market analysis for coffee market.docx

8/10/2019 Market analysis for Coffee Market.docx

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Market analysis for

Coffee Market

Irina Achim

Antonia Cline-Petre

Group 942, year II, REI, ASE


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1.Market area

History of coffee

The history of coffee goes at least as far back as the thirteenth century. The story of Kaldi, the9th-century Ethiopian goat herder who discovered coffee while searching for his goats, did not appear

in writing until 1671 and is probably apocryphal. From Ethiopia, coffee was said to have spread to

Egypt and Yemen. The earliest credible evidence of either coffee drinking or knowledge of the coffee

tree appears in the middle of the fifteenth century, in the Sufi monasteries of Yemen. By the 16th

century, it had reached the rest of the Middle East, Persia, Turkey, and northern Africa. Coffee then

spread to Balkans, Italy, and to the rest of Europe, to Indonesia, and then to America.

The first step in Europeans' wresting the means of production was effected by Nicolaes Witsen,

the enterprising burgomaster of Amsterdam and member of the governing board of the Dutch East

India Company who urged Joan van Hoorn, the Dutch governor at Batavia that some coffee plants be

obtained at the export port of Mocha in Yemen, the source of Europe's supply, and established in the

Dutch East Indies; the project of raising many plants from the seeds of the first shipment met with

such success that the Dutch East India Company was able to supply Europe's demand with "Java

coffee" by 1719.

The first coffee plantation in Brazil occurred in 1727 when Lt. Col. Francisco de Melo Palheta

smuggled seeds, still essentially from the germ plasm originally taken from Yemen to Batavia, from

French Guiana. By the 1800s, Brazil's harvests would turn coffee from an elite indulgence to a drink

for the masses. Brazil, which like most other countries cultivates coffee as a commercial commodity,relied heavily on slave labor from Africa for the viability of the plantations until the abolition of

slavery in 1888. The success of coffee in 17th-century Europe was paralleled with the spread of the

habit of tobacco smoking all over the continent during the course of the Thirty Years' War (1618

1648).

For many decades in the 19th and early 20th centuries, Brazil was the biggest producer of coffee

and a virtual monopolist in the trade. However, a policy of maintaining high prices soon opened

opportunities to other nations, such as Colombia,Guatemala, Nicaragua, Indonesia and Vietnam, now

second only to Brazil as the major coffee producer in the world. Large-scale production in Vietnambegan following normalization of trade relations with the US in 1995. Nearly all of the coffee grown

there is Robusta.

Despite the origins of coffee cultivation in Ethiopia, that country produced only a small amount

for export until the Twentieth Century, and much of that not from the south of the country but from

the environs of Harar in the northeast. The Kingdom of Kaffa, home of the plant, was estimated to


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produce between 50,000 and 60,000 kilograms of coffee beans in the 1880s. Commercial production

effectively began in 1907 with the founding of the inland port of Gambela. 100,000 kilograms of

coffee was exported from Gambela in 1908, while in 1927-8 over 4 million kilograms passed through

that port. Coffee plantations were also developed in Arsi Province at the same time, and were

eventually exported by means of the Addis Ababa - Djibouti Railway. While only 245,000 kilogramswere freighted by the Railway, this amount jumped to 2,240,000 kilograms by 1922, surpassed

exports of "Harari" coffee by 1925, and reached 9,260,000 kilograms in 1936.

Coffee market

Coffee is an important commodity and a popular beverage. Over 2.25 billion cups of coffee are

consumed in the world every day. Over 90% of coffee production takes place in developing

countries, while consumption happens mainly in the industrialized economies.

Worldwide, 25 million small producers rely on coffee for a living. For instance, in Brazil alone,where almost a third of all the world's coffee is produced, over 5 million people are employed in the

cultivation and harvesting of over 3 billion coffee plants; it is a much more labour-intensive culture

than alternative cultures of the same regions as sugar cane or cattle, as it is not subject to automation

and requires constant attention.


