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In December last year, coffee prices in futures markets such as the New York Arabica Future reached a 14-month high of about 15% in six months. In addition, Nikkei Asian also stated that coffee bean prices in many Asian countries rose, especially in China which has risen 120%, and 90% in Indonesia. At the same time, the increase in coffee prices is attributed to higher demand than the actual supply.
According to Mr. Korn Sanguankaew, Vice President of the Thai Special Coffee Association, the problem is that demand for coffee in Thailand is very high compared to the production capacity of farmers, particularly Arabica coffee with 2-3 times and Robusta coffee with 10 times higher demand.
One of the reasons why Thai farmers are unable to produce enough coffee to meet the demand is that the landscape suitable for growing Arabica coffee needs to be 800-1,400 meters in height above sea level, most of which are in national parks or reserved forests. In addition, it is difficult to harvest coffee in high-rise areas, causing farmers to rely solely on manpower.
Global warming is another major factor affecting coffee production. The volatile weather caused unseasonable rain last year reduced the amount of coffee farmers harvested by up to 50%, resulting in a significant rise in coffee prices in Thailand.
Coffee businesses have long supply chains ranging from planting, and harvesting, to roasting and selling. The rise in the prices of coffee beans has led to higher coffee prices.
He added that despite the high prices of coffee, many people may not know that a kilogram of coffee sold at a coffee shop can only make 50 cups of coffee. When other costs are included, such as employee wages, rent, and other living expenses, coffee prices must rise.
Another reason for rising domestic coffee prices is the 90% import tax, which drives up the cost of importing coffee. According to Kasetsart University research, Thais consume about 80,000 tons of coffee per year, while farmers can produce only 16,000 tons, making them dependent on imports.
While many view that Thai farmers should grow enough coffee to meet the demand, Mr. Korn believes that they should focus on improving the quality of their coffee beans because the price of high-quality coffee does not fluctuate much according to the global market.
“Focusing on improving the quality of Thai coffee will help farmers have a better quality of life without having to focus on production volume.”
The high cost of Thai coffee though it can be planted domestically, is the result of many factors, including excessive demand, lower production compared to the demand, high import tariffs, and complex supply chains. If we want to lower domestic coffee prices, there must be many improvements for a sustainable Thai coffee production system and the ability to support the demand in the future.
References from
bangkokbiznews / workpointtoday / happyespresso
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