Coffee: How it goes from crop to cup
Enjoyed all over the world, coffee is a truly global commodity鈥敳共曰逄齮he actual聽cost of this simple drink is complex and far-reaching. According to the聽聽(ICO), the coffee industry had聽an estimated gross value聽of聽about US$173.4 billion in 2012, while worldwide coffee consumption has grown an average聽of 2.4 percent per year since 2000. From the fields of Ethiopia 补苍诲听Guatemala to聽trendy coffee shops in聽the United State 补苍诲听Spain, the coffee industry has a聽worldwide social and economic impact.
础听聽presented at the 2014聽聽asserts that production costs have steadily increased over time, while the recent decline in world coffee prices forced many producers to sell their product at a loss. The study聽identifies the social repercussions of this trend, noting that聽鈥渨hen prices are lower than production costs, opportunities for the rural population to renew itself are diminishing given the lack of interest in farming among young people and the exodus to urban centers and developed countries.鈥� This pattern threatens the economic stability of聽countries for聽which coffee is a principal聽export.
Farmers typically make only a聽聽of the market price, much of which聽goes to paying workers and absorbing farm costs. The ICO pinpoints labor, fertilizers, and farm products (such as pesticides) as the industry's聽top three production costs. 罢丑别听聽defines 10 steps in the labor-intensive harvest and production process; however, the market value of cheap coffee can't cover聽the total cost of that same coffee's聽many transformations from grower聽to exporter聽to roaster and, finally, to market.
A January 2015聽market聽聽from the ICO shows the composite daily price fell聽from US$1.85 per pound聽in October 2014 to US$1.30聽in聽February 2015. The ICO expects production to decline聽as well. In the 2014-2015 crop year, world production hit its lowest level in three years.聽Variations in production of coffee are difficult to anticipate, as they may be due to factors as varied as agricultural and climatic conditions, labor availability, and production costs.
罢丑别听聽also identified聽a negative聽correlation between global availability of coffee and its consumption (quantified by pounds of beans roasted).聽The market聽had聽average ratio of 1.5 bags of raw beans to one bag of roasted. Thus, more coffee exists than the global population can drink;聽indicating that, despite high production costs, there is no market incentive for prices to increase. According to the same Januray 2015 report,聽continuation of this trend has put the coffee market at a deficit for the current year. A saturated market favors the consumers and brings prices down to below true cost. Your favorite coffee may have traveled thousands of miles before reaching your cup, and you may be getting a聽bargain.聽
