The real CPI – the Cappuccino Price Index

What do I have in common with a South American coffee bean farmer? We both hate too much rain.

A little bit is fine; pitter patter on a tin roof. But both Sydney and Brazil have been pelted with a little too much wet stuff this year.

Apparently this is the reason that $4.50 has become the standard price of a coffee if you live in Perth. Bejusus!

Western Australia’s leading paper, The West, is reporting on this scandal today. Not very comprehensively in this story. Because the writer has not gone so far as to confirm the cause of the price hike in the last three years.

My personal guess; is simply cause they can. Perth is a now a rich mining town, and everything costs a bomb, including coffee.

A story in The West from several days ago makes the connection though, stating that

“…world coffee prices (have) hit at a 12-year high.

Poor harvests in Central America and Colombia this year because of heavy rain have affected supplies of Arabica coffee and pushed up the price.

One Australian supplier said the increase for the raw product would trigger increases of between 5 and 10 per cent in cafes and supermarkets.”

It may be stating the obvious, but it leads me to ask; why has the price of coffee in Sydney not risen to $4.50?

Sure it’s gone up a bit, but generally I’m forking out between $3 and $3.80 for my coffee in Sydney.

Another writer for The West suggests a different theory in his piece

“Employment costs are a factor – Melbourne baristas earn on average $10 an hour less”.

So the cost of Perth’s coffee is higher because their cafe staff are better paid than barista in Sydney Or Melbourne? Really? Forgive my cynicism. I’d like a a little bit of proof to support that claim.

The ABC’s Simon Lauder provides yet another take on the price of coffee in a radio interview from ABC AM this week.

Lauder says

“Rabobank senior analyst Wayne Gordon says the price of coffee beans has hit a 12 year high on the New York Futures Exchange.

The industry is absorbing the extra cost for now but consumers are being warned”.

In short, Lauder’s story is a little more credible, but also suggests that a bucket load of rain over South America has created the ‘butterfly effect‘ that will cause Aussie coffee prices to catapult.

Although the price of beans is through the grinder now, the good news is that wholesale coffee supply is expected to be better in 2011. So the financial pain for most coffee merchants may only be temporary while the cost of beans is higher than usual.

 

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