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Coffee is also bought and sold as a commodity on the New York Board of Trade. This is where

coffee futures contracts are traded, which are a financial asset involving a standardized contract for

the future sale or purchase of a unit of coffee at an agreed price. The world's largest transfer point for

coffee is the port of Hamburg, Germany.

Coffee statistics show that among coffee drinkers the average consumption in the United

States is 3.1 cups of coffee per day.

COFFEE STATISTICS: 50% of the population, equivalent to 150 million Americans, drink

espresso, cappuccino, latte, or iced/cold coffees.

COFFEE SHOP FACTS: Independent coffee shops equal $12 billion in annual sales.

At the present time there are approximately 24,000 Coffee Shops across the country. Statisticsshow there will be approximately 50,000+ Coffee Shops by the year 2012. The

average Espresso Drive-thru Business sells approximately 200-300 Cups of Espresso and Coffee

Based Drinks per day.

Coffee Statistics & Coffee Consumption Statistics

The National Coffee Association and The Specialty Coffee Association of America conduct

annual surveys regarding coffee consumption each year. The gathered data below can be extremelybeneficial to anyone wishing to start a business or just have an insight on coffee consumption.

The Specialty Coffee Association of America (SCAA)

CoffeeResearch.org

Results of Gathered Data:

Over 50% of Americans over 18 years of age drink coffee every day. This represents over 150

million daily drinkers. 30 million American adults drink specialty coffee beverages daily; which

include a mocha, latte, espresso, caf mocha, cappuccino, frozen/iced coffee beverages, etc.


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Average Beverage Price:

The average price for an espresso based drink is $2.45

The average price for brewed coffee is $1.38.

Coffee Cup Consumption per Day:

Men drink as much coffee as women; each consuming an average of 1.6 cups per day. Women

seem to be more concerned about the price than men. Among coffee drinkers, the averageconsumption in the United States is 3.2 cups of coffee per day.

Average Cup Size:

The average coffee cup size is 9 ounces.

30% of the population drinks coffee occasionally.

Time of day:

65% of all coffee is consumed during breakfast hours, 30% between meals, and the remaining5% with other meals.

Coffee Shops Nationwide


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Preferences:

35% of coffee drinkers prefer black coffee

65% prefer to add sugar and/or cream

Motivations:

Women indicated that drinking coffee is a good way to relax. Men indicated that coffee helps

them get the job done.

Miscellaneous:

The United States imports in excess of $4 Billion worth of coffee per year.

Americans consume 400 million cups of coffee per day making the United States the leading

consumer of coffee in the world.

On an average, 250 Cups of espresso and coffee drinks are sold per day at almost any espresso

drive-thru business with a great visible location. (500 cups per day is extraordinary.)

Independent coffee shops manage to sell 31% of espresso-based drinks, while the rest is brewed

coffee.

2.Market structureTarget Market

Coffee Elitists


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For coffee enthusiasts, there is a whole culture dedicated to coffee. There are websites where

you can order whole bean coffees that are sourced from high elevations and are considered the

world's best by other coffee critics and enthusiasts.

The Everyday Man

The coffee market also targets "the everyday man" who is just looking for a cup of coffee to get

them through the day. Coffee for this particular group is also sourced at a high elevation, but for

cost's sake, it is grown at a slightly lower elevation than the whole bean that an elitist would normally

buy. Many of the big name coffee retailers provide for this particular market.

Specialty Drinks

Black coffee isn't for everybody. As a result, many retailers have formulated drinks that appeal

to other tastes. For example, coffee, specifically espresso, can be mixed with flavored syrups, sugars

and powders to create drinks such as the white chocolate mocha or caramel latte that appeal to peoplewho are looking for a sweeter drink.

Kids Drinks

Even kids are partaking in this growing industry. Cold, blended beverages are extremely popular

with children. There is normally more sugar and less coffee in blended beverages, which makes the

caffeine level a little more tolerable for this younger generation of coffee drinkers. Cold blended

beverages are made by blending a cold coffee base, dairy products such as milk or cream, sugar and

ice. The result is a thick, frothy drink that is tasty and sweet.

