Commodity prices fluctuate tremendously. The reason is because demand could go up very fast but supply could not suddenly increase. Coffee trees for example takes 5 years to mature and could only produce 1 POUND of roasted coffee in that year. Read here to understand more about coffee tree. Thus, when prices are up, more and more coffee plantations start. Often, the supply is now much more than the demand once all the supply starts to come into the market. This has happened. We love coffee and there are ever more new cafes opening everywhere BUT the demand is not enough to take up all the supply. The coffee prices in the international market has slumped.
Do read a bit on the coffee slump here. Article in Nasdaq.com “Coffee prices on the New York market have hovered at or below $1 (RM4.10) per pound (450gm) so far in 2019.” Therefore, 1kg of coffee will be approximately RM10. To produce a cup of 220ml of coffee, approximately 10gm of coffee powder is needed. 10gm for a cup of coffee meant RM10 could produce 100 cups. 🙂 Okay, before everyone starts go crazy about why they are still paying for RM10 for a cup, let’s understand that there’s logistics issue, wastage during transportation, insurance costs etc while the coffee served to you in a cafe meant there’s the rental, the salary of the barista, the electricity etc… So, that’s why they priced it at RM10. However, due to this slump, many farmers may be forced to turn to other crops for example…
What is certain is this. There are ever more new brands of coffee on the shelves in the supermarket and many are getting cheaper too. By the way, many belong to the same parent company… They (parent brand) just want to cover the whole market. From those who buy premium brands to those who are price sensitive. Will this really help the property market? If you are asking me alone, the answer is no. Starbucks / Coffee Bean / San Francisco and even McCafe remain a staple for me but if I could save RM6-8 per cup per day, that’s still RM2,200 – RM3,000 per year. Over just 10 years, I have more than enough to pay downpayment for an affordable home. So, it is probably proven that coffee prices (commodity) may fluctuate but prospects for the property market depends on the drinker’s habits instead. Happy enjoying that cup of aromatic coffee.
<Featured Image is courtesy of Stock Photos from Nitr>
written on 11 April 2019
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