The price of coffee has fallen by more than half since 2010, but why are we still paying $4 a cup?
The price of coffee has fallen by more than half since 2010, but why are we still paying $4 a cup? Photo: Edwina Pickles

Matt Holden

The price of coffee has fallen by more than half since 2010, as Bloomberg news reported in January, but why are we still paying $4 a cup?

The price in question is the price of coffee futures on the Intercontinental Commodities Exchange, also known as the C price. It fell to just $US1.107 ($1.25) a pound for March delivery (less than the cost of production for many smaller growers). Coffee prices now are at six-year lows, according to the London-based International Coffee Organisation.

I'll spare you the maths, but $US1.07 a pound represents about 2.5 cents a cup in an Australian cafe, so a big fall in the C price has a small effect on the cup price.

Even when the price is multiplied through the supply chain, with cafes paying something like $25 a kilo for wholesale coffee (which often includes the cost of supplying and maintaining espresso machines and grinders), the cost of the coffee in your cup would still only be about 30 cents. Milk costs another 30 cents a cup.

Roasters here mostly buy what is known as ''current crop'' - coffee bought within six months of picking - and pay what the contract price was at the time they bought the coffee.

The C price is an indicator of the average price of coffee in the market, says Tas Chronis of the Australian Coffee Traders Association. But roasters could also be paying a premium on top of the C price for higher-quality green beans.

The price of speciality coffee - high-grade beans from traceable origins - bears little relation to the C price.

A lot of speciality coffee is bought in small lots at auctions.

Melbourne Coffee Merchants paid $US6.20 a pound for one lot that will end up being served filter-style in Melbourne and Sydney for about $6 a cup - a bargain when you think of paying $3.80 for a cup of commodity coffee, as I did at a suburban shopping centre recently.

Cafe owners usually cite wages as their major cost; rent can't be far behind. But before you complain about Australia's high minimum wages, consider this: a high minimum wage makes Australia a fairer country, with fewer working poor.

If you don't like that, you can always open a cafe in China.