Happenings

The World & Coffee

There is a lot of discussion about what has happened to coffee prices in the last year. Is it crop production in relation to demand? Is it commodity speculators? As it turns out, like most complex issues, the answer is also complex. To the consumer, at first glance it seems a simple question… coffee prices are high? Why? But there is a far more dynamic relationship in the back story of every coffee bean, and there is no single reason. On one hand, global demand is going up. Some areas like Colombia and Sumatra have had several consecutively bad growing years, with relation to weather patterns. (Is this climate change? Many attribute it to a change, and speculate that these weather shifts are bound to become a permanent fixture. Others suggest that historic patters will return and great coffee growing regions will remain so in the long run.)
So there is less production in these areas while global consumption is increasing, especially as Asian and Indian markets are increasingly discovering the wonders of coffee. It has even been referenced in “peak” terms, suggesting that the point at which production could keep up with demand is perhaps past us, though this suggestion is dismissed by many who argue that as markets demand more coffee, farmers will switch back from other crops to meet said demands.
And still again a step in explaining it in another direction is to look at the bond market and speculation. As the US dollar has slumped, commodities across the board have gone up in value, as growers seek to gain back their losses in revenue value by charging more. A largely unregulated bond market in both the US and Britain have allowed banks to speculate, essentially bet on, the future prices of all major commodities, including wheat, coco, sugar, and coffee. Because so many countries have amassed such great debt in these bond markets, there are vast pools of money to be spent. And as there is the basic premise that as the world grows in population, and as people demand more of these commodities, there will be less available, the commodity markets have been a place of vast transfers of wealth in the past few years, but seldom at the ends of the spectrum, for either the grower or the retailer of these commodities. It is a complex issue that has few simple answers. Here is an article published in The Globe and Mail that addresses the subject with a good bit more detail.

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *