market analysis for coffee market.docx
TRANSCRIPT
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Market analysis for
Coffee Market
Irina Achim
Antonia Cline-Petre
Group 942, year II, REI, ASE
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1.Market area
History of coffee
The history of coffee goes at least as far back as the thirteenth century. The story of Kaldi, the9th-century Ethiopian goat herder who discovered coffee while searching for his goats, did not appear
in writing until 1671 and is probably apocryphal. From Ethiopia, coffee was said to have spread to
Egypt and Yemen. The earliest credible evidence of either coffee drinking or knowledge of the coffee
tree appears in the middle of the fifteenth century, in the Sufi monasteries of Yemen. By the 16th
century, it had reached the rest of the Middle East, Persia, Turkey, and northern Africa. Coffee then
spread to Balkans, Italy, and to the rest of Europe, to Indonesia, and then to America.
The first step in Europeans' wresting the means of production was effected by Nicolaes Witsen,
the enterprising burgomaster of Amsterdam and member of the governing board of the Dutch East
India Company who urged Joan van Hoorn, the Dutch governor at Batavia that some coffee plants be
obtained at the export port of Mocha in Yemen, the source of Europe's supply, and established in the
Dutch East Indies; the project of raising many plants from the seeds of the first shipment met with
such success that the Dutch East India Company was able to supply Europe's demand with "Java
coffee" by 1719.
The first coffee plantation in Brazil occurred in 1727 when Lt. Col. Francisco de Melo Palheta
smuggled seeds, still essentially from the germ plasm originally taken from Yemen to Batavia, from
French Guiana. By the 1800s, Brazil's harvests would turn coffee from an elite indulgence to a drink
for the masses. Brazil, which like most other countries cultivates coffee as a commercial commodity,relied heavily on slave labor from Africa for the viability of the plantations until the abolition of
slavery in 1888. The success of coffee in 17th-century Europe was paralleled with the spread of the
habit of tobacco smoking all over the continent during the course of the Thirty Years' War (1618
1648).
For many decades in the 19th and early 20th centuries, Brazil was the biggest producer of coffee
and a virtual monopolist in the trade. However, a policy of maintaining high prices soon opened
opportunities to other nations, such as Colombia,Guatemala, Nicaragua, Indonesia and Vietnam, now
second only to Brazil as the major coffee producer in the world. Large-scale production in Vietnambegan following normalization of trade relations with the US in 1995. Nearly all of the coffee grown
there is Robusta.
Despite the origins of coffee cultivation in Ethiopia, that country produced only a small amount
for export until the Twentieth Century, and much of that not from the south of the country but from
the environs of Harar in the northeast. The Kingdom of Kaffa, home of the plant, was estimated to
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produce between 50,000 and 60,000 kilograms of coffee beans in the 1880s. Commercial production
effectively began in 1907 with the founding of the inland port of Gambela. 100,000 kilograms of
coffee was exported from Gambela in 1908, while in 1927-8 over 4 million kilograms passed through
that port. Coffee plantations were also developed in Arsi Province at the same time, and were
eventually exported by means of the Addis Ababa - Djibouti Railway. While only 245,000 kilogramswere freighted by the Railway, this amount jumped to 2,240,000 kilograms by 1922, surpassed
exports of "Harari" coffee by 1925, and reached 9,260,000 kilograms in 1936.
Coffee market
Coffee is an important commodity and a popular beverage. Over 2.25 billion cups of coffee are
consumed in the world every day. Over 90% of coffee production takes place in developing
countries, while consumption happens mainly in the industrialized economies.
Worldwide, 25 million small producers rely on coffee for a living. For instance, in Brazil alone,where almost a third of all the world's coffee is produced, over 5 million people are employed in the
cultivation and harvesting of over 3 billion coffee plants; it is a much more labour-intensive culture
than alternative cultures of the same regions as sugar cane or cattle, as it is not subject to automation
and requires constant attention.
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Coffee is also bought and sold as a commodity on the New York Board of Trade. This is where
coffee futures contracts are traded, which are a financial asset involving a standardized contract for
the future sale or purchase of a unit of coffee at an agreed price. The world's largest transfer point for
coffee is the port of Hamburg, Germany.
