Warning: This post contains a large amount of geeky background on coffee… Don’t be scared. It’ll be alright in the end.
The, “C Market,” where commodity grade coffee (think poor quality Maxwell House) futures is traded is at a pretty low spot at the moment ($1.316/lb. at close on 10/9/2015 for green (unroasted) coffee). The C Market has little to do with the people who are in the coffee industry. Most of the coffee bought and sold on the C Market is never delivered to a individual customer. The C Market is for people who are interested in making money on futures. Maxwell House, a division of Kraft foods, runs their own farms and harvests their own crops. About fifty percent of the world’s coffees come from one of the, “big four”: Kraft, Nestle, J.M. Smucker, and Sarah Lee. All of them control the process from growing and harvesting to roasting and distributing.
So where is this going? Prices on the C Market do not have much to do with coffee. The big four control their own supply chains. Those of us in the Speciality Coffee arena do not pay any attention to the C Market prices. They have no bearing on how much we pay for green coffee. Our prices depend mostly on the quality of the coffee we are purchasing.
The C Market doesn’t really affect coffee prices all that much, but it does affect the mindset of coffee growers around the world, and it is a rough benchmark for coffee brokers and suppliers. The low prices make it less attractive to coffee growers who will only get a fraction of the market value by the time the brokers, shippers, and everyone else in the chain gets paid. They have little incentive to plant more trees, little incentive to grow coffee.
And here’s the problem: with the leaf rust that is affecting the coffees in Central America, and the drought that is affecting Brazil and other coffee producing countries, last year the coffee supply was 6.4 million bags short. This year should be a little better, but we are still going to be about 3.5 million bags short this harvest season.
So we have a shortage, depressed coffee prices, a lack of incentive to plant new trees and expand farms, drought, leaf rust problems, and the fact that coffee continues to grow as a product, especially among a growing middle class in places like China. Couple that with the projection that in the next decade, coffee consumption will increase by another third. The bottom line is that by 2030, as a world, we will have to produce an additional 50 million bags of green coffee to satisfy the demands of the world coffee drinkers.
Who wants to plant a coffee tree in your house? Or maybe, we should be willing to pay just a few pennies more for our coffee so that the farmers will want to grow those extra 50 million bags of coffee a year, earn a living wage, and supply us with our amazing morning nectar. Good coffee, like all things worth enjoying, is worth a little more, and you get the satisfaction of both an excellent brew, plus the knowledge that you are contributing to making individual farmers lives more sustainable.
image from: https://u.osu.edu/coffeebeanscommoditychain/1-harvesting/