Coffee Market Analysis

In recent years local supply issues have impacted individual country output, such as the leaf rust and weather-induced output reduction in Colombia between 2008 and 2012, and more recently in Central America. Examples of reduced output have regularly been offset by ever-increasing production in Brazil and Vietnam.

The coffee plant’s sensitivity to climatic variables means that global climate change is likely to have profound impacts on coffee growing and production in the years to come. Coffee, as a tropical crop, demands temperatures that are neither too high nor too low, and requires distinct wet and dry seasons. This means that the typical extreme weather events triggered by climate change – such as extended periods of dryness or heavy deluges at other times – pose a serious threat to future coffee cultivation.

These challenges come at a time when consumption continues to rise. Consumption is the driver of the world coffee economy. After all, all coffee produced must be used at some stage for it not to burden the market with a surplus and thus put pressure on prices. Despite a slowdown in many developed countries with already high per capita consumption, the increase in total coffee consumption in the second half of the 20th century was phenomenal and the coffee community is pinning high hopes on new frontiers for coffee consumption such as traditional tea-drinking countries like China and Russia. Also, the coffee shop revolution has breathed fresh life into several supposedly saturated markets. This provides opportunities and challenges for businesses alongside the coffee value chain.

Emerging economies, coffee producing countries and “new” coffee markets have been major drivers of global coffee consumption in recent years. Despite some clouds on the horizon coffee producers remain upbeat about future coffee consumption. Of course, satisfying this growth will be a challenge. However, the past has shown that a combination of area expansion, improved planting techniques and technological progress has resulted in impressive production gains – with the full potential yet to be tapped in most countries.