MANILA: Consumers may soon pay more for their daily cup of joe as supply woes brew in the global market, but this could be a blessing in disguise for Filipino coffee farmers who now have greater opportunity to boost their income.
Global coffee prices may rise further this year if key growing regions experience further significant supply reductions, a report by the Food and Agriculture Organisation (FAO) of the United Nations (UN) said.
It cites several factors behind the recent price spikes: limited supplies from Vietnam and Indonesia, adverse weather conditions in Brazil and higher shipping costs.
Coffee, one of the most widely consumed beverages worldwide, is commercially produced in more than 50 countries.
The world consumes three billion cups a day, says the International Trade Centre, a joint agency of the UN and the World Trade Organisation.
Brazil, Vietnam, Colombia and Indonesia are the major coffee producers.
The FAO estimates that Brazil and Vietnam account for almost 50% of global coffee production valued at US$20bil annually.
In the Philippines, the local unit of Nestle, the Swiss-based global food giant known for its Nescafe coffee brand, had to temper upward price adjustments in the first quarter to cushion Filipino consumers from rising coffee prices.
“In the event of significant and continuing global upward movements in coffee prices, we adjust retail prices as a last resort. We try our best to absorb increased costs if possible and look for greater efficiencies to avoid price increases,” Nestlé Philippines said in an email to the Inquirer.
In light of looming supply constraints, the Department of Agriculture (DA) warns rising global prices could make importing coffee into the Philippines more challenging.
After all, the country relies on importation to cover 90% of its consumption of soluble coffee, commonly known as instant coffee.
Cheryl Marie Natividad-Caballero, agriculture undersecretary for high- value crops, said the extent of the impact depends on how much prices increase and whether they stabilise at a certain level.
“If prices rise significantly, overall consumption may decrease as lower-income households prioritise basic necessities like food, shelter, healthcare and education,” Natividad-Caballero said in an email interview with the Inquirer.
In the Philippines, low and middle-income households are the biggest coffee consumers, who mostly purchase three-in-one coffee sachets due to their affordability and convenience, the DA said.
“Despite potential declines in mass consumption, the speciality coffee segment and coffee shop aficionados will likely continue consuming their preferred brews even at higher prices,” she added.
However, the Philippine Coffee Board Inc (PCBI), a private sector-led group established to promote the Philippine coffee industry through various initiatives, said the country will rely on importation even more to meet the increasing demand for coffee.
“Coffee imports will not decline as we still consume so much more than we produce,” said Pacita Juan, PCBI president and co-chair.
“More Asean imports will be made as Indonesia and Vietnam will be closer to us and will be better for logistics.”
Citing government data, the DA said the Philippines produces just about 38.1% of its total coffee beans supply requirement.
On the other hand, PCBI estimated local consumption at 200,000 tonnes, much higher than the domestic output of just between 20,000 tonnes and 30,000 tonnes.
Although the cost of instant coffee remains stable based on market monitoring, the Department of Trade and Industry said it is closely working with the DA to ensure fair pricing and combat profiteering through intensified market monitoring and enforcement initiatives.
“Nevertheless, both agencies will continue to closely monitor coffee price trends to protect consumers and take decisive action against profiteering practices,” Trade Secretary Maria Cristina Roque said in a statement.
“These efforts include rigorous oversight of compliance with the Suggested Retail Price Bulletin to prevent unjustified price manipulation, thereby safeguarding consumer welfare,” she added.
For its part, Nestlé Philippines said it is absorbing higher costs and boosting operational efficiencies whenever possible to manage price spikes.
“Moving forward, it remains to be seen if and how any price adjustments, depending on their amounts, will impact on local coffee consumption,” the company said, adding that coffee consumption increased last year.
The FAO explained price fluctuations are a common feature of coffee markets, with historical trends showing that recurring imbalances between supply and demand drive such patterns.
“These imbalances are further exacerbated by the inherent economic and physical characteristics of the coffee market,” it said. “The demand for coffee is inelastic, meaning consumption changes only marginally in response to a change in prices.”
To mitigate the effects of price fluctuations, the FAO recommended improving market transparency.
It explained that access to reliable and real-time information would aid all industry players in making sound decisions, planning production activities effectively and reducing the associated risks with price shocks and market volatility. — Philippine Daily Inquirer/ANN
