Coffee is beloved by all. While that could be a generalisation, it can’t be that far off. Estimates are that 400 billion cups are consumed annually, with 450 million of those consumed in the United States alone. The Finnish consume 26 pounds of coffee each person, average of four cups a day, and are required by law to take two 10-minute coffee breaks throughout the workday. The world’s most popular beverage is coffee, bar none. Nothing compares to it.
Therefore, learning about coffee’s well-known trading position in global markets shouldn’t surprise. Two commodities are sold more frequently than any other when considering the overall picture of world trade. Crude oil is the first. Our whole global infrastructure, including our manufacturing and transportation systems, is powered by this. The second fuels the human race; coffee is the second-most traded commodity in the world and the number one in food commodities trading.
What is a commodity? A commodity is “a raw material that can be used to manufacture other finished items,” according to FXSSI. Items referred to as raw commodities, of which coffee is one, fall under this description. Something that “cannot be eaten in the form that it is sold” is a raw commodity. You are not eating coffee made from freshly picked berries. The procedure that goes into making the beverage that you’re putting in your cup includes selecting, drying, transporting, grinding, and brewing the beans.
The coffee market is about $100 billion globally. Most people throughout the world use coffee regularly, but we barely ever stop to consider how significantly it influences international trade. Farmers, transportation firms, cafes, supermarkets, and entire nations are all impacted. Coffee is the second most traded commodity since it is consumed by a large portion of the world’s population.
Both emerging and developed markets consider coffee a staple of their diets. Although there are just a few non-consumption uses for this commodity, the enormous demand for coffee has led to the development of a thriving futures market.
Because coffee has such specialised uses, it frequently attracts investors looking for short-term investment opportunities by gambling on price swings that could occur as a result of supply and demand variables.
Different kinds of volatility are linked to the coffee trade. However, several elements affect all coffee bean varieties, such as:
Because coffee is grown in tropical and subtropical climates, any dramatic weather changes that occur throughout the transit process may have an impact on the real state of the coffee. These unfavourable circumstances include freeze, frost, and prolonged periods of extremely hot weather.
Extreme heat in the atmosphere has the power to bind and melt coffee bean particles. When supply declines due to damaged crops brought on by a natural disaster, prices may drop once again.
To grow and produce a good crop, coffee plants require very specific climatic conditions. As climate changes, the areas where it can be grown shift to locations higher up in the mountains. This makes growing coffee more difficult.
Climate change also threatens the areas in Africa where coffee comes from. The wild coffee plants grown in Ethiopia are the only source of genetic variability. If they disappear, we might not be able to find plants that are resistant to pests and diseases.
Pests and diseases
Coffee production is threatened by pests and diseases. I wrote about the most important one, coffee rust, exactly two years ago.
Price of oil
Despite this, the price of oil has an effect on the price of coffee in both nations. The cost of coffee beans increases along with the price of oil. The cost of oil is one factor that directly affects the cost of coffee beans. With oil prices going up, the cost of your morning cup might be much higher soon!