

7.Corruption

Not nice but impossible to ignore. This will definitely lead to increase in the price of coffee. Sometimes, the distributors of the products in the foreign markets are involved in corruption where they take bribes so as to favor a buyer with a lower price, or perhaps the best bidder is ignored and the tender given to a buyer with a lower unit price. Most governments are trying all means to eliminate corruption as this is something of a bottleneck to the development process of, particularly developing states.

8.Changes In Tax Policies On Cash Crops

Taxation is another dictator of the unit price of coffee. When there is an increase in the tax, the prices will also increase. The increase in the prices is meant to maintain the state of an economy and ensure that it is very stable. The taxes are unpredictable and may change anytime depending on the rules set by a given state.

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