Coffee: facts and curiosities about the commodity
We’ve created this exclusive blog post to share some interesting facts about this commodity. Indispensable to a large part of the population, coffee is part of people’s daily lives and drives the economy both locally and globally.
In 2023 alone, world production was 168.2 million 60-kg bags of coffee or 10.1 million tons. The data covers the coffee year from December 2022 to November 2023 and comes from the International Coffee Organization (ICO).
However, the supply was not enough to meet the demand of 10.4 million tons. The surplus required stocks from previous harvests. That fact alone makes you realize how important this commodity is for the planet, right?
To find out more about the commodity that has conquered the population, we recommend you read on. How about grabbing a cup of your favorite coffee while you read?
Where did the bean originate?
The origin of coffee is uncertain. Many scholars trace it back to the 9th century, in the highlands of Ethiopia. Due to this inability to find an exact location, there are many legends surrounding the emergence of the bean.
One of them concerns a goatherd called Kaldi. He saw his flock eating fruit from a strange tree and noticed that the animals stayed awake all night. So, he told this to a group of monks and, from then on, they started turning the fruit into a hot drink to keep them awake during prayers.
Although the coffee plant has African origins, it was in Yemen that it began to be cultivated. In this region, coffee was known as Kaweh and the drink was called Kahwah, which means strength.
What are the varieties of coffee?
As the ICO explains, coffee belongs to the botanical family Rubiaceae, a group that includes gardenias and quinine-producing plants. However, coffee plants (Coffea) are the most economically and culturally relevant genus.
There are several coffee species, but when we talk about global coffee production, we are referring to two varieties: Coffea arabica and Coffea canephora. The other two known species are Coffea liberica and Coffea dewevrei.
Arabica coffee descends from the original plants discovered in Ethiopia. These shrubs produce a more refined, smooth, and aromatic type of coffee. That’s why it’s more expensive on the supermarket shelves.
Robusta coffee, on the other hand, is more bitter and has twice as much caffeine. It is grown in Central and West Africa, parts of Southeast Asia, and Brazil.
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Who are the main producers and consumers of coffee?
Coffee is mainly produced in the Southern Hemisphere. The world’s largest producers are Brazil, Vietnam, Colombia, Indonesia, Ethiopia, and Honduras.
In 2023, according to the National Supply Company (Conab), Brazilian producers harvested just over 55 million bags of coffee. This figure represents an increase of 8% compared to 2022. The growth is due to the greater quantity of the arabica variety.
Brazil exported around 35 million bags of coffee last season, mainly to the United States. Countries such as Germany, Belgium, Italy, and Japan are also important destinations for Brazil’s shipments.
When it comes to coffee consumption, there’s a curious fact you need to know: 400 billion cups of coffee are drunk every day. The ICO recently published a survey on the amount of coffee consumed per person in kg over one year.
The top 5 on the list are Finland, Norway, Iceland, Denmark and the Netherlands. The biggest importers are the United States, the European Union, and Japan. According to data from the United States Department of Agriculture (USDA), imports from the European bloc are expected to increase even more in the 23/24 cycle.
Coffee consumption is changing. According to the Ministry of Agriculture and Livestock (MAPA), around 5% to 10% of consumption in Brazil is already of specialty coffees. It’s been a rapid growth, which goes hand in hand with consumer curiosity to try different flavors and prioritize more sustainable production.
Read also: Coffee consumption trends and impacts on the commodity market
The coffee cycle in Brazil: how did it all begin?
Coffee has been part of Brazil’s history since the time of the Empire in the 19th century. The coffee cycle began in 1727 and lasted until the 20th century. During this period, the commodity was the country’s main source of wealth and its main export item.
It was first grown in Belém. Later, it was taken to Maranhão and Rio de Janeiro, where it was used for domestic consumption. Later, it reached the fertile lands of the Serra do Mar and arrived in the Paraíba Valley around 1820. From there, it spread to São Paulo, Minas Gerais, Espírito Santo and Paraná.
The coffee cycle boosted the development of the Southeast. Until then, the North and Northeast had been more important economically. This cycle was particularly significant for São Paulo and Paraná.
Coffee soon became a globally traded commodity, and Brazil emerged as one of the world’s leading exporters. The product was a feature on the flag of the Empire and remains part of the Coat of Arms of the Republic. It symbolizes its importance in the Brazilian economy, both past and present.
A Volatile product
It’s a fact: coffee is a volatile product. The volatility in its production is due to the influence of internal and external factors. Do you know what they are? We’ve listed the 4 main ones below, check them out!
- Weather
Climatic conditions affect coffee production. This is a perennial crop, so aspects of the climate in each cycle can even influence the next cycle, depending on the intensity.
Factors such as temperature, rainfall, and humidity have a direct impact on crop productivity. For example, prolonged droughts can reduce production, while excessive rainfall can damage cultivation and development.
- Agricultural pests
Agricultural coffee pests cause direct damage to coffee plantations, which reduces the productivity and quality of the beans. In addition, the need for pest control and management measures can increase production costs for farmers and affect final coffee prices.
Uncertainty about the extent of the damage caused by pests leads to unpredictable fluctuations in the supply of coffee. The result? Possible volatility in the prices of the product on the market.
- Changes in global demand
Demand for coffee varies over time, whether due to changes in consumption habits, consumer preferences or seasonal effects. All these aspects interfere with demand.
- Government policies
It includes policies related to agricultural subsidies, trade tariffs, environmental regulations and trade agreements. Changes in these policies alter production dynamics.
Volatility in coffee production is therefore the result of a complex interaction of various factors that cause price fluctuations.
Risk management in the coffee market: how important is it?
Risk management in the coffee market is essential to protect producers, traders and investors from price volatility. In this scenario, Hedgepoint stands out by offering sophisticated hedging products for this chain.
In this way, we develop tools that adapt to the needs of each client. We use a detailed analysis of the coffee market, combined with financial hedging instruments. Our approach offers confidence for decision-making in one of the most important sectors on the planet.
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