Black liquid gold derived from the ground and refined by heat to fuel the global economy every single day... did you think I am describing crude oil?
Well, not exactly.
I am talking about the 8th most traded commodity globally, one of the most consumed agricultural articles, and the essence of life I could not go without – coffee.
The magnitude of the coffee market
According to the estimates by the Specialty Coffee Association, International Coffee Organization, and Chatham House: "every minute, 2.3 million cups of coffee are consumed globally." That makes the market of this beverage a multibillion-dollar industry.
In the United States alone, the retail coffee industry's worth reaches approximately $18 billion annually. Jonathan Silvertown depicted the magnitude of the yearly coffee consumption in his book 'An Orchard Invisible: A Natural History of Seeds' as "enough to fill Yankee Stadium 85 times."
Coffee and the global economy
Considering the immensity of the coffee market, it is relatively easy to realize that those innocent seeds significantly influence the global economy. But how exactly?
Fairtrade has estimated that "125 million people worldwide depend on coffee for their livelihoods."
Sounds truly powerful when we look at the worth of this market, right?
Actually, the majority of these people are unable to earn a living from this. The companies exporting coffee make the most impressive profit margins; meanwhile, the earnings of the farmers who stand at the very beginning of this supply chain leave much to be desired.
Approximately 80% of coffee is produced by 25 million smallholder farmers. Most of the market value assigned to coffee comes from the last part of its supply chain – retail. Meanwhile, crucial steps to arrive at that stage are upwardly: distribution, roasting, exporting, and obviously - cultivation.
The difficulty of pricing coffee
Coffee is well-known for being a so-called 'boom and bust' commodity. Its production is different from year to year, which makes the global coffee prices fluctuate constantly. Moreover, individual countries vary in this commodity's availability, its relative costs, and the final prices of the completed product. Coffee producers do not have power over these particular changes; however, when their harvest suffers, they suffer too.
The differences in prices also depend on the type of coffee. We can identify two primary species – Arabica and Robusta. Both of them are predominantly produced in the countries located in subequatorial areas due to these plants' climate requirements. These days Brazil is an unquestionable leader in the production and export of coffee, with Vietnam following it.
More problems faced by the coffee industry
With an image of a coffee tree in mind, the first logical connections popping into your head are probably pesticides, diseases, or fungi. Apparently, these natural microscopical opponents of coffee are not the only villains in the universe of this commodity.
One of the most severe issues the coffee industry faces is climate change, highlighted in the short documentary created by the Stumptown Coffee Roasters titled "Flower of Flowers." Rising temperatures and new rainfall patterns cause problems, especially for Arabica coffee, beloved by most coffee drinkers for its smoother and sweeter taste when compared to Robusta. Arabica needs to grow in colder temperatures; thus, climate change is a huge threat here.
Another problem tormenting the coffee market is labor shortage: job's informality and technological development in coffee-producing countries make fewer people interested in the physical work, for example, coffee picking. Additionally, as I have already underscored, the limited ability to price coffee adds more uncertainty to this industry, resulting in workers' unreliable incomes.
How to support the coffee industry?
If your mood, creativity, and the feeling of power depend on this exceptional black gold, you would probably want to know how to support its market, especially in the era of ongoing climate change and humanitarian crises.
Mindful of the importance of farmers' better well-being can lead to searching for coffee with certificates, like Fair Trade Certified™. Many coffee lovers wonder if these guarantees actually mean a thing. Theoretically, a document like this is a promise to meet standards connected with fair labor, care about the environment, or production efforts. Nonetheless, a four-year research project conducted by economists at SOAS showed that these endeavors do not improve the lives of the very poorest rural people. Ensuring ethical coffee production may be tricky because of the scarcity of sufficient market information and numeracy barriers.
Choosing local coffee shops instead of large chains can be a first step in the right direction. Notwithstanding, if you want to have a better grasp of your favorite coffee-shop chain's ethical approach, you can take your time and indulge in the research of their suppliers.
One of the most significant ways to directly help the coffee farmers is supporting organizations that provide farmers with savings groups, agricultural techniques, education, and access to the global networks, like Food for the Hungry (FH).
I hope that the next time you grab a cup of coffee, you will think about the economic complexity behind this exquisite beverage and choose the best way to support people standing at the very beginning of its supply chain :)
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