Coffee Alternatives

The coffee market also provides alternatives for people who cannot have caffeine because of

health problems and for people who just don't prefer the coffee taste. Decaf is often available for

those who love the taste of coffee but cannot handle caffeine for one reason or another. Coffee

retailers also have a lot of non-coffee alternatives often made with cream bases as opposed to coffee

bases to eliminate coffee altogether.


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3.Market capacity

Potential market (?)

2010 Study Highlights:

Daily consumption of coffee beverages among consumers remained unchanged as compared to

2009, with 56% of adults partaking.

84% of consumers have not changed their consumption habits despite the economic

environment.

40% of the coffee consumed is now gourmet.

Coffee preparation at home is up 4 percentage points with 86% of past-day coffee drinkers

reporting that they made coffee at home.


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Effective market (?)

4.Market dynamics

Coffee market in Japan, first half of 2010

Peculiarities of the industry

However Japan is famous for its tea ceremonies, in the twenties century coffee became a significant part of everyday life ofJapanese people and thus a traditional beverage. Japanese incline to drink high-quality coffee species. Thus the country isthe main consumer of Blue Mountain, Jamaican high-quality coffee, and imports about 90 percent of its total production.

Japan is one of the main coffee consuming countries, holding the 4th place in the world by volume of coffee consumed perperson following the USA, Germany and France. These countries import mostly green coffee and then process it at thefactories.

Japan imports coffee from producer countries such as Kenya (following the Scandinavian countries and Germany), Cted'Ivoire (following Italy, France and USA), Ethiopia (following Germany and Saudi Arabia), Vietnam, Zambia (followingEurope and USA), Columbia (following USA and Germany), and Jamaica (80 percent of total coffee import of the country).

The fact that the network of world-known coffee houses Starbucks is widely developing in Japan nowadays, about 500coffee houses, shows that coffee consumption is increasing in the country. Moreover, there are enormous coffee machinesin large cities. You can order a cup of fresh brewed coffee at any caf.

It is worth mentioning that the price of a cup of coffee is rather high in Japan. It is due to that fact that the price includesnot only the beverage itself but the seat as well. But Japanese prefer to drink coffee at home, i.e. they buy green coffeebeans and roast it themselves.


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The fact that Japan celebrates Coffee Day on the 1st of October may also be the evidence of coffee playing an importantrole in everyday life of Japanese people.

Production35,847 thousand tons of instant coffee was produced in Japan in 2009, which is 3.4 percent less than in 2008. During the1st quarter of 2010 8,452 thousand tons was produced. Figure 1 shows production dynamics.

Fig. 1 Dynamics of instant coffee production in Japan, 2007

1st quarter of 2010

Source: The results of the Survey on Current Status of Oils and Fats Production and Survey on Current Status ofProcessed Food Production, General Food Policy Bureau, Ministry of Agriculture, Forestry and Fisheries

PriceThe prices of instant coffee in Japan are far higher than the prices of coffee beans. While the prices of coffee beans arerelatively steady, the prices of instant coffee vary year after year.

Thus average retail price of instant coffee in Tokyo in 2009 was 698 JPY per 100 g. pack, which is 1.5 percent lower than in2008. But the price has collapsed to 633 JPY by the 1st half of 2010. In Osaka the price of instant coffee was higher: theprice of pack was 741 JPY in 2009 which is 3 percent lower than in 2008. But the price has fallen to 672 JPY by the 1st half

of 2010.

Retail price of coffee beans was 125 JPY per 100 g. pack in Tokyo in 2009 decreasing to 1.6 percent if compared to 2008.The price has grown 2.4 percent by 128 JPY by the 1st half of 2010. In Osaka in 2009 the price was 124 JPY shrinking 12.7percent if compared to 2008. During the 1st half of 2010 the price was at the same level as it was in 2009.

Figure 2 shows retail price dynamics.Fig. 2 Dynamics of instant coffee and coffee beans retail prices in Japan, 2007 1st half of 2010


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Source: Monthly Information on Imports and Exports Agricultural, Forestry and Fisheries Products, internationalDepartment, Ministry of Agriculture, Forestry and Fisheries.

