Storm brewing as blight to force up coffee prices
CAFFEINE lovers may be faced with a spike in prices for their favourite hot drinks, one of the country's leading coffee distributors has predicted.
Prices have been falling since a peak in 2011, with analysts predicting that an oversupply is going to keep prices dipping for the first half of this year.
The monthly price average fell to 131.5 US cents per pound in February, down 2.9pc from January and a massive 27.9pc below February's price last year.
But there's a wild card in the pack. A deadly fungus is sweeping across the bean-growing countries of Central America that could significantly hamper production which would have a knock-on effect on supply.
David McKernan, the founder of Java Republic, says retail prices are likely to increase within the next 18 months. At present, the cost of a Java Latte at its roastery is €2.50.
"As roasters, as importers, exporters, we'll all be hit with the price and we always have to pass it on or we won't survive," he said.
Java imports from 17 countries including Haiti, Nicaragua, Bolivia and Brazil.
Aggressive outbreaks of the blight known as roya have hit Central America's major coffee-producing nations and Mexico, which are home to more than a fifth of the world's arabica coffee production.
With falling coffee prices to date, farmers face the double-whammy of shrinking incomes on top of depressed output.
Dutch-owned Rabobank said it expected a 14pc increase for quarterly average prices by the end of the year.
It said the concerns about reduced production in Central America are being countered by the expectations of a large crop this year from Brazil.
But it warned prices will move higher as the frost season in Brazil begins.
Latest figures from the London-based International Coffee Organisation show that Brazil, Vietnam and Colombia are the biggest exporters of coffee, while the European Union is the biggest importer.
Interestingly, the EU imports almost three times more coffee than the United States.
"Coffee consumption in Ireland is very strong. It's very strong in Europe," Mr McKernan said.
"Younger people are drinking coffee. I see 13 or 14-year-old girls drinking cappuccino and lattes."
Within the EU, Germany is the biggest importer of coffee, followed by Italy and then France. Japan follows the French closely in terms of imports.
But will a price increase dampen that enthusiasm?
Mr McKernan said that while Ireland has been hammered by the global recession, coffee sales remain strong.
"The recession has hit and it's biting, but coffee sales seem to be quite strong. It is a habit in one sense, but it's also a lifestyle," he said.
"They (consumers) decide on their petrol station based on the quality of the coffee."