Coffee statistics show that among coffee drinkers the average consumption in the United
States is 3.1 cups of coffee per day.
COFFEE STATISTICS: 50% of the population, equivalent to 150 million Americans, drink
espresso, cappuccino, latte, or iced/cold coffees.
COFFEE SHOP FACTS: Independent coffee shops equal $12 billion in annual sales.
At the present time there are approximately 24,000 Coffee Shops across the country. Statisticsshow there will be approximately 50,000+ Coffee Shops by the year 2012. The
average Espresso Drive-thru Business sells approximately 200-300 Cups of Espresso and Coffee
Based Drinks per day.
Coffee Statistics & Coffee Consumption Statistics
The National Coffee Association and The Specialty Coffee Association of America conduct
annual surveys regarding coffee consumption each year. The gathered data below can be extremelybeneficial to anyone wishing to start a business or just have an insight on coffee consumption.
The Specialty Coffee Association of America (SCAA)
CoffeeResearch.org
Results of Gathered Data:
Over 50% of Americans over 18 years of age drink coffee every day. This represents over 150
million daily drinkers. 30 million American adults drink specialty coffee beverages daily; which
include a mocha, latte, espresso, caf mocha, cappuccino, frozen/iced coffee beverages, etc.
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Average Beverage Price:
The average price for an espresso based drink is $2.45
The average price for brewed coffee is $1.38.
Coffee Cup Consumption per Day:
Men drink as much coffee as women; each consuming an average of 1.6 cups per day. Women
seem to be more concerned about the price than men. Among coffee drinkers, the averageconsumption in the United States is 3.2 cups of coffee per day.
Average Cup Size:
The average coffee cup size is 9 ounces.
30% of the population drinks coffee occasionally.
Time of day:
65% of all coffee is consumed during breakfast hours, 30% between meals, and the remaining5% with other meals.
Coffee Shops Nationwide
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Preferences:
35% of coffee drinkers prefer black coffee
65% prefer to add sugar and/or cream
Motivations:
Women indicated that drinking coffee is a good way to relax. Men indicated that coffee helps
them get the job done.
Miscellaneous:
The United States imports in excess of $4 Billion worth of coffee per year.
Americans consume 400 million cups of coffee per day making the United States the leading
consumer of coffee in the world.
On an average, 250 Cups of espresso and coffee drinks are sold per day at almost any espresso
drive-thru business with a great visible location. (500 cups per day is extraordinary.)
Independent coffee shops manage to sell 31% of espresso-based drinks, while the rest is brewed
coffee.
2.Market structureTarget Market
Coffee Elitists
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For coffee enthusiasts, there is a whole culture dedicated to coffee. There are websites where
you can order whole bean coffees that are sourced from high elevations and are considered the
world's best by other coffee critics and enthusiasts.
The Everyday Man
The coffee market also targets "the everyday man" who is just looking for a cup of coffee to get
them through the day. Coffee for this particular group is also sourced at a high elevation, but for
cost's sake, it is grown at a slightly lower elevation than the whole bean that an elitist would normally
buy. Many of the big name coffee retailers provide for this particular market.
Specialty Drinks
Black coffee isn't for everybody. As a result, many retailers have formulated drinks that appeal
to other tastes. For example, coffee, specifically espresso, can be mixed with flavored syrups, sugars
and powders to create drinks such as the white chocolate mocha or caramel latte that appeal to peoplewho are looking for a sweeter drink.
Kids Drinks
Even kids are partaking in this growing industry. Cold, blended beverages are extremely popular
with children. There is normally more sugar and less coffee in blended beverages, which makes the
caffeine level a little more tolerable for this younger generation of coffee drinkers. Cold blended
beverages are made by blending a cold coffee base, dairy products such as milk or cream, sugar and
ice. The result is a thick, frothy drink that is tasty and sweet.
Coffee Alternatives
The coffee market also provides alternatives for people who cannot have caffeine because of
health problems and for people who just don't prefer the coffee taste. Decaf is often available for
those who love the taste of coffee but cannot handle caffeine for one reason or another. Coffee
retailers also have a lot of non-coffee alternatives often made with cream bases as opposed to coffee
bases to eliminate coffee altogether.