Exports

Japan coffee export is rather low if compared to its import into the country. During the 1st half of 2010 the country hasexported coffee to the sum of 2,004,214 thousand JPY which is 13.9 percent more than it was in the corresponding periodin 2009 (see Figure 5).

Fig 5 Dynamics of coffee export by value, 1st half of 2009 1st half of 2010


Instant coffee export accounts for about half of the total Japan coffee export in the 1st half of 2010. Thus, during the 1sthalf of 2010 the country has exported 981,268 kilos of instant coffee to the sum of 1,039,200 thousand JPY, that is 5.5percent more than it was in the corresponding period in 2009, but 14.7 percent less by value. Figure 6 shows dynamics ofinstant coffee export.

Fig 6 Dynamics of instant coffee export by volume and by value, 1st half of 2009 1st half of 2010


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5.Market evolutionSince coffee is by far the most popular drinks of our times, without any known rival so

far, it goes without saying that the coffee market itself is a very competitive sector. With

the huge number of coffee brands, companies have to come up not with just good prices,

but with quality guarantees to prove that their coffee is well-flavored and tasty. Statistics

show that there is only one commerce domain more active than coffee market and it is


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that of oil; consequently one can hardly imagine the extent of the transactions and the

number of figures for the profits that result from the coffee market.

From time to time, crisis periods appear on the coffee market, related to poor bean

quality, the creation of stocks or oversupplies, not to mention the very low coffee prices.

All these elements threaten to affect the lives of those who depend on coffee cultivation

for a living, the coffee farmers or producers. Furthermore, pollution has a heavy word to

say in the evolution of the coffee-growing areas where entire ecosystems could be

endangered; while the coffee consumer is actually unaware of the strive that is going on

behind the morning coffee he or she prepares.

In global economy, the coffee market is among the fewest domains where small

producers dominate trade commodities; statistics show that more than 75% of the world's

coffee production comes from little farms that are entirely independent in terms of

harvesting and supplying. Every time, coffee prices drop, there are farmers who come toabandon their coffee fields, moving to different sectors of activity. Such changes on the

coffee market leads to instability within many communities as well as to shifts in the

evolution of national economies since a part of the investments in the sector are lost.

Though the demand on the coffee market usually remains stable, there are times when

fluctuations occur here as well. However, even during the times when the coffee prices

drop, there is no relevant price reduction for the coffee products on the market due to the

same little fluctuation in the demand. If people need just as much coffee as before, why

would anyone try to make it cheaper: businesses profit from this constancy in the fieldand have profit changes unaffected by such fluctuations. Such transactions profitable only

for some parts of the trading process are not suspected by the small farmers who have no

idea about the coffee price in London or Sydney.

The commodity price of Arabica coffee hit its highest level since 1998 at the end of

last week. Although our business operates largely independently of the commodity

market, it is impossible not to feel the effects of such a major development.

On Monday (2 August) Arabica coffee for September delivery reached a high of

US$1.815 a poundon the ICE US futures in New York. It has since fallen back slightly,closing at US$1.6985/lb on 5 August. To put this into perspective, the Fair Trade

minimum price is US$1.35/lb, a typical price for specialty coffee beans is US$2.00-

$4.00/lb, and the commodity price had recently been hovering around US$1.25-$1.40.

At Mercanta we have gone a long way towards de-commoditising our product, by

establishing direct, independent relationships with premium quality coffee growers. The


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specialty coffee market is notpegged to the commodity price and, usually, we remain

largely immune to the daily price fluctuations in New York.

However, we cannot help but be affected by major commodity market trends. The

majority of coffee farmers, including specialty coffee farmers, reference the market price

when negotiating sales. The bottom line is that, when the market is up significantly,

this inevitably pushes up the specialty price.

Put simply, when Mercanta negotiates prices with growers the following factors come

into play:

What price is available to the grower in the local market for partly processed coffee

parchment or cherry? (This rate generally fluctuates in line with the commodity price).

What price are other buyers paying for specialty beans, thus benchmarking a level for

that farm?

