Like Oil, Gold, Silver and Diamonds, Coffee is a commodity. Actually, there is more demand for coffee than any other commodity. Over 2.25 billion cups of coffee are consumed around the world every day.
Because of the demand, coffee growth, production and sales are analyzed, hedged and agonized over in every trading house around the world. Why? Every country demands coffee. It is part of tradition. It is part of the workday. It is part of life. Without coffee there could be worldwide work disruption and economic meltdowns.
This year, coffee has been trading from $1.15 to $1.20 per pound on the New York ICE Futures Exchange. Strangely that is a decline from previous years. If it’s so popular, why is it losing value?
Let’s take a look at some of the factors that sets the price of coffee on the Commodities Exchange.
The Coffee Supply and Demand Factor
Brazil is the top producer of coffee beans worldwide and with a bumper harvest in 2013 investors saw supply overtaking demand. Traders look at the projected availability of coffee, then factor in the demand from consumers to devise their projected value. Supply surpassed demand so the price of coffee went down.
Coffee Commodity Forecast –
Experts tell us to expect gains in the coffee futures markets
According International Business Times there are several factors are that will drive the prices up:
“Steadily rising demand, combined with limited supply from South American countries, particularly Brazil, where coffee farmers have slowly cut back to favor more profitable crops, will drive dynamics over the next few years.”
Emerging new markets:
Recently there have been increases in demand for coffee from China, India and Brazil. Coffee houses such as Starbuck Corporation are continually looking for new markets. They have introduced coffee lovers to new flavours and recipes. There are new coffee houses popping up on every corner in every town. Plus, as our population ages and our children reach the age of 18, a new consumer pool enters the dynamics.
Specialty Coffee Supply and Demand:
Thanks to the specialty coffee shops spreading like wild fire around the world, consumer have developed a tasted for the finer specialty coffees. Demand has exploded. We don’t just want our coffee available at the coffee shop, we want to delight our guests in the comfort of our homes. Offering coffee to a guest is only polite. Offering enticing and invigorating specialty coffee shows class.
The demand keeps increasing, but it is a sad fact that specialty growers are in decline. Over the last decade, the Costa Rican production has decreased by 35%. Demand will soon out strip the specialty production of coffee and coffee prices will rise.
Coffee Leaf Rust Outbreak:
Another factor in the declining specialty coffee grower supply is nature. According to the International Coffee Org. 2013, The Central American Coffee growing region has been hit with an epidemic of Coffee Leaf Rust with a 53% incident rate. This will have a huge effect on the crops coming in and more importantly, the coffee producers’ ability to remain in business. If we lose the specialty growers we lose our coffee!
Now I need a coffee
Is this confusing to you? Because Brazil has a bumper season or two, the price of coffee on the commodities market declines. Yet, the specialty coffee regions in Central America are struggling to produce and have actually seen a decline in production due to economic and natural causes, but the coffee price is still in decline?
And the market for coffee is continually growing worldwide. What is going on? The price is a based on an overall commodity projection of supply and demand, not on specific product.
The only way to help the small struggling coffee farmer with glorious tasting specialty coffee blends is to buy direct or from specialty coffee brokers that support fair trade. Check out our fine selection of gourmet coffees from all around the world. Your taste buds will thank you and your heart will too.