Coffee is grown and harvested in over 50 countries including United States, Mexico, Indonesia, Yemen and the list goes on from there. There are various aspects to look into when we are looking at coffee production from all over the world.
The coffee cherry species, conditions of the soil, weather, accurate altitudes of where coffee is growing and amount of rainfall, all affects the quality of the final product. All these elements combined with how coffee cherries are processed contribute to the uniqueness of how each coffee tastes from different country.
Coffee has become a vital commodity to not only coffee producing countries but also to the world economy itself. For a sustainable economy, coffee production is now an asset to many developing countries as it is an agent of development. In addition to that, it provides livelihood to people all over the world as coffee harvesting requires major labour intensive work.
“In terms of international trade, coffee is the most valuable tropical agricultural product. Export revenue of coffee producing countries in coffee year 2012/13 is preliminarily estimated at US$19.1 billion.”
World Coffee Conference
The International Coffee Organization holds this conference every 4 to 5 years to discuss important topics regarding the global coffee market. The latest World Coffee Conference was held at Ethiopia in 2016.
The 4th World Coffee Conference at the Ethiopian capital had brought together 77 Member Countries of the International Coffee Organization (ICO) and more than 900 attendees that included coffee growers and representatives from government, private sectors, and international agencies with the aim to discuss coffee culture for the upcoming years.
Here’s what happened on the 6-8 March at Addis Ababa, Ethiopia during the 4th World Coffee Conference:
International Coffee Organization
The International Coffee Organization (ICO) was founded in 1963 and since then, various operations and agreements such as the first International Coffee Agreement (ICA) have been carried out among the fellow committee. The following ICA agreements made were in 1968, 1976, 1983, 1994, 2001 and 2007. As an intergovernmental organization, they work together to tackle the challenges faced in the world coffee sector through international partnerships.
The next following dates are scheduled for the next ICO meetings which include:
On the 9-13 April 2018: 121st Session of the International Coffee Council and other ICO bodies in Mexico.
Next on the 17-21 September 2018: 122nd Session of the International Coffee Council and other ICO bodies in London. In 2019, the meetings will be held on the 8-12 April and 23-27 September.
The International Coffee Organization recognizes specific coffee grades traded into 4 major groups, the Colombian Mild Arabicas which are exported by Colombia, Kenya and Tanzania. Next, Other Mild Arabicas, the Brazilian and other Natural Arabicas that are exported by Brazil, Ethiopia and Paraguay and Robustas mostly produced in Africa, Asia and Brazil.
Based on the Development Strategy for Coffee document by the International Coffee Organization, there are also a few downsides that have become a concerning issue. To be more specific, the challenges faced by the coffee economy are:
- Deterioration in coffee quality
- Coffee pests and diseases
- Production cost increases
- Shortage of agricultural labor
- Climate change
- Environmental degradation
- Increased poverty in coffee-producing areas
- Volatility of world coffee prices.
Development strategy and action program
During the United Nations Conference on Environment and Development in 1992, the primary goal was aimed to maintain sustainable global coffee economy while giving importance to the environment, social and economic aspects. This strategy was also intended on contributing to achieve at international standards for development goals such as reducing world poverty, gender equality and loss of biodiversity.
Coming back to the issues related in the coffee development sector, there are 7 important areas which are subjected to be reviewed by the International Coffee Council to take action on.
First and foremost, promotion of a sustainable coffee economy is prior to take into account of the United Nations Agenda 21 criteria. It is extremely crucial that the economic environments are stable and in living standards for people involved with coffee production. By securing adequate returns back to producers and consideration is given in order to maintain quality, not the quantity of coffee produced.
The motto, quality over quantity should be practiced in all coffee industries worldwide as it can benefit the commodity market and influencing more consumers into the coffee experience. Moreover, ICO gives importance to coffee growing communities’ establishments and is aware of the difficulty in finding alternative income in various coffee sectors. Having collaborations with other bodies involved in coffee sectors as well can increase sustainability.
The International Coffee Organization also wants to promote awareness about the usage of environmentally-friendly technology throughout the whole coffee processing chain. Programs such as conservation of germplasm of wild coffee species are essential to protect the economy in coffee producing countries, livelihood of the farming nation, more importantly the quality of coffee products.
Next, increased consumption and market development is well needed to ensure sustainable coffee economy. Quality improvements can be carried out through educational and promotional projects where the ICO would collaborate with government and non-governmental bodies. These programmes help to raise opportunities for future growth in the coffee industry and consumption in existing markets.
“For example, India, Indonesia and Mexico have a combined population of 1.52 billion and currently have a combined annual consumption of only 7.1 million bags. Increased domestic consumption in producing countries also has other benefits: making producers more aware of consumer demands and quality factors; providing an alternative market to the export market; generating experience in the production and marketing of value-added products; and stimulating small and medium enterprises. It should be noted that the encouragement of domestic consumption can be accomplished through a number of actions that would not normally be classified as generic promotion.”
As mentioned earlier, quality enchantment is vital for sustaining a long term of coffee consumption in the market. It also adds value to the product itself and becomes recognizable in domestic and international trades. Steps like improving cultivation, processing, storage, transportation and disseminating awareness in marketing sectors can definitely preserve the authentic rich coffee quality.