What is the production cost for the farm? Typically this ranges from US$1.00-$1.40/lb,

so the so called ethics of buying rarely come into play in the true specialty

business. Invariably Mercanta is paying 30-150% MORE than the cost of

production.

What is the growers quantity expectation? Mercanta can pay any price for coffee - but

if the grower seeks a substantial premium for his product, there may well be a quantity

impact on what we can buy.

Undervalued?

The recent developments in the commodity market emphasise a point that we have been

getting at for several years now - specialty coffee as sold by Mercanta is undervalued

as a product. All the more so when you consider that the average price for a Cup of

Excellence coffee in 2009 was US$6.69/lb and so far in 2010 is US$7.75/lb, with

winning lots reaching as much as US$35/lb. The Cup of Excellence brand offers fine

coffee in small lots, judged by expert cuppersthis is exactly what Mercanta sells. Yet

our (non COE) coffee typically commands only US$2.00-$4.00/lbie. it sells for pricesthat are far closer to the market rate for commodity grade coffee, even though an

increasing number of the farms that Mercanta offers have a Cup of Excellence pedigree.

This point is well-illustrated in the below graph, showing the evolution of coffee prices

following the collapse in 1989 of the International Coffee Agreement, which had

regulated prices and exports. The graph shows: the International Coffee Organisations


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annual average commodity price for coffee; the ICO annual average commodity price for

washed Arabicas (non Colombian); the Fair Trade minimum price; and the Cup of

Excellence annual average price since the first auction in 1999. The dashed rectangle

shows the typical price range of non-COE specialty coffeesie. what Mercanta sells.

This data makes two things clear:

1) Specialty coffee demands a far fairer price than Fair Trade(which will either

pay farmers the minimum guarantee of US$1.35/lb, or the market price plus US$0.10/lb

premium).

2) The gap between COE lots and normal specialty coffee is growing ever wider.

What now?

It is difficult to predict what the market will do next. The current high was triggered byshort supplies from Colombia after last years Arabica production fell to a 33-year low,

and has been inflated further by market speculation. The ICO warned on Friday (30 July)

that the current tight demand and supply situation was likely to persist in the near to

medium term. A technical analysis published this week forecast that prices will continue

to fall back slightly in the short term, before easing with the arrival of the new Brazilian

crop in October.


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A note from Brazil

This years crop is set to be very large, which should take pressure off the commodity

market price later in the year. However, because of very uneven flowering/maturation the

harvest will yield an unusually high percentage of naturals, and the price difference

between pulped naturals and naturals will be as wide as it has ever been. This is because

multinational giant roasters are buying up pulped natural Brazils in place of washed

Arabicas from Colombia and Central America (which are scarce and expensive). This is

pushing up the pulped natural price. In contrast, natural Brazils have a taste profile

unsuited to substitution for washed Arabicas meaning that they are likely to be more

plentiful, and therefore comparatively cheaper.

Robusta is no alternative

Another point to take from the commodity price high is that, despite a plentiful supply ofRobusta at around US$0.80/lb, multinational giants are still paying up for Arabica at

more than twice that price. Consumer tastes are becoming increasingly refinedthese

days there is only so much Robusta that even the multinationals can get away with.

6.Market conjuncture

7.Demand and offer

Besides the high demand and cost for gasoline these days, coffee is considered the second

most traded commodity on worldwide markets next to oil. "Coffee is grown in more than

50 countries in a band around the equator and provides a living for more than 20 million

farmers. Altogether, up to 100 million people worldwide are involved in the growing,

processing, trading and retailing of the product" (Spilling the Beans, ). In 2001, coffee

farmers and plantations produced over 15 billion pounds of coffee while the world

market only bought 13 billion pounds. The overproduction in the coffee industry is not a

usual thing and is one of the major reasons why prices vary throughout the industry.

One of the major corporations today that is trying to control a large portion of the supply

of coffee is Starbuck. Starbucks Corporation is the leading retailer, roaster and brand of

specialty coffee in the world. Starbucks purchases, roasts, and sells whole bean and rich-


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brewed coffees, espresso beverages, cold blended beverages, an assortment of food items,

coffee-related

accessories and equipment, a selection of quality teas and a line of compact discs.

