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Coffee economics : How is its price influenced?
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There are two black liquids on earth that humans need daily:
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- The first one gives the necessary energy to the machines/cars to run
- The second one activates and "energizes" the human being!
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We're obviously talking about coffee. Each country consumes it in its own way, with its ingredients, its cultural habits, its history.
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Embedded in the morning habits of the human being, it is one of the 3 most consumed drinks in the world, with tea and water!
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We are talking about approximately 2 billion cups consumed per day in the world, and this is not nothing!
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Green coffee, because yes, the bean in the cherry tree that we use to make coffee becomes green only after roasting, is therefore naturally one of the most traded agricultural commodities in the world.
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Todays topic is : How is coffee valued in the stock market, what makes its price go up or down ? What influences its price?
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We'll try to explain the one or other thing about it without turning this content into an economics class, we promise.
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Price varies in a very dynamic way
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The price of commodity coffee varies enormously, with large increases and decreases, influenced by its production: If it is abundant, the supply decreases but if on the other hand the harvest is not very fruitful and does not allow to supply all the roasters, distributors, wholesalers then the prices will soar.
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Many factors come into play and often they are not necessarily related to the "work" of the growers: World events such as a pandemic, wars, embargoes etc. The time of "life" (= time of conservation of the green coffee before it perishes,) can also strongly influence the value of the coffee.
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Consumers don't always realize this because the reseller/roaster often gets his supplies from all over the world, which smoothes the average price per kilo. This does not prevent a strong variation in prices. Depending on where you are in the coffee chain, the impact of a variation will be more or less felt.
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Let's see what factors make the price of coffee "move" so much. Supply and demand, it's as simple as that. The impact of the COVID-19 pandemic has also impacted the coffee business, with complete or partial lockdowns, curfews, etc.
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For example, according to the article found on the website of the "International Coffee Organization", we can see clearly that large producing countries such as Brazil, India or Indonesia have delays in their harvests, port operations, etc. We put you the link to the precise report in description, but we are not here only to talk about "statistics"...
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The price of coffee as well as other commodities will change according to the world situation but also according to political, meteorological, social events ... of the region of culture.
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The coffee market has doubled in 20 years. This shows very clearly that the demand does not stop growing. The large scale industrialization of a large part of the market is a further proof.
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Today and for the last 3-4 years we notice that a return to local, traceable, high quality products is desired by a growing number of consumers. Coffee is obviously no exception.
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To find a coffee without additives/creamer, etc. is fortunately again a predominant desire in the choice of its coffee. The project www.8grams.store was born from this desire to offer to the greatest number of people a coffee roasted according to the Italian tradition without using chemical additives so that your coffee looks like a big brand.
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Commodity vs. Speciality Coffee
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Coffee is as complex as wine, if not more so :
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Have you ever walked into a coffee shop for lunch, you smell that "good" fragrant coffee, which makes you order an espresso or a coffee-filter that you even want to drink without sugar to discover its different notes while thinking "why doesn't the coffee at home taste AS GOOD as in the coffee shop?"
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Well, it's simply because most of the time, the coffees offered in supermarkets are commodity coffees - these are the types of coffees that are listed on the stock market.
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Simply put, industrial commodity coffee is a type of coffee roasted to more or less the same quality standards regardless of the brand, but which in itself does not necessarily bring a unique touch, a very specific flavor profile in your cup.
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These types of coffee are massively traded all over the world.
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Quick reminder : Robusta vs. Arabica
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These are the two main families of coffee, even if the plants have several subspecies, especially for the Arabica: it is a type of coffee tree much more fragile, which must be taken care of because the altitude, the exposure to the sun can have a huge impact on its growth and its taste which can be more or less complex.
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The Robusta, as the name indicates, is a more robust plant. Perhaps you have already asked yourself the question of what makes it more "Robust"? Robusta contains more caffeine, a poison that is supposed to repel insects but has energizing effects on humans.
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This type of coffee tree grows at the foot of large hills or mountains and, in terms of its aromatic profile, is more "raw": tobacco or woody notes, less finesse in the cup, but which, on the other hand, gives the coffee more "body" in the cup (a denser coffee...)
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It is especially appreciated in Italy where different blends contain more or less espresso to give character to the coffee. Among the most famous and productive coffee producing countries, we find Brazil, Vietnam, India, but also Colombia and Ethiopia.
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Key factors that have impacted the price of coffee in 2022
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As you might expect, coffee is far from the only consumer product that has gone up in price, and the years 2022-2023 will see the return of inflation in full force, with rising energy, fuel and food prices. We have all noticed a painful increase in our bills.
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In 2022 alone, coffee already costs almost twice as much as it did in 2020.
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In terms of prices: Arabica is priced in New York, while Robusta is priced in London... Robusta prices have increased by 69% between January 2021 and February 2022... and Arabica prices by 117%!
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Between 2020 and 2022, the price of a ton of coffee has more than doubled.
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It is important to know that world consumption is currently growing at an average of 1 to 2% per year and should be reduced by at least 5% if we want to avoid further surges in coffee prices. We must also not neglect speculation, which has amplified the rise, as it did in the early 1970s for sugar, although the situation is much more serious today, because many countries produce sugar in sufficient quantities.
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On the other hand, it is impossible to produce coffee in Europe, and we are forced to import all the coffee consumed in our continent from South America, Asia and Africa.
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The speculation, the constant increase of the demand and a supply which does not manage to follow the rhythm requested by the big industrial groups. Make coffee an additional product that knows a strong tariff increase.
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As in everything, excesses are never good, that's why we have chosen at 8Grams to work only with small or medium roasters with a certain traceability of products.
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Let's hope that 2023 will be a year less rich in bad surprises but still rich in caffeine ... and you, how do you think the price of coffee will evolve? Let us know in the comments!
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Sources :
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« Coffee break series » de ico.org : https://www.ico.org/documents/cy2019-20/coffee-break-series-2f.pdf
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> Click here to see our whole coffee beans selection
> Mokarico (Florence, Tuscany)
> Lollo Caffè (Naples, Campania)
> Caffè Carraro (Vicenza, Veneto)
> Gearbox Speciality Coffee (Florence, Tuscany)
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Coffee is one of the most popular drinks in the world and it has its own set of health benefits for humans. We have a YouTube channel dedicated to the world of coffee and we cover many different topics, if you are interested.
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> Click here to visit our YouTube Channel
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> Have a look at our YouTube video : Top 10 benefits of coffee
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