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3.Market capacity
Potential market (?)
2010 Study Highlights:
Daily consumption of coffee beverages among consumers remained unchanged as compared to
2009, with 56% of adults partaking.
84% of consumers have not changed their consumption habits despite the economic
environment.
40% of the coffee consumed is now gourmet.
Coffee preparation at home is up 4 percentage points with 86% of past-day coffee drinkers
reporting that they made coffee at home.
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Effective market (?)
4.Market dynamics
Coffee market in Japan, first half of 2010
Peculiarities of the industry
However Japan is famous for its tea ceremonies, in the twenties century coffee became a significant part of everyday life ofJapanese people and thus a traditional beverage. Japanese incline to drink high-quality coffee species. Thus the country isthe main consumer of Blue Mountain, Jamaican high-quality coffee, and imports about 90 percent of its total production.
Japan is one of the main coffee consuming countries, holding the 4th place in the world by volume of coffee consumed perperson following the USA, Germany and France. These countries import mostly green coffee and then process it at thefactories.
Japan imports coffee from producer countries such as Kenya (following the Scandinavian countries and Germany), Cted'Ivoire (following Italy, France and USA), Ethiopia (following Germany and Saudi Arabia), Vietnam, Zambia (followingEurope and USA), Columbia (following USA and Germany), and Jamaica (80 percent of total coffee import of the country).
The fact that the network of world-known coffee houses Starbucks is widely developing in Japan nowadays, about 500coffee houses, shows that coffee consumption is increasing in the country. Moreover, there are enormous coffee machinesin large cities. You can order a cup of fresh brewed coffee at any caf.
It is worth mentioning that the price of a cup of coffee is rather high in Japan. It is due to that fact that the price includesnot only the beverage itself but the seat as well. But Japanese prefer to drink coffee at home, i.e. they buy green coffeebeans and roast it themselves.
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The fact that Japan celebrates Coffee Day on the 1st of October may also be the evidence of coffee playing an importantrole in everyday life of Japanese people.
Production35,847 thousand tons of instant coffee was produced in Japan in 2009, which is 3.4 percent less than in 2008. During the1st quarter of 2010 8,452 thousand tons was produced. Figure 1 shows production dynamics.
Fig. 1 Dynamics of instant coffee production in Japan, 2007
1st quarter of 2010
Source: The results of the Survey on Current Status of Oils and Fats Production and Survey on Current Status ofProcessed Food Production, General Food Policy Bureau, Ministry of Agriculture, Forestry and Fisheries
PriceThe prices of instant coffee in Japan are far higher than the prices of coffee beans. While the prices of coffee beans arerelatively steady, the prices of instant coffee vary year after year.
Thus average retail price of instant coffee in Tokyo in 2009 was 698 JPY per 100 g. pack, which is 1.5 percent lower than in2008. But the price has collapsed to 633 JPY by the 1st half of 2010. In Osaka the price of instant coffee was higher: theprice of pack was 741 JPY in 2009 which is 3 percent lower than in 2008. But the price has fallen to 672 JPY by the 1st half
of 2010.
Retail price of coffee beans was 125 JPY per 100 g. pack in Tokyo in 2009 decreasing to 1.6 percent if compared to 2008.The price has grown 2.4 percent by 128 JPY by the 1st half of 2010. In Osaka in 2009 the price was 124 JPY shrinking 12.7percent if compared to 2008. During the 1st half of 2010 the price was at the same level as it was in 2009.
Figure 2 shows retail price dynamics.Fig. 2 Dynamics of instant coffee and coffee beans retail prices in Japan, 2007 1st half of 2010
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Source: Monthly Information on Imports and Exports Agricultural, Forestry and Fisheries Products, internationalDepartment, Ministry of Agriculture, Forestry and Fisheries.
Exports
Japan coffee export is rather low if compared to its import into the country. During the 1st half of 2010 the country hasexported coffee to the sum of 2,004,214 thousand JPY which is 13.9 percent more than it was in the corresponding periodin 2009 (see Figure 5).
