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tsunami may affect coffee prices
Topic Started: Jan 21 2005, 11:29 PM (410 Views)
Sophie
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Keeper of the spider-cats
link


it says that due to the tsunami, prices of coffee and tea might go up.

Quote:
 
The economic toll of the Dec. 26 Indian Ocean tsunami is just beginning to become clear, but the disaster may have an effect on exports of coffee to the United States, the top consumer of the world's second-largest export, a product consumed by 52 percent of the U.S. population every day.

A survey of coffee retailers, trade specialists and analysts reveals reactions from the rosy to the cautiously optimistic. Some, though, expressed more dire concerns about the potential for higher coffee prices and decreased availability in the lucrative U.S. market.

Indonesia and Sri Lanka are two of the countries hardest hit by the disaster, which has so far taken more than 162,000 lives. Those countries are major suppliers of coffee (Indonesia is the world's fourth-largest coffee producer) and tea (Sri Lanka is the world's third-largest producer, behind India and China, according to United Nations statistics).

But with the scope of the disaster still playing itself out, and relief efforts still gathering steam, executives at some U.S. coffee and tea companies and trade organization representatives can't predict the impact on the caffeinated bottom lines — or what it all means for the prices that consumers pay at the cup.

Differing reactions
Some U.S. companies have been comfortable about speculating on the disaster's economic impact; others less so. On Dec. 29, responding to an interview request, Starbucks released a statement expressing confidence in availability of the company's products from Sumatra, Indonesia, the center of the catastrophe.

‘We're not really going to see the full implications of this for months, or even years, to come.’

— STACY MARSHALL
co-owner, Grounds for Change, a Washington-based coffee company
“Regarding our supply chain, we do not believe that there will be an impact on Starbucks supply chain and are confident in the short- and long-term supply of Indonesian coffee,” said the statement — one the company reiterated without elaboration as recently as Jan. 11.

Starbucks, however, had no comment on whether prices for products from the affected regions would remain steady for U.S. consumers. The Seattle-based coffee giant had already raised its prices in October, including prices for its Sumatra brand, among its top-selling coffees.

Other companies have adopted a position reflecting anticipation of some change in south Asia's coffee production — changes they expect from the tsunami itself; from the displacement of millions of people; the effect on roads, bridges and other infrastructure; and the potential for air- and water-borne disease.

For Stacy Marshall, co-owner of Grounds for Change, a Washington-based coffee company, some impact on the industry is inevitable; the big uncertainty is when that impact would occur.

Dire price forecasts
“It makes sense given how organic the process is,” said Marshall, whose 2-year-old company specializes in fair trade coffee produced by small independent farmers. “We're not really going to see the full implications of this for months, or even years, to come.”

And higher tsunami-related prices may be the “two” of a one-two punch: Based on rising worldwide demand and smaller 2004 crops from two other major coffee producers, Brazil and Vietnam, prices were expected to go up even before the tsunami hit.

Some coffee producers didn't wait for disaster. On Dec. 9, Procter & Gamble Co. announced a 14 percent price increase for its Folgers roast and ground coffee, the biggest rise in a decade, because of sustained increases in the cost of raw coffee.

Peter Longo, owner of Porto Rico Importing, a New York-based coffee roaster and retailer, told Bloomberg News that Sumatran coffee was selling — to retailers — for $1.84 a pound before the tsunami. “I would think after this catastrophe ... we may see Sumatran coffee at $4 or $5 a pound,” Longo told Bloomberg. Sumatra accounts for about 70 percent of Indonesian coffee production.

Infrastructure effect
The impact on the infrastructure is still largely unknown. “The condition of those roads has not been competently assessed,” said Wayne Forrest, executive director of the American-Indonesian Chamber of Commerce.

“The tsunami hit the coast, but there were earthquakes in other parts of Aceh,” said Forrest, referencing the aftershocks that have plagued the region since the Dec. 26 disaster. “They may not have caused the same loss of life, but the factories and the infrastructure were affected.”

“Right now, we're pretty sure there’ll be no impact on coffee itself,” said Mike Ferguson, chief communications officer for the Specialty Coffee Association of America (SCAA) a California-based trade association. “If there is an effect, it will be on the infrastructure — and getting coffee out of the country.”

While much of the damage done by the tsunami largely left farms and plantations in affected countries untouched — since many are located inland and at higher altitudes — the bigger problem may be one of worker power. Exporters face a critical manpower shortage brought on by the estimated 5 million people made homeless in the region by the tsunami, at the start of the four-month rainy season.

“If there aren’t people to pick the beans or pluck the tea leaves, you're gonna have a problem,” Longo of Porto Rico Importing told MSNBC.com.
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Fesarius
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Admiral
I think in this case, I won't be complaining about the rising prices.
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Minuet
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Fleet Admiral Assistant wRench, Chief Supper Officer
^^^ I would almost agree except we all know that none of the added cost will be going back to the victims. Middlemen will be the ones taking the profit. :no:
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Fesarius
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Admiral
^^^
Too true. I hadn't thought of that. You are almost making me a believer that Canadians are thinking people too.

































:Fes:
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Admiralbill_gomec
UberAdmiral
This will affect tea prices more than coffee prices, worldwide.

