While a Dow-Jones or NASDAQ market plummet resulting from political upheaval is usually cause for alarm, it’s the commodities market that has the most far-reaching consequences. Especially when Mother Nature sweeps across the globe’s prime coffee-growing regions.
Coffee, it seems, is an economic driver that’s so pervasive, few people know how much influence this crop wields. Add disease, parasites, and demand that increases exponentially, and it’s easy to understand why coffee is the most powerful beverage on the planet.
Should you lose sleep wondering if those beans are going to disappear in the near future? Not yet. But you may want to grab a cup of your favorite brew while we explain just how important the coffee industry is to the world’s economy.
- Coffee: As valuable as oil?
- The current state of the coffee market
- The short life of coffee
- Dramatic projections
- Agricultural changes can save coffee’s future
- Coffee breeding for fun and profit
- What stands in the way of progress?
- How the coffee market impacts all of us
- Where do you work?
- Keep tabs on the future
Coffee: As valuable as oil?
When food writer Tori Avey chronicled the history of coffee for PBS, she revealed heady facts about the beverage most likely to impact your mood on any given day. Coffee, she writes, is “the most valuable legally traded commodity in the world” next to oil. She wasn’t joking.
Because it’s been around for thousands of years, coffee comes with plenty of legends, lore, and improbable attributions, but suffice to say the energy exhibited by coffee berry eaters–long before they were made into beverages around 1000 A.D.–proves this crop’s staying power over so many millennia.
The first coffee plantations sprung up in Southeast Asia around 1616. Trader merchants delivered beans around the world. Some say the Boston Tea Party was responsible for the popularity of coffee in the New World, but it’s more likely that the energy people derive from a single cup of coffee is the reason this beverage has maintained its popularity throughout the globe. (1)
The current state of the coffee market
The United Nations Food and Agriculture Organization (UNFAO) monitors everything from the coffee plant growing hubs and distribution systems to worldwide consumption trends. In a comprehensive white paper published in 2016, the FAO addressed eight critical topics that ran the gamut from the importance of food security to projected gains in commodities like coffee through the year 2030.
The BBC took a less optimistic position when it published “Coffee in Crisis: The Bitter End of our Favourite Drink?” authored by journalist David Robson. He noted that growers throughout the planet have become alarmed by global weather changes that don’t discriminate from one continent to another.
It’s not that coffee plants are fragile. After all, they’ve been around for thousands of years. But if they get waterlogged, plants can suffer damage that spreads from the fruit and leaves to the beans themselves.
When the weather is extreme–monsoons, hurricanes, and storms so powerful, a coffee plantation can be swallowed up by mud–that can be the end of a grower’s season and livelihood and that nation’s market can suffer exponentially.
But dramatically-changing weather patterns aren’t the only worries farmers deal with. Bugs, parasites, and germs have begun to morph from benign pests to virulent carriers of the disease capable of sweeping across a plantation faster than entomologists can identify strains and chemical companies can formulate pesticides. (2)
If you’re interested in knowing more about the relationships between Mother Nature and coffee-growing nations, this video production, made by Columbia’s Coffee Federation, can explain how science is coming to the rescue of growers.
The short life of coffee
If you think your life moves at the speed of light, consider the lifespan of the coffee plant. This crop is genetically engineered to flower for just 48 hours before it’s no longer capable of withering into the seeds that help the plant reproduce itself.
Further, the temperature window of the coffee plant is equally short and fragile. Coffee grows best when temperatures range from 18- to 22-Celsius, so a single freeze is strong enough to interrupt the life cycle of even the healthiest crop.
Here’s just one recent example of this dynamic: In 2013, temperature extremes paired with a disease called coffee bean leaf rust blanketed areas of Central America, home to the world’s most popular bean, Arabica. As a result of these conditions, coffee bean prices jumped 20-percent and consumers suffered at the supermarket checkout line. (4)
A scholarly study was undertaken by four academicians entitled, “A bitter cup: climate change profile of global production of Arabica and Robusta coffee,” may not be the easiest white paper to understand, but there’s enough proof within the text to judge the impact of climate change on the international coffee bean market.
Authors of this study project the disappearance of prime land most hospitable to growing Arabica beans is likely to be cut in half by 2050 due to climate change.
In an effort to develop more agricultural reach, rainforests are being destroyed at alarming rates, adding to the list of conditions that impact the future of coffee cultivation.