Fig 5 Dynamics of coffee export by value, 1st half of 2009 1st half of 2010
Source: Monthly Information on Imports and Exports Agricultural, Forestry and Fisheries Products, internationalDepartment, Ministry of Agriculture, Forestry and Fisheries.
Instant coffee export accounts for about half of the total Japan coffee export in the 1st half of 2010. Thus, during the 1sthalf of 2010 the country has exported 981,268 kilos of instant coffee to the sum of 1,039,200 thousand JPY, that is 5.5percent more than it was in the corresponding period in 2009, but 14.7 percent less by value. Figure 6 shows dynamics ofinstant coffee export.
Fig 6 Dynamics of instant coffee export by volume and by value, 1st half of 2009 1st half of 2010
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Source: Monthly Information on Imports and Exports Agricultural, Forestry and Fisheries Products, internationalDepartment, Ministry of Agriculture, Forestry and Fisheries.
5.Market evolutionSince coffee is by far the most popular drinks of our times, without any known rival so
far, it goes without saying that the coffee market itself is a very competitive sector. With
the huge number of coffee brands, companies have to come up not with just good prices,
but with quality guarantees to prove that their coffee is well-flavored and tasty. Statistics
show that there is only one commerce domain more active than coffee market and it is
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that of oil; consequently one can hardly imagine the extent of the transactions and the
number of figures for the profits that result from the coffee market.
From time to time, crisis periods appear on the coffee market, related to poor bean
quality, the creation of stocks or oversupplies, not to mention the very low coffee prices.
All these elements threaten to affect the lives of those who depend on coffee cultivation
for a living, the coffee farmers or producers. Furthermore, pollution has a heavy word to
say in the evolution of the coffee-growing areas where entire ecosystems could be
endangered; while the coffee consumer is actually unaware of the strive that is going on
behind the morning coffee he or she prepares.
In global economy, the coffee market is among the fewest domains where small
producers dominate trade commodities; statistics show that more than 75% of the world's
coffee production comes from little farms that are entirely independent in terms of
harvesting and supplying. Every time, coffee prices drop, there are farmers who come toabandon their coffee fields, moving to different sectors of activity. Such changes on the
coffee market leads to instability within many communities as well as to shifts in the
evolution of national economies since a part of the investments in the sector are lost.
Though the demand on the coffee market usually remains stable, there are times when
fluctuations occur here as well. However, even during the times when the coffee prices
drop, there is no relevant price reduction for the coffee products on the market due to the
same little fluctuation in the demand. If people need just as much coffee as before, why
would anyone try to make it cheaper: businesses profit from this constancy in the fieldand have profit changes unaffected by such fluctuations. Such transactions profitable only
for some parts of the trading process are not suspected by the small farmers who have no
idea about the coffee price in London or Sydney.
The commodity price of Arabica coffee hit its highest level since 1998 at the end of
last week. Although our business operates largely independently of the commodity
market, it is impossible not to feel the effects of such a major development.
On Monday (2 August) Arabica coffee for September delivery reached a high of
US$1.815 a poundon the ICE US futures in New York. It has since fallen back slightly,closing at US$1.6985/lb on 5 August. To put this into perspective, the Fair Trade
minimum price is US$1.35/lb, a typical price for specialty coffee beans is US$2.00-
$4.00/lb, and the commodity price had recently been hovering around US$1.25-$1.40.
At Mercanta we have gone a long way towards de-commoditising our product, by
establishing direct, independent relationships with premium quality coffee growers. The
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specialty coffee market is notpegged to the commodity price and, usually, we remain
largely immune to the daily price fluctuations in New York.
However, we cannot help but be affected by major commodity market trends. The
majority of coffee farmers, including specialty coffee farmers, reference the market price
when negotiating sales. The bottom line is that, when the market is up significantly,
this inevitably pushes up the specialty price.
Put simply, when Mercanta negotiates prices with growers the following factors come
into play:
What price is available to the grower in the local market for partly processed coffee
parchment or cherry? (This rate generally fluctuates in line with the commodity price).
