The price trend of green coffee
The price of coffee, as happens with other commodities, depends on phenomena only partly attributable to the “natural” dialectic between supply and demand. Alongside the economic phenomena that arise from time to time and which in this specific historical phase concern geopolitical tensions and difficult weather conditions in some producing countries, it is also necessary to consider the effects of the non-occasional interventions on the financial markets of investment funds investment, always attentive to sniffing out business opportunities in the raw materials sector.
A mix of connected and interdependent causes, which is at the basis of the period of turbulence that the global coffee market is experiencing, causing concern not only among producers and distributors but also among end consumers.
The graph below indicates that from September ’22 to October ’23 the price of the ICO composite index, constructed as a weighted average of the prices of the main blends (Colombian, Brazilian, Robusta and others), substantially decreased. It started to grow at the end of 2023, but it is experiencing a strong acceleration in the current year. In April, the index was 216.89 US$ cents per pound (4.44 euros/kg). In the first half of April 2024, the price increased by 21.8%, going from 193.39 to 235.50 US$cents per pound (from 3.96 to 4.82 euros/kg).
Price of green coffee – (ICO Composite Index)
Source: International Coffee Organization
Values not far from those reached in September 2022, when the traffic congestion in the ports of embarkation, the difficulties in finding containers suitable for the transport of the raw material, the international tensions following the conflict in Ukraine and the increase in energy costs. Between these two periods characterized by strong increases, the price underwent significant reductions. Insiders attribute the surge in prices in recent weeks to the sharp contraction in supply from Vietnam (which, as is known, is the main producer of robusta quality), to the adverse weather conditions in Brazil, to the strengthening of the dollar against the euro which worsens the exchange rate or, again, the increase in transport costs resulting from the lengthening of routes to avoid passage through the Suez Canal.
However, it should be noted that the bullish phenomena occurred following a phase which saw the strong use of inventories to keep prices under control and the subsequent activity of restoring them with consequent growth in demand not directly connected to consumption . The rationing of the supply was also conditioned by the fact that starting from 1 December 2023 the re-certification process which allowed quantities of coffee which had exceeded the storage time in the deposits. Ultimately, it is clear that the surge in prices in recent months cannot be attributed exclusively to “external” and/or natural factors. On the contrary, there is the “hand” of those who operate in the market of what remains one of the main global soft commodities.
Dynamics of the price of green coffee – values in Euro/Kg
Source: FIPE Study Center processing on International Coffee Organization data
On the other hand, the International Coffee Organization (ICO) has forecast an increase in production of 5.8% year on year and global consumption of 2.2% in the two-year period 2023/24, thus even determining a surplus of 1 million bags (difference between the production of 178 million bags and the consumption of 177 million).
So what to expect in the coming months? Remaining within the supply/demand dialectic, we should expect a period of cooling in prices. However, the ICO always warns of the implicit risks due to the effects of weather conditions but, above all, of the policies of producing countries which could impact production and overturn an overall positive forecast picture. The role of the investment funds that push, with the contracts, should not be overlooked future, to sell quantities of coffee relating to future production on the financial markets and, at the same time, carry out the buying and selling activity based on the daily ups and downs of prices.
The cup of espresso at the bar
In April 2024, the average price of espresso in Italy was 1.18 euros, with an increase of 5.3% compared to a year ago when the average cup cost 1.13 euros. Along the peninsula the average price fluctuates within a range that goes from 0.95 euros in Messina to 1.36 euros in Bolzano.
The average price of a cup of coffee in April 2021 was 1.00 euros which, revalued at April 2024 prices, becomes 1.16 euros. The result is that the cup confirms that it has held up, in the April period. ’21-Apr.’24, inflation levels with a moderate real increase of 2.1%. Yet the price dynamics of overall coffee products remained below the general inflation line for a long period from June 2021 to September 2024.
Trend dynamics of prices – var. % on the same month of the previous year
Source: FIPE Study Center processing on Istat data
Different reasons play on this prudence which concern the structure of the competitive system (high number of micro-enterprises operating in local micro-markets) or even an inadequate use of the price lever. It should not be forgotten, however, that the coffee shop is a leading category of the bar with a high frequency of purchase, an aspect which makes the consumer’s immediate perception of the price adjustments made by the establishments.
Furthermore, in the formation of the price of the cup, the cost of the raw material has an absolutely secondary weight both compared to that of the service and to the share of the total revenues generated by the sale of this product. The more coffee affects overall sales, the more it will have to absorb not only the direct costs but also the general costs of the business.
In this context, it cannot be the increase in the cost of coffee beans quantifiable in a few euro cents per cup that can justify an immediate and specific intervention on the price list capable of bringing significant benefits to the economic accounts. Instead, a more general assessment would be needed on the actual remuneration capacity of the “production factors” ensured by current price levels, of all prices, not just the cup.
Espresso coffee at the bar – values in euros
| provincial capital | average price | provincial capital | average price |
| Alexandria | 1.18 | Modena | 1.25 |
| Ancona | 1.16 | Naples | 1.08 |
| Aosta | 1.08 | Novara | 1.16 |
| Arezzo | 1.18 | Padua | 1.30 |
| Ascoli Piceno | 1.20 | Palermo | 1.19 |
| Avellino | 1.10 | Parma | 1.37 |
| Bari | 1.07 | Perugia | 1.18 |
| Belluno | 1.30 | Pescara | 1.29 |
| Benevento | 1.50 | Piacenza | 1.20 |
| Bergamo | 1.15 | Pistoia | 1.18 |
| Biella | 1.18 | Pordenone | 1.25 |
| Bologna | 1.27 | Ravenna | 1.28 |
| Bolzano | 1.36 | Reggio Calabria | 0.99 |
| Brescia | 1.20 | Reggio Emilia | 1.20 |
| Cagliari | 1.12 | Rimini | 1.29 |
| Cosenza | 1.20 | Rome | 1.07 |
| Wedge | 1.22 | Rovigo | 1.14 |
| Ferrara | 1.29 | Sassari | 1.20 |
| Florence | 1.19 | Siena | 1.14 |
| Forlì | 1.20 | Syracuse | 1.02 |
| Genoa | 1.14 | Terni | 1.16 |
| Gorizia | 1.24 | Turin | 1.26 |
| Grosseto | 1.12 | Trent | 1.31 |
| Lecco | 1.19 | Treviso | 1.24 |
| Livorno | 1.15 | Trieste | 1.29 |
| Praises | 1.16 | Udine | 1.30 |
| Lucca | 1.18 | Varese | 1.12 |
| Macerata | 1.20 | Venice | 1.23 |
| Mantua | 1.28 | Verona | 1.17 |
| Messina | 0.95 | Vicenza | 1.25 |
| Milan | 1.17 |
Source: Price Observatory based on Istat data
The value chain of the cup of coffee at the bar
In April 2024, as we have seen, 4.44 euros were needed for a kilo of green coffee. On average in the last 12 months the price was 3.52 euros/kg. with an increase of 21.4% compared to April 2023.
Looking at the value chain of the cup of espresso coffee at the bar, the steps in which the mark-ups are recorded are highlighted: from the raw foodists, through the roasters, up to the merchants, the increase is 5.6 times, while from the merchant to the consumer is 5.9.
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