Diversification is another key factor in development strategy in the coffee industry. Horizontal diversification program has been much encouraged by the ICO with the goal to create sufficient wages for growers with projects like introducing new crops other than coffee plantations itself. Vertical diversification is only subjected to issues like production of specialty coffee where it creates bigger benefits for coffee producers.
“The aim should be to create a balanced enterprise for farmers and a careful analysis of market and ecological conditions is essential when embarking on projects in this area. The CFC, in its Five-Year Plan, as well as in its project selection criteria, has addressed this question when talking about marketing issues, stressing the need to move producers up the value addition chain.”
Furthermore, the development strategy also includes improving marketing systems in coffee exporting countries by ensuring there are risks involved and this can be done by eliminating basic functions that were undertaken by marketing board regulatory institutions.
In coffee exporting countries, many which consist of small-holder farmers that need assistance in improving organization efforts to build up the coffee sectors in a specific area. Their capacities are developed to compete in the bigger coffee market while allowing them to gain access to commercial credits and technical data. It helps the farmers to learn about price volatility of the coffee industry through proper financial methods.
“The ICO is committed to enhancing market transparency by producing statistics, research studies and other information on the world coffee economy, as well as organizing seminars covering a wide array of topics of interest to the world coffee community. In so doing, transaction costs are reduced to the benefit of all components of the coffee supply chain and economic decisions can be taken on the basis of accurate and timely data. The ICO also seeks to evaluate and, if appropriate, propose new instruments of international cooperation designed to monitor particular coffee market trends that might be of interest to Members. “
Another key step in the development strategy is through research and new technologies. In today’s world where technology is used in businesses, household, education, it plays a huge role in guaranteeing success in the coffee sector as well. The cultivation and harvesting process of coffee needs to paid special attention to as to how it will impact the coffee growing population on a global stage.
Such new technologies which are also ecologically beneficial needs to be carried out during plant breeding, improvement in soluble coffee process, genetically modified plants and even internet trading. With proper technology advances during post harvesting processes, the coffee community will be gaining lots more than just good coffee.
Last part in the development strategy plan is rehabilitation of production capacity. Many coffee industries in coffee producing countries suffered enormous amounts of loss in production all due to force majeure. Hence, program to ensure that coffee remains in the commodity market should be encouraged strongly by government bodies of the countries and avoid exploitation of comparative advantage. In addition to that, technical assistance and studies on coffee development programs should be promoted in developing and coffee producing countries to maintain proper coffee cultivation.
Coffee Market Report in March 2018
In all seriousness, the world coffee market has taken a turn, continuing to decrease.
“Since August 2017, the ICO composite indicator price has declined in each month except January 2018. The composite indicator decreased by 1.1% in March 2018 to an average of 112.99 US cents/ lb. which is the lowest monthly price since February 2016. Indicator prices for all groups fell in March 2018, though the largest month on month decrease occurred to Colombian Milds which fell by 1.4% to 139.45 US cents/ lb. This narrowed the price differential between Colombian Milds and Other Milds to an average of 4.42 US cents/lb. 15.3% lower than last month. Global production is estimated at 159.66 million bags in 2017/18, 1.2% higher than 2016/17, resulting in an estimated surplus of0.78 million bags. Arabica production is estimated 4.6% lower at 97.43 million bags while Robusta is estimated 12.1% higher at 62.24 million bags. The surplus in production is reflected in increased shipments for all groups, except Colombian Milds, during the first five months of coffee year 2017/2018.”
Image sourced (www.ico.org)
The global production of coffee was estimated at 159.66 million bags for 2017/18, increment of 1.2% from the previous 2 years. Moreover, output of Robusta coffee increased by 12.1% while Arabica production decreased by 4.6%.
In February 2018, the total world coffee exports were at 9.93 million bags which was increased by 0.4% compared in February 2017.
image source: www.ico.org
“The decline in Arabica production is driven by lower output of Colombian Milds at 15.21 million bags (‐4.6%) and Brazilian Naturals estimated at 50.23 million bags (9.6%). However, production of Other Milds is estimated at 31.98 million bags, 4.3% higher than last year. Colombia’s production is estimated at 14 million bags, 4.3% lower than last year.”
“According to data from the National Federation of Coffee Growers of Colombia, the country’s total output for October 2017 through February 2018 reached 6.27 million bags compared to 6.94 million bags for the same period one year ago. In the last five years, output during the first five months of the coffee year has been around 43% of the total. The decline in production of the Brazilian Naturals group can be attributed largely to a decrease in Brazil’s estimated to increase production. “
Based on the March 2018 report from ICO, the world coffee supply and demand is shown in the diagram below. The most drastic changes in coffee production are Robusta and Asia and Oceania with an increment of 12.1% and 10% respectively.
Where else coffee consumption has only progressed very little throughout the years. South America, Europe, Africa and exporting countries have only each increased coffee consumption by less than 1%.
Image source: www.ico.org
The table below represents the total exports for Arabica (Colombian Milds, Other Milds, Brazilian Naturals) and Robusta coffee types by exporting countries. The only major loss that occurred between February 2017 and 2018 was for Colombian Milds. Within one year, the total exports of Colombian Milds decreased by 5.2%.
Image source: www.ico.org
The next update on the data from will be most likely at the end of April 2018.
Coffee will still be one of the most important trading activity done globally for many years to come and will continue to contribute to the country’s economy status.