What price are other buyers paying for specialty beans, thus benchmarking a level for
that farm?
What is the production cost for the farm? Typically this ranges from US$1.00-$1.40/lb,
so the so called ethics of buying rarely come into play in the true specialty
business. Invariably Mercanta is paying 30-150% MORE than the cost of
production.
What is the growers quantity expectation? Mercanta can pay any price for coffee - but
if the grower seeks a substantial premium for his product, there may well be a quantity
impact on what we can buy.
Undervalued?
The recent developments in the commodity market emphasise a point that we have been
getting at for several years now - specialty coffee as sold by Mercanta is undervalued
as a product. All the more so when you consider that the average price for a Cup of
Excellence coffee in 2009 was US$6.69/lb and so far in 2010 is US$7.75/lb, with
winning lots reaching as much as US$35/lb. The Cup of Excellence brand offers fine
coffee in small lots, judged by expert cuppersthis is exactly what Mercanta sells. Yet
our (non COE) coffee typically commands only US$2.00-$4.00/lbie. it sells for pricesthat are far closer to the market rate for commodity grade coffee, even though an
increasing number of the farms that Mercanta offers have a Cup of Excellence pedigree.
This point is well-illustrated in the below graph, showing the evolution of coffee prices
following the collapse in 1989 of the International Coffee Agreement, which had
regulated prices and exports. The graph shows: the International Coffee Organisations
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annual average commodity price for coffee; the ICO annual average commodity price for
washed Arabicas (non Colombian); the Fair Trade minimum price; and the Cup of
Excellence annual average price since the first auction in 1999. The dashed rectangle
shows the typical price range of non-COE specialty coffeesie. what Mercanta sells.
This data makes two things clear:
1) Specialty coffee demands a far fairer price than Fair Trade(which will either
pay farmers the minimum guarantee of US$1.35/lb, or the market price plus US$0.10/lb
premium).
2) The gap between COE lots and normal specialty coffee is growing ever wider.
What now?
It is difficult to predict what the market will do next. The current high was triggered byshort supplies from Colombia after last years Arabica production fell to a 33-year low,
and has been inflated further by market speculation. The ICO warned on Friday (30 July)
that the current tight demand and supply situation was likely to persist in the near to
medium term. A technical analysis published this week forecast that prices will continue
to fall back slightly in the short term, before easing with the arrival of the new Brazilian
crop in October.
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A note from Brazil
This years crop is set to be very large, which should take pressure off the commodity
market price later in the year. However, because of very uneven flowering/maturation the
harvest will yield an unusually high percentage of naturals, and the price difference
between pulped naturals and naturals will be as wide as it has ever been. This is because
multinational giant roasters are buying up pulped natural Brazils in place of washed
Arabicas from Colombia and Central America (which are scarce and expensive). This is
pushing up the pulped natural price. In contrast, natural Brazils have a taste profile
unsuited to substitution for washed Arabicas meaning that they are likely to be more
plentiful, and therefore comparatively cheaper.
Robusta is no alternative
Another point to take from the commodity price high is that, despite a plentiful supply ofRobusta at around US$0.80/lb, multinational giants are still paying up for Arabica at
more than twice that price. Consumer tastes are becoming increasingly refinedthese
days there is only so much Robusta that even the multinationals can get away with.
6.Market conjuncture
7.Demand and offer
Besides the high demand and cost for gasoline these days, coffee is considered the second
most traded commodity on worldwide markets next to oil. "Coffee is grown in more than
50 countries in a band around the equator and provides a living for more than 20 million
farmers. Altogether, up to 100 million people worldwide are involved in the growing,
processing, trading and retailing of the product" (Spilling the Beans, ). In 2001, coffee
farmers and plantations produced over 15 billion pounds of coffee while the world
market only bought 13 billion pounds. The overproduction in the coffee industry is not a
usual thing and is one of the major reasons why prices vary throughout the industry.
One of the major corporations today that is trying to control a large portion of the supply
of coffee is Starbuck. Starbucks Corporation is the leading retailer, roaster and brand of
specialty coffee in the world. Starbucks purchases, roasts, and sells whole bean and rich-
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brewed coffees, espresso beverages, cold blended beverages, an assortment of food items,
coffee-related
accessories and equipment, a selection of quality teas and a line of compact discs.
