Monday, January 7, 2013

The Great Coffee Bean Switcheroo (Price Inflation Substitute Edition)

Dale Fitzgerald emails:

Could this be one of the reasons inflation isn't showing up at the consumer level? Inferior substitutes?

Reuters reports (via AOL)
Research out of agricultural bank Rabobank confirms that demand for Arabica beans among coffee buyers "has fallen 27% year-to-date, while Robusta [demand] is 25% higher." This seems to confirm a widespread alteration of the bean mix.

At least one coffee roaster has admitted it. In November, Massimo Zanetti USA, which roasts for both Chock full o'Nuts and Hills Bros., publicly confirmed upping its Robusta usage by 25% this year.

Why the switcheroo? Prepare to not be shocked. The answer is: price.

Last year, a shortage of Arabica caused prices of the premium bean to spike as high as $3 a pound -- $2 more than what a pound of Robusta would cost. This compares to a five-year historical trend of Arabica costing closer to 70 cents more than Robusta. In recent weeks, the trend has reversed, with Arabica prices falling to just a 62-cent premium over Robusta.

1 comment:

  1. "Chained CPI" a measure sought by the govt. inflation statistics manipulation crowd. It is about individuals substituting to lower priced products, ex. high fat content hamburger for increased price steak.
    Switching to a lesser grade coffee type would appear to validate the behavior they believe occurs. It enables them to officially state a lower inflation rate, than if the higher price item continued to be purchased. Of course, the consumer is losing ground by doing this switch, but enables less COLA payouts, and Uncle Ben Bernanke to justify his artifically held low interest rates.