Coffee is not only a fantastic drink but an essential global commodity. The most common species of coffee being harvested globally today are Arabica and Robusta. Interestingly, the Arabian bean takes about 70% of the World’s coffee production. This coffee species which is normally used for making specialty and higher grade coffee mainly comes from Latin America while Robusta is primarily grown in African and Asian countries.
Besides its sweet rich taste and aroma, coffee is an interesting commodity. The allure of a cup of cappuccino, Espresso, Latte and Americano is too irresistible for millions of consumers all over the World. As a result, many people cannot do without this commodity. Actually, it is estimated that about 2.5 billion cups of coffee are consumed each day globally. Well, this is one of the widely traded products in the World. Unsurprisingly, millions of people rely on this commodity directly or indirectly. As a matter of fact, coffee is only second to oil in terms of value internationally.
According to the World Bank, about 95 out of 140 developing countries generate at least 50% of their revenues from this commodity’s export annually. It is believed that more than 25 million families in developing countries produce coffee as a means of their daily livelihood.
With the price of a cup of coffee fluctuating with each passing day, it is important to ask yourself; what are some of the possible factors affecting the economics of coffee?
Market Price Volatility
It is not surprising how the coffee market can get volatile over a very short duration of time. While not every coffee consumer notices the fluctuation in prices, most consumers feel it when it happens. When the coffee market price gets volatile it leads to consumer confusion and annoyance.
It is a fact that the word overproduction is not very common in the coffee industry. For that, prices of this commodity also vary throughout its global market. The truth is that the coffee industry generates sales exceeding $70 billion yearly. Sadly, only about $5billion of this value goes back to the coffee producing countries. Consequently, this has affected the production level of coffee with many farmers in developing countries opting for other cash crops for their own good. In the end, the cost of a cup of coffee the consumers take keeps fluctuating with each passing day.
Number of consumers in the market
Coffee being an essential commodity reigns as the United States largest food import to date. Its global chain starts with coffee producers, a string of middlemen, importers, exporters, roasters, retailers, and consumers. Well, the bottom line is that when the demand for coffee exceeds the supply then consumers should prepare themselves to pay more for their cup of coffee.
By understanding the economics of coffee it will be easy for you to understand why you have to pay more or less for your cup of coffee the next time you order one.