Still, it is just one more thing in a chain of events that has happened to these folks. Their lives, their homes, their infrastructure, and now some of their livelihoods.

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Fesarius
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Admiral
^^^
No kidding. I've been thinking lately of both quakes and flooding, and how I would recover from either. I don't really have any plans in place should either occur. I like to think I am prepared financially for other things, but these aren't things I think of preparing for that frequently.
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somerled
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Admiral MacDonald RN
Not a big deal.

Most people I know can survive without either. And in my household it will take a long time before we run out of tea bags .

Anyway, tea is grown and cultivated in the mountains, so the tsunamis and flooding will have little if any effect on the supply and quality of the product.
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Sophie
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Keeper of the spider-cats
but what of the tea harvesters? Do they have a way to get to the tea in the mountains? How many of the tea harvesters survived the tsunami?
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somerled
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Admiral MacDonald RN
T'Lac
Jan 22 2005, 10:52 PM
but what of the tea harvesters? Do they have a way to get to the tea in the mountains? How many of the tea harvesters survived the tsunami?

Likely had little or no effect on them as they live near the plantations in the main with their extended families and clans.

I think if you check you'll find that tea prefers the tropical alpine climate.
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Admiralbill_gomec
UberAdmiral
somerled
Jan 22 2005, 09:44 PM
Not a big deal.

Most people I know can survive without either. And in my household it will take a long time before we run out of tea bags .

Anyway, tea is grown and cultivated in the mountains, so the tsunamis and flooding will have little if any effect on the supply and quality of the product.

As usual, another uncaring, thoughtless comment from Somerled.

He never fails to disappoint.
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somerled
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Admiral MacDonald RN
Admiralbill_gomec
Jan 23 2005, 10:40 AM
somerled
Jan 22 2005, 09:44 PM
Not a big deal.

Most people I know can survive without either. And in my household it will take a long time before we run out of tea bags .

Anyway, tea is grown and cultivated in the mountains, so the tsunamis and flooding will have little if any effect on the supply and quality of the product.

As usual, another uncaring, thoughtless comment from Somerled.

He never fails to disappoint.

Never bothered considering this post
Quote:
 

Likely had little or no effect on them as they live near the plantations in the main with their extended families and clans.

I think if you check you'll find that tea prefers the tropical alpine climate.


Did you?

I know enough about how Cylon tea is grown to be pretty sure the desaster , which was entirely coastal , will have have little if any effect on people involved . So before you make more of fool of yourself - I suggest you find out something about these people and how and where the product is grown.
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cptjeff
Captain of the Enterprise-J
It's certainly sad- but what can we do? I can't stop the middleman from scraping a little extra off the top...
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ANOVA
Vice Admiral
Free markets allow for this.

A new equlibrium demand price structure will occur due to changing commodity supply.

The new price will effect demand as people are priced out of the market and seek alternatives.

The bidding for the existing commodity will start at the plantation level unless they were locked into a contract. Those plantations that are unable to deliver on thier contract may be changing ownership.

So the land owner who was able to produce the commodity without a contracted price will be the first to profit not middlemen.

Besides middlemen take much risk in moving a commodity from a supplier across the world to a distributor.

Whether or not this will have any financial impact will depend on where the commodity is traded and the actual output of different states in the region. Shri Lanka should see a negative effect unless it has trading houses within its borders.

The regional impact will not be full known for awhile. With many people in the region dead or having lost their source of income, demand in the region will fall of for nonessential commodities in the near future.


All in all tea and coffee prices are the least of the regions worrys.

ANOVA
Their's always someone who can turn a tragedy into an investment opportunity.
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somerled
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Admiral MacDonald RN
ANOVA
Jan 23 2005, 03:01 PM
Free markets allow for this.

A new equlibrium demand price structure will occur due to changing commodity supply.

The new price will effect demand as people are priced out of the market and seek alternatives.

The bidding for the existing commodity will start at the plantation level unless they were locked into a contract. Those plantations that are unable to deliver on thier contract may be changing ownership.

So the land owner who was able to produce the commodity without a contracted price will be the first to profit not middlemen.

Besides middlemen take much risk in moving a commodity from a supplier across the world to a distributor.

Whether or not this will have any financial impact will depend on where the commodity is traded and the actual output of different states in the region. Shri Lanka should see a negative effect unless it has trading houses within its borders.

The regional impact will not be full known for awhile. With many people in the region dead or having lost their source of income, demand in the region will fall of for nonessential commodities in the near future.


All in all tea and coffee prices are the least of the regions worrys.

ANOVA
Their's always someone who can turn a tragedy into an investment opportunity.

I'm not so sure any change in supply will occur for coffee or tea, though I wouldn't put it past the middlemen , wholesalers and retailers to use the Indian Ocean desaster as pretence to bump up the prices and to profit from the desaster.

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ANOVA
Vice Admiral
^^^^

Your premise is flawed.

If supply remains equivalent to last harvest.

Brokers will not be able to bid the price up and the end user will be able to reduce thier cost by price shopping, in effect forcing retailers to compete for market on price.

Unless there is a tea or coffee cartel that I'm unaware of.

The price bump in oil had to do more with increased demand then with the gnomes of Zurich fixing prices.


ANOVA
Not listed on Nasdaq
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