The Price of Coffee

Coffee prices are low this year, especially compared with last year, and this makes the job of a conscientious coffee buyer more difficult. For now I’m going to try to sort out, as much for myself as anyone who happens to read this, how the price changes that occurred in the past two years can be explained. Later (next post?) I’ll try to detail why low world market prices make the job of being a conscientious coffee buyer more difficult. 

As with other commodities, particularly agricultural commodities, price trends can be tricky and coffee has some peculiarities that make just understanding what you are looking at when you see a price on a per weight basis a little more convoluted. First, we have two kinds of coffee (Arabica and Robusta) and sometimes they’ll be lumped together and other times taken separately. In the world, Arabica coffee is produced in much higher quantity and Latin America dominates on this side. Cameroon was producing about 66 thousand bags (about  4,000 t) of Arabica in the mid 2000’s, though I will venture a prediction that Cameroon’s production will increase in response to some aggressive government programs for distributing new coffee plants. This is maybe a bold prediction since Cameroon’s Arabica production has actually been decreasing for the past four years or so, but I’m going to stick to it. 

Robusta production is concentrated more in South East Asia and Africa and Cameroon’s production is much heavier on the Robusta side (about 525 thousand bags (about 31,000 t) of Robusta in the mid 2000’s). Here in Oku, we’re talking about Arabica, the small side of the Cameroon market, but the big side of the world market. Aside from varietal concerns, something else to be careful about when looking at data concerning coffee production is the time frame involved. For coffee, harvesting, processing, and farm-gate sales occur over two different calendar years, so some financial reports will give information on a single calendar year or fiscal period which may not coincide with the rhythm of production. Feel free to ignore those subtleties for the next few minutes (I have). 

So let’s go into the story since 2010 with extreme brevity. Brazil is most certainly the 800-pound gorilla when it comes to Arabica producing about 2.5 million tons of Arabica coffee in the 2010/11 season about 4.5 times more than the #2 country, Colombia. Obviously, this gives Brazil a whole lot of clout when it comes to the world market price of Arabica coffee. Analysts fret over droughts, frosts, disease outbreaks, and all other forms of natural or man-made catastrophes that could reduce the Brazilian output. So apparently, from the start of 2010 until about March of 2011 based on speculation (and the eventuality) of a low yield from Brazil and many other Arabica producing nations the commodity price of coffee rose to a 14-year highof 306.25 cents per pound in the early part of 2011. Notably, these couple of short seasons also left the stocks of exporting countries at all time lows at the beginning the 2012/13 season (that would be this one).  Meanwhile, on the other side of the planet growers in Oku were able to enjoy the higher price as well and for two selling seasons were getting around prices between $2-3 per kilogram. 

It seems like the good times are over... Not really, the markets are just readjusting and Brazil is having a really good season (Brazil has this funny two year cycle of higher and lower coffee yields). Also, we can all take a great deal of heart in the fact that coffee consumption is steadily increasing as populations in emerging markets are getting a taste for the brew. So, maybe some farmers will be discouraged this year and some may even turn away from their coffee crop, but my hope is that the producers I’ve been working with the past year will stick in the game and take on the challenge of trying to sustainably increase their production in order to stay viable as coffee farmers for years to come.