Starbucks has over 8,700 retail locations in North America, Latin America, Europe, the
Middle East, the Pacific Rim and is continuing to grow. When coffee is considered
Starbucks has developed a worldwide name for itself and has become a huge success.
An article in the Seattle Post, describes the alliance that Starbucks is making to ensure
that a sustainable supply of high quality of coffee is produce in Latin America.
"Starbucks President and CEO Orin Smith said the alliance is partly his company's effort
to pass on the "high price" of a cup of coffee to farmers." (Lee, 2004). He states that the
high price enables them to pay the highest price to the farmers. Though the high prices to
suppliers can demonstrate that money get to farmers with being diverted. Starbucks
overall goal with this alliance is to buy 60 percent of its coffee under the standards agreedupon by 2007. "The agreement reflects the growing power of the premium coffee market
and efforts to exploit it for the benefit of small farmers" (Lee, 2004).
When it comes to the supply, demand and price of coffee there are certain factors that can
fluctuate these characters to rise or fall. Weather is one example that affects the
consumption of coffee. People tend to drink more coffee in the winter rather than the
summer due to the cold temperature, shorter days and the fact that it is harder to get going
without a cup of coffee during the holidays. Starbucks has tried to avoid these dramatic
drops in the summer by offering a variety of cold drinks and desserts however; during thesummer these factors are considered more of a "want" compared to almost a "need"
during the wintertime.
Another factor that directly affects coffee prices is the taxes and tariffs that the
government imposes. In the same boat as cigarettes and alcohol, coffee is one of the
highest taxed products in the United States. Just recently the tax on coffee went up to
about 10 cents per cup, on top of all the tariffs that already are paid. In response to the
increase, coffee drinkers all over the country reacted by protesting but coffee still remains
highly taxed.
The amount of coffee drinkers during the last decade has gone up from 71 to 76 percent
and the average cups of coffee per day have increased from 3 to 3.5 cups. Another factor
to this increase in consumption is the aging of the baby boomers and their increasing
spending power, creating a good customer base for the coffee shops. This of course, has a
very positive effect of the demand on the coffee industry.
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Supply and demand are the key words to economics and is the answer to many questions
that pertain the shift in prices. Demand is all about the willingness and ability an
individual will pay for a particular product or service. "Prices are the tool by which the
market coordinates individuals' desires and limits how much people are willing to
buyhow much they demand" (Colander, 2004). There is an invisible hand in economicsthat sees to it that what people demand matches what is available. When goods are
limited the market reduces the quantity, as prices go up, people buy fewer goods and as
goods become abundant, prices go down and people want more. Some factors that affect
the demand curve are society's income, the price of the goods, tastes, expectations and
taxes.
Supply the other the hand refers to a schedule of quantities a seller is willing to sell per
unit of time at various prices. It is considered a mirror image of demand. Individuals
again control the factors of production, inputs or resources necessary to produce goods.
"Individuals' supply of
these factors to the market mirrors other individuals' demand for those factors" (Colander,
2004). Just as demand, supply is fundamental to the invisible hand's ability to coordinate
an individual's actions in the market. The main bases for the law of supply is on the firm's
ability to substitute production of one good for another or vice versa.
Despite the many factors that affect supply and demand, Starbucks is in no way going to
do any worse than its competitors in the coffee industry. Starbucks has turned itself into
the Microsoft of coffee and as long as nothing too severe happens to our economyStarbucks can look forward to a prosperous future.
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8.Prices and tariffs
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According to the Composite Index of the London-based coffee export country group
International Coffee Organization the monthly coffee price averages in international trade
had been well above 100 US cent/lb during the 1970s and 1980s, but then declined during
the late 1990s reaching a minimum in September 2001 of just 41.17 US cent per lb and
stayed low until 2004. The reasons for this decline included a collapse of theInternational Coffee Agreement of 19621989[8] with Cold War pressures, which had
held the minimum coffee price at US$1.20 per pound.
