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Coffee consumption up but trade prices are low

Coffee consumption up but trade prices are low

Despite a steady increase in coffee consumption around the world, trade prices have fallen dramatically in the past three years, hitting producers.

At the same time, the cost of an espresso or latte remains as full-fat as ever. What’s going on?

Futures on arabica and robusta, the most widespread varieties of coffee, have fallen 40 per cent since the beginning of 2017 and are now at historically low levels.

This is largely because of bumper harvests in Brazil, the world’s main coffee producer.

But at the same time, consumption has grown by an average of 2.1 per cent a year for the past decade, according to the International Coffee Organisation (ICO).

Two billion cups of coffee are drunk every day, according to Fairtrade International, which works to improve the lot of farmers through better pricing and conditions.

The crisis in prices is beginning to create “real structural problems” for producers, said Valeria Rodriguez, a manager at fairtrade organisation Max Havelaar France.

“The consequences are terrible — they can no longer support themselves, invest in production or prepare for the challenges of climate change,” she told AFP.

In Central and South America, many smaller producers are giving up, in particular those who grow arabica, which is more difficult to produce than the robusta variety favoured in Asia, according to Jack Scoville, a futures markets analyst with Price Group.

Few have the money to invest, and access to the kind of fertile land they would need to switch to mechanised processes with economies of scale is limited.

As a result, “origins with a higher cost of production such as Colombia, Honduras and Guatemala are forecast to produce less coffee for the 19/20 season”, said Geordie Wilkes, head of research at Sucden Financial.

ICO figures published last week illustrate the trend — south America will see production fall 3.2 per cent in the coming season, compared with 0.9 per cent worldwide.