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I'm saying that supply of highest-quality coffee may be less elastic than demand. Certainly we could grow more coffee, and that would likely increase net outpu
by cwkoss 9y ago
I'm saying that supply of highest-quality coffee may be less elastic than demand.
Certainly we could grow more coffee, and that would likely increase net output of high quality coffee. However, if a company is buying the 'best 10%' of coffee and need to double their output, it is more likely that they buy 80th-90th percentile coffee than reinvest their profits into increase the quality that tranche of coffee to meet that of the top 10%. Even if a company chose to do this, the amount of time it takes to deploy capital in agriculture (~1yr+) is likely much less than the amount of time it takes to deploy capital in manufacturing (months), which effectively would cap growth rate.
- ovao 9y agoAn interesting argument I hadn't considered. I wonder, though, how genuinely impactful bean quality is for the end product. It's well understood that it's impactful to some degree, but do premium roasters need the top 10%, or is, say, the better half of arabica produced sufficient to yield effectively the same brewed product? Said another way, is the slope of quality distribution that severe?
- cwkoss 9y agoGood question, I'd also be interested in the answer. I'd guess its a long-tailed distribution something like this (https://qph.ec.quoracdn.net/main-qimg-3b21f991d3f0446ce30b9b33496e87ab https://qph.ec.quoracdn.net/main-qimg-3b21f991d3f0446ce30b9b...) (quality on x axis, volume on y-axis) However, I know little about the complexities of coffee agricultural and manufacturing process, mostly just speaking in abstract armchair economics terms.