The expansion of Brazilian coffee plantations and Vietnam's entry into the market in
1994 when the United States trade embargo against it was lifted added supply pressures
to growers. The market awarded the more efficient Vietnamese coffee suppliers with
trade and caused less efficient coffee bean farmers in many countries such as Brazil,
Nicaragua, and Ethiopia not to be able to live off of their products, which at many times
were priced below the cost of production, forcing many to quit the coffee bean
production and move into slums in the cities. (Mai, 2006).
A coffee plantation on a hill near Oros, Costa Rica.
The decline in the ingredient cost of green coffee, while not the only cost component of
the final cup being served, occurred at the same time as the rise in popularity specialty
cafs, which sold their beverages at unprecedented high prices. According to theSpecialty Coffee Association of America, in 2004 16% of adults in the United States
drank specialty coffee daily; the number of retail specialty coffee locations, including
cafs, kiosks, coffee carts and retail roasters, amounted to 17,400 and total sales were
$8.96 billion in 2003.
Specialty coffee, however, is frequently not purchased on commodities exchangesfor
example, Starbucks purchases nearly all its coffee through multi-year, private contracts
that often pay double the commodity price.[9] It is also important to note that the coffee
sold at retail is a different economic product than wholesale coffee traded as a
commodity, which becomes an input to the various ultimate end products so that its
market is ultimately affected by changes in consumption patterns and prices.
The market for soft drinks has been steadily climbing, passing the consumption of coffee
in terms of mass of product consumed in the early 2000s.
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In 2005, however, the coffee prices rose (with the above-mentioned ICO Composite
Index monthly averages between 78.79 (September) and 101.44 (March) US Cent per lb).
This rise was likely caused by an increase in consumption in Russia and China as well as
a harvest which was about 10% to 20% lower than that in the record years before. Many
coffee bean farmers can now live off their products, but not all of the extra-surplustrickles down to them, because rising petroleum prices make the transportation, roasting
and packaging of the coffee beans more expensive.
Prices have risen from 2005 to 2009 and sharply in the second half of 2010 on fears of a
bad harvest in key coffee-producing countries, with the ICO indicator price reaching 231
in March 2011
9. Exports and imports
In 2010, global coffee net-exports is projected to reach 5.5 million tonnes (92million bags). Latin America and the Caribbean, with an export of 2.9 million
tonnes (48 million bags), is expected to continue to be the leading exporting
region, although there will be a decline in the net-exports of 0.5 percent annually.
By contrast, in Africa there will be a net export increase at a rate of 1.6 percent
annually, reaching 1.0 million tonnes (17 million bags) and accounting for a 18
percent share of global exports. In Asia, export availabilities are expected to grow
to 1.5 million tonnes (24 million bags) in 2010, accounting for 27 percent of world
coffee exports. Export availabilities from Oceania are estimated to increase by 7.3percent, reaching 150 000 tonnes (2.5 million bags), about 3.0 percent of global
export availabilities.
World coffee imports are expected to increase by 0.2 percent annually during the
projection period to reach 5.5 million tonnes (92 million bags) by 2010. This
compares with average imports of 5.4 million tonnes (90 million bags) in 1998 -
2000. Imports by developing countries are projected to reach 421 000 tonnes (7million bags) in 2010, accounting for less than 8 percent of the world's total and
similar to their share in 1998 - 2000. Reflecting the slower growth of consumption,
import requirements of the developed countries are projected to grow at an annual
rate of 0.1 percent, reaching 5.1 million tonnes (85 million bags) by 2010 and
accounting for 92 percent of the global total. Import demand by North America is
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projected to decline moderately to 1.54 million tonnes (26 million bags) by 2010.
Imports into Europe are projected to decrease marginally to 2.96 million tonnes (49
million bags) by 2010. Imports to Japan are projected to grow at 1.6 percent
annually reaching 460 000 tonnes (7.7 million bags). Growth in import demand by
the former Soviet Union/CIS, where consumption in soluble form has grown butno processing firm has been established in the area, is expected to remain low at
less than one percent per annum during the projection period.
http://www.fao.org/docrep/006/y5143e/y5143e0v.htm