Coffee Industry

More than 100 million people around the world are involved in the coffee industry. In international food trade, coffee has been one of the most frequently traded goods for many years. The consumer price of the product varies greatly because many factors influence the cost of coffee.

The price of different types of coffee is determined depending on the complexity of the production technology and the quality of the raw material. Compared to beans, instant and ground coffee, the most complex and correspondingly expensive technology is the production of coffee in capsules. Nevertheless, it allows you to obtain an excellent product that is not inferior in quality to grain coffee and at the same time, unlike natural grains, retains its aromatic and flavor properties for a long time.

What determines the price of coffee beans?

The main factors that influence the price of coffee beans are:

• Grain variety;
• Place of cultivation;
• Growing conditions;
• Fertility;
• Costs of maintaining and processing coffee beans;
• Coffee roasting technology;
• Transport costs.

Overall, products from Brazil, Ethiopia, Colombia and Cuba offer good value for money. Rare varieties of coffee, such as those from Yemen, New Guinea, Hawaii and Jamaica, are not available to everyone. The better the quality of the coffee beans and the better the processing, the higher the price. The wet method of coffee processing is the most expensive, but the most common are dry, semi-dry and semi-moist.

It is known that high-altitude Arabica is the most expensive. It is believed that the higher coffee trees grow above sea level, the better the quality of the beans grown. Robusta is less appreciated, and Liberica is considered the lowest quality coffee.

What is the price of ground coffee?

Ground coffee is a ready-ground mixture of natural coffee beans. The grind of the coffee can be coarse, medium or fine. The finer the consistency, the stronger the drink. This is why a fine grind is optimal for espresso. Finely ground coffee is most often used for brewing in a coffee maker. The price of ground coffee depends not so much on the degree of grinding, but on the quality of the raw materials.

In most countries, coffee can be purchased at current stock exchange prices. This is how Brazilian, Colombian and Vietnamese coffee is valued. However, in Ethiopia or Kenya, for example, the pricing system is completely different and the price of coffee is not related to the stock exchange.

What exactly is a coffee exchange?

These are organizations that regularly trade coffee. To trade on a coffee exchange, you need a futures contract, which is an agreement that allows you to purchase future supplies of coffee at today's price.

Everyone benefits from futures contracts - producers and exporters insure against possible price drops, traders and importers determine profits from resale, and roasters try to buy coffee at the best possible prices.

In addition to trade, coffee prices are also influenced by the weather, harvest, the balance of supply and demand, and the political and economic situation in the producing countries. All these factors have a major impact on the decline in production. Hence the price increase.

The impact of the differential on coffee prices in different countries

In addition to the coffee exchange, there is another way to shape the price of coffee beans - the correction differential for a given country. This is the relative difference in the price of coffee between producing countries.

This difference arises from the production costs and profits of coffee producers, and also depends on the security of doing business with a given country.

Each country will have a different rate. For example, in Colombia the differential is positive (a certain amount is always added to the price of coffee on the exchange), while in Peru the differential is negative (coffee trades below the exchange level due to the high risk and frequent cheating of buyers).

What influences differentiation? It is mainly the geography of coffee cultivation, processing, breeding and administrative costs. By the way, it is worth noting that in some countries the level of exchange does not affect the price of coffee or affects it indirectly. In Ethiopia, the price of coffee depends on the level of supply and demand. In Kenya, the price of coffee is also independent of the stock exchange level, due to the fact that Kenyan coffee is more expensive and sold in small batches.