The Roasterie’s Bean Hunter, Paul Massard, recently attended the SCAA (Specialty Coffee Association of America) Symposium in Houston, TX. Here’s his report on the state of the coffee marketplace and the factors currently affecting coffee prices.
This was my first year to attend the SCAA Symposium and I went in very excited to have two days of intensely in-depth conversation about the coffee market and the factors that influence it.
My time there started with a conversation and presentations from different farmers about how climate change is affecting coffee productions around the world. We were then introduced to the theory of “Peak Coffee,” the idea that the industry can’t produce any more coffee right now, but the consensus was that we are nowhere close to reaching a ceiling on the production of coffee. So we talked about producing more coffee! Due to slightly increasing temperatures in the producing countries, the land that is viable for producing amazing specialty coffee is moving up the mountain where the daytime and nighttime temperatures are at the perfect conditions. Production is moving ever-so-slightly away from the equatorial regions – further north in the Northern Hemisphere and further south in the Southern Hemisphere.
Next up: bugs! We talked about the life cycle changes of the Coffee Borer Beetle – the only animal that loves coffee beans as much as we do. They’ve gone from being able to have two life cycle a year, due to previously colder weather, to now having up to seven life cycle per year as the weather has gotten warmer, making it viable for them to reproduce for a longer period of time in a year.
All of this led to the big question everyone is asking: Are weather changes in producing countries going to affect the long term supply chain viability of specialty coffee?
After some heated debate, we came to the consensus that we can overcome all of these factors by introducing new coffee varietals that can produce specialty coffee at slightly higher temperatures, as well as varietals that are resistant to pests – all of which is currently being done… although this will obviously take some time as the initial crop production of a coffee tree is anywhere from two to five years.
We then moved on to the topic of new trends in market volatility. We were shown lots of trend graphs, all of which pointed to the fact that we should soon see this market come down. The large response to that question is, obviously, when? We went through the reasons that “C” market (coffee commodity price) has increased to a level that we have never before seen. Higher coffee consumption around the world (especially in developing nations) has led to a tightening of supply. If production isn’t increased, there’s a slight possibility of a coffee deficit, where more is consumed than produced. Hopefully, though, that won’t happen. Due to higher coffee prices, the farmers are now greatly incentivized to increase their production. So, in theory, we should see a spike in production due to new plantings of coffee farms, as well as better husbandry – which produce higher yields from current coffee plantings, as the trees are being better cared for.
That’s good news, but it doesn’t change the fact that the dollar is worth less and commodities, especially coffee, cost more. Coffee is grown in many countries that are currently experiencing a revaluing or strengthening of their currency, and being traded for US Dollars. That’s not great for the farmers. The Dollar is worth less to them. This is especially true in Brazil, the largest producer of coffee and the country with the largest revaluation of their currency in relation to the Dollar.
Another dominant factor affecting coffee prices is the current low interest rates. Investors cannot seem to get a good return on their money investing in traditional investment vehicles, so we are seeing them move into commodities. Since the “crash” of 2005, we have seen incredible amounts of money invested in the commodities markets, from which we have seen the price of all commodities hit all-time highs.
Even with the market where it is, the good news is that coffee is still an affordable commodity. You won’t feel a cup or two of great coffee like you will at the pump. And here at The Roasterie, we’ve been working hard on efficiency so we can keep our prices as low as possible.
Stay tuned for Part II…