Starbucks has over 8,700 retail locations in North America, Latin America, Europe, the

Middle East, the Pacific Rim and is continuing to grow. When coffee is considered

Starbucks has developed a worldwide name for itself and has become a huge success.

An article in the Seattle Post, describes the alliance that Starbucks is making to ensure

that a sustainable supply of high quality of coffee is produce in Latin America.

"Starbucks President and CEO Orin Smith said the alliance is partly his company's effort

to pass on the "high price" of a cup of coffee to farmers." (Lee, 2004). He states that the

high price enables them to pay the highest price to the farmers. Though the high prices to

suppliers can demonstrate that money get to farmers with being diverted. Starbucks

overall goal with this alliance is to buy 60 percent of its coffee under the standards agreedupon by 2007. "The agreement reflects the growing power of the premium coffee market

and efforts to exploit it for the benefit of small farmers" (Lee, 2004).

When it comes to the supply, demand and price of coffee there are certain factors that can

fluctuate these characters to rise or fall. Weather is one example that affects the

consumption of coffee. People tend to drink more coffee in the winter rather than the

summer due to the cold temperature, shorter days and the fact that it is harder to get going

without a cup of coffee during the holidays. Starbucks has tried to avoid these dramatic

drops in the summer by offering a variety of cold drinks and desserts however; during thesummer these factors are considered more of a "want" compared to almost a "need"

during the wintertime.

Another factor that directly affects coffee prices is the taxes and tariffs that the

government imposes. In the same boat as cigarettes and alcohol, coffee is one of the

highest taxed products in the United States. Just recently the tax on coffee went up to

about 10 cents per cup, on top of all the tariffs that already are paid. In response to the

increase, coffee drinkers all over the country reacted by protesting but coffee still remains

highly taxed.

The amount of coffee drinkers during the last decade has gone up from 71 to 76 percent

and the average cups of coffee per day have increased from 3 to 3.5 cups. Another factor

to this increase in consumption is the aging of the baby boomers and their increasing

spending power, creating a good customer base for the coffee shops. This of course, has a

very positive effect of the demand on the coffee industry.


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Supply and demand are the key words to economics and is the answer to many questions

that pertain the shift in prices. Demand is all about the willingness and ability an

individual will pay for a particular product or service. "Prices are the tool by which the

market coordinates individuals' desires and limits how much people are willing to

buyhow much they demand" (Colander, 2004). There is an invisible hand in economicsthat sees to it that what people demand matches what is available. When goods are

limited the market reduces the quantity, as prices go up, people buy fewer goods and as

goods become abundant, prices go down and people want more. Some factors that affect

the demand curve are society's income, the price of the goods, tastes, expectations and

taxes.

Supply the other the hand refers to a schedule of quantities a seller is willing to sell per

unit of time at various prices. It is considered a mirror image of demand. Individuals

again control the factors of production, inputs or resources necessary to produce goods.

"Individuals' supply of

these factors to the market mirrors other individuals' demand for those factors" (Colander,

2004). Just as demand, supply is fundamental to the invisible hand's ability to coordinate

an individual's actions in the market. The main bases for the law of supply is on the firm's

ability to substitute production of one good for another or vice versa.

Despite the many factors that affect supply and demand, Starbucks is in no way going to

do any worse than its competitors in the coffee industry. Starbucks has turned itself into

the Microsoft of coffee and as long as nothing too severe happens to our economyStarbucks can look forward to a prosperous future.


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8.Prices and tariffs


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According to the Composite Index of the London-based coffee export country group

International Coffee Organization the monthly coffee price averages in international trade

had been well above 100 US cent/lb during the 1970s and 1980s, but then declined during

the late 1990s reaching a minimum in September 2001 of just 41.17 US cent per lb and

stayed low until 2004. The reasons for this decline included a collapse of theInternational Coffee Agreement of 19621989[8] with Cold War pressures, which had

held the minimum coffee price at US$1.20 per pound.

