After taking my children to school in the mornings, I am in the habit of visiting my local café. Recently, I was quite surprised to find that the cost of my flat white went up 25p overnight. Despite being mostly aware of current events, I found the change alarming and was left wondering whether this price hike is indicative of dire inflationary changes in my future.
The Coffee Trade
Brazil, the largest global producer, supplies 300% more coffee than its closest competitive neighbor: Colombia. As the crop yield in the 2020/2021 season in Brazil has been largely affected by the impacts of climate change in the growing regions, the cost of exported beans has risen. Similar patterns can be seen in other coffee producing areas for a myriad of reasons: shipping disruptions impacting the supply chain in Vietnam and Indonesia and escalating civil unrest in Ethiopia, for example.
The Market Basket
During each research quarter, prices are collected for more than 350 goods and services commonly used or consumed by expatriates, giving AIRINC the most comprehensive international market basket in the industry . For each item, five to six sample prices are collected from multiple outlets, producing typical sample price counts of up to 1,800 in each location. This approach helps manage the volatility of specific products by allowing price increases, price stability, and price decreases to work together to paint the larger picture of inflation in each location.
The Outlook
The U.S. leads the top of the coffee importer list, followed by many European countries, Canada, and Japan. The U.K. is now the 9th largest importer of coffee beans in the world, despite its reputation of being categorically made up of tea-drinkers. While the overall Cost of Living in London is not increasing at the same rate as my flat white, thanks to the robust market basket this example reflects a change in the world’s supply and trade, with experts suggesting that the price/kilo of coffee beans will continue to increase into 2022.
