Coffee - The Market (Part 1 of 2) - The Economics of Coffee

Note - If in any doubt Consult your Doctor! This information is NOT a replacement for his/her advice. Coffee - The Market - The Economics of Coffee (Part 1 of 2)

Coffee is the second most valuable legally traded commodity on Earth (after oil) with global retail sales of coffee estimated to be $70 billion. Of this approximately $6 billion finds its way into the hands of the producing countries, and the rest goes to those who market it and sell it to us in various forms (and often for ridiculously high prices) in places like coffee bars. Coffee is unusual in that 70 per cent of the world crop is grown on farms smaller than 25 acres, and hence it is often a family run, and people intensive endeavour that provides a living for over 20 million people around the world. Its name is derived from the Arabic qahwa, which literally means "that which prevents sleep" and we know that it was being made in the 9th century by boiling the beans. The drinks made from coffee beans soon became known as Arabian Wine as Muslims, who were forbidden to drink wine, used coffee as a stimulating substitute. It was discovered by around the 13th century that roasting the beans produced a better flavour, and our modern drink was born.

Next week I want to dig into the science behind coffee, but today I want to explore with you the world market for coffee so that you start to see new sides to one of the food stuffs that we all take for granted. There are over twenty five major varieties of coffee, but only two account for the majority of world production. Coffea arabica accounts for about 70% of world coffee production; whilst Coffea canephora (variety - robusta) accounts for most of the other 30%. To give you a better idea about the composition of the world market for coffee, below are some statistics about countries that are the leading world coffee producers. These figures are based on the number of 60-kilogram bags produced (the industries standard measure) during the 2002/2003 crop year, the last period for which statistics have been finalised by the U.S. Department of Agriculture.