The expansion of Brazilian coffee plantations and Vietnam's entry into the market in

1994 when the United States trade embargo against it was lifted added supply pressures

to growers. The market awarded the more efficient Vietnamese coffee suppliers with

trade and caused less efficient coffee bean farmers in many countries such as Brazil,

Nicaragua, and Ethiopia not to be able to live off of their products, which at many times

were priced below the cost of production, forcing many to quit the coffee bean

production and move into slums in the cities. (Mai, 2006).

A coffee plantation on a hill near Oros, Costa Rica.

The decline in the ingredient cost of green coffee, while not the only cost component of

the final cup being served, occurred at the same time as the rise in popularity specialty

cafs, which sold their beverages at unprecedented high prices. According to theSpecialty Coffee Association of America, in 2004 16% of adults in the United States

drank specialty coffee daily; the number of retail specialty coffee locations, including

cafs, kiosks, coffee carts and retail roasters, amounted to 17,400 and total sales were

$8.96 billion in 2003.

Specialty coffee, however, is frequently not purchased on commodities exchangesfor

example, Starbucks purchases nearly all its coffee through multi-year, private contracts

that often pay double the commodity price.[9] It is also important to note that the coffee

sold at retail is a different economic product than wholesale coffee traded as a

commodity, which becomes an input to the various ultimate end products so that its

market is ultimately affected by changes in consumption patterns and prices.

The market for soft drinks has been steadily climbing, passing the consumption of coffee

in terms of mass of product consumed in the early 2000s.


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In 2005, however, the coffee prices rose (with the above-mentioned ICO Composite

Index monthly averages between 78.79 (September) and 101.44 (March) US Cent per lb).

This rise was likely caused by an increase in consumption in Russia and China as well as

a harvest which was about 10% to 20% lower than that in the record years before. Many

coffee bean farmers can now live off their products, but not all of the extra-surplustrickles down to them, because rising petroleum prices make the transportation, roasting

and packaging of the coffee beans more expensive.

Prices have risen from 2005 to 2009 and sharply in the second half of 2010 on fears of a

bad harvest in key coffee-producing countries, with the ICO indicator price reaching 231

in March 2011

9. Exports and imports

In 2010, global coffee net-exports is projected to reach 5.5 million tonnes (92million bags). Latin America and the Caribbean, with an export of 2.9 million

tonnes (48 million bags), is expected to continue to be the leading exporting

region, although there will be a decline in the net-exports of 0.5 percent annually.

By contrast, in Africa there will be a net export increase at a rate of 1.6 percent

annually, reaching 1.0 million tonnes (17 million bags) and accounting for a 18

percent share of global exports. In Asia, export availabilities are expected to grow

to 1.5 million tonnes (24 million bags) in 2010, accounting for 27 percent of world

coffee exports. Export availabilities from Oceania are estimated to increase by 7.3percent, reaching 150 000 tonnes (2.5 million bags), about 3.0 percent of global

export availabilities.

World coffee imports are expected to increase by 0.2 percent annually during the

projection period to reach 5.5 million tonnes (92 million bags) by 2010. This

compares with average imports of 5.4 million tonnes (90 million bags) in 1998 -

2000. Imports by developing countries are projected to reach 421 000 tonnes (7million bags) in 2010, accounting for less than 8 percent of the world's total and

similar to their share in 1998 - 2000. Reflecting the slower growth of consumption,

import requirements of the developed countries are projected to grow at an annual

rate of 0.1 percent, reaching 5.1 million tonnes (85 million bags) by 2010 and

accounting for 92 percent of the global total. Import demand by North America is


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projected to decline moderately to 1.54 million tonnes (26 million bags) by 2010.

Imports into Europe are projected to decrease marginally to 2.96 million tonnes (49

million bags) by 2010. Imports to Japan are projected to grow at 1.6 percent

annually reaching 460 000 tonnes (7.7 million bags). Growth in import demand by

the former Soviet Union/CIS, where consumption in soluble form has grown butno processing firm has been established in the area, is expected to remain low at

less than one percent per annum during the projection period.

http://www.fao.org/docrep/006/y5143e/y5143e0v.htm

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