12/3/2023 0 Comments Alternative blueharvestWhat we know about the split between arabica and robusta consumption is less clear and this really deserves more clarity. Looking more closely, it is 102 million bags of arabica (an increase of 2.2% from the previous year) and 63 million bags of robusta (an increase of 11.7%.) That’s a lot more robusta produced this year and it plays a big part when we combine our numbers together. (We can talk about how coffee finds its way into this system later.)Ī quick summary: according to the International Coffee Organization, total arabica and robusta production in 2017/18 was roughly 165 million bags. You’ve already gone over some of this in recent posts, but, for our purposes, it’s key to remember that we are talking about the ICE Coffee “C” futures contract, which is of course the world price benchmark for arabica coffee. It’s important to break those numbers down rather than talking about them together. Usually we hear about global supply and demand in absolute numbers that include both arabica and robusta. Not to be a bore, but we probably need it for context. PH: Well, that takes us down the rabbit hole! Can you give more detail?įirst, let’s cover the basics of physical supply and demand. For these funds trading in “soft”commodity futures, the easing of regulation and the possibility of further deregulation provide for an open season on financial markets. To more pointedly answer your question, supply and demand dynamics are a cause for the current low “C” market price, I’d never minimize that but so too are currency markets and, perhaps more significantly: market speculation from giant hedge funds that have nothing to do with physical coffee. Increasingly, the problem has felt very systemic, but many proposals (including your C-5 benchmark) are focused on treating the price symptom alone. Part of what I saw was an evolution of price dysfunction. That said, for years I sat with a futures screen on my desk and was witness to some historic market changes and days of what can only be called “ridiculous” volatility. So I’m not typically combing over supply and demand numbers or analyzing coffee futures charts. My company – Coffee Unified – is a social enterprise that builds relationships to support specific sustainable development goals. Thanks Paul! I’ve enjoyed reading the Coffeelands blog for many years and I’m excited to be a digital guest! As for my understanding of the market, here’s a disclaimer: I’m a coffee guy, not a commodities market expert. You’ve challenged me with some great articles, forcing me to dig deeper into commodity markets than I was expecting.Ĭan you explain your understanding of what’s happening in the coffee market, to cause so much volatility in prices? PH: First, thanks for taking the time to walk me through the complexities of the coffee trade – I’m learning a lot from the exchange. We’ve edited our many emails and chats over the past few weeks to construct a Q&A format for this post.Īdam highlights the risks of speculative trading in coffee, and how this can drive price volatility. Adam has a career in the coffee trade: as an importer, coffee buyer, and now as a development entrepreneur in the coffee sector with Coffee Unified. After my recent posts on the Scandal of the C-Price, I reached out to Adam Kline, founder and CEO of Coffee Unified, for his insights.
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