One researcher, estimating the amount of rainforest needed to meet demand if coffee consumption continues at its current level, says Earth will need growing space by 2050 that’s “equal to the country of Wales.”(5)
Agricultural changes can save coffee’s future
Your mom told you that while there’s life, there’s hope, though governmental regulation with regard to climate change is moving in an unhealthy direction. That’s not to say all is lost, posits Jon Fisher, writing for Nature.org.
Fisher reports that scientists, farmers, and environmentalists are already taking quiet steps in the right direction to mediate challenges facing the international coffee market.
For example, slash and burn agriculture, deforestation and other negative practices are being replaced by smarter cultivation methods. According to the aforementioned UN report, cultivatable acreage needed to grow crops has begun to decrease thanks to innovative new practices.
Further, organizations like The Nature Conservancy point to emerging practices that emphasize “resilient farming practices,” like sustainable intensification that uses new science and technology methodology to grow coffee beans more efficiently, on less land and with less water.
Adopting water quality and soil conservation measures in concert with new, non-toxic fertilizer and pesticide formulations are futuristic goals leading to actionable change, say U.S. Department of Agriculture scientists. Learn more about how the U.S. is taking an active part in this movement by watching this video:
Coffee breeding for fun and profit
An in-depth article published by “National Geographic” discusses agribusiness’s success at “tweaking the genes” of soybeans and corn. Genetic moderation of coffee plants is expected to have a big impact on the future of this plant. Science fiction? Not if you keep up with cutting-edge agronomics.
Costa Rica, Nicaragua and Mexico are currently experimenting with coffee hybrids, several of which were imported from Africa. Unless you missed that day in biology when your science teacher brought up the name of Mendel, you know that hybrids designed to repel disease and extreme weather conditions are becoming commonplace solutions.
If genetic engineering makes inroads, plants that need less water, repel disease and bugs and stand up to anything Mother Nature dishes out will become the norm rather than the exception. (8)
What stands in the way of progress?
Money, of course. The first genetically-modified coffee plants to see the light of day are being underwritten by public-private consortiums eager to make sure coffee remains on beverage menus forever. The guy leading the charge is Tim Schilling of the World Coffee Research Group.
Developing new strains of coffee plants not only assures future supplies, but there’s a developing career niche for scientists eager to become coffee breeders.
Funding for these experimental programs is not easy to come by, so it could be up to the large coffee manufacturers to do the heavy lifting, providing funding for projects that explore the furthest reaches of coffee chemistry, even if their motives begin and end with self-interest.
How the coffee market impacts all of us
The National Coffee Industry (NCI), established in 1911, has a vested interest in more than whether you take yours black or with cream and sugar. This organization’s facts and figures prove coffee “helps power the U.S. economy.”
The NCI partnered with the Specialty Coffee Association of America (SCAA) to fund a study proving that the American economy wouldn’t be half as healthy without coffee in the mix. Consider the following study highlights to understand why:
- Coffee literally creates jobs-from specialty roasting companies to baristas at Starbucks. Research proves that 1,694,710 jobs exist because coffee exists!
- More people drink coffee than water, likely to the chagrin of doctors who would as soon their patients cut back on the amount of caffeine they ingest.
- Coffee generates around $28 billion in taxes every year; this includes the beverage itself and additional goods made to support coffee drinking.
- In 2015, sleepyheads spend around $74.2 billion on their coffee fixations.
- The NCI/SCA study concluded that coffee-driven commerce accounted for about $225 billion in 2015 and represented “1.6-percent of the total U.S. gross domestic product” in that calendar year alone.
Where do you work?
Are you interested in knowing how far the coffee market extends? These 10 industries are just the tip of the iceberg, but they give you an idea of auxiliary industries that depend upon coffee to help drive the U.S. economy.
- Artificial sweetener and whitener producers
- Coffeemaker manufacturers
- Coffee importers and exporters
- Coffee roasting companies
- Commercial coffee equipment distributors
- Retail coffee emporiums
- Producers of disposable products like filters
- The flavorings industry
- Specialized packaging industries
- Shipping, trucking and transportation entities.
Keep tabs on the future
Not every investor is comfortable with commodities markets, but there’s no denying that coffee futures are here to stay. You can keep tabs on the coffee market specifically via any number of resources. Television can keep you in the loop, giving you daily updates on why Starbuck’s CEO is focused on the China market or reporting on the amount of rain falling in Columbia that has the potential to “sink” the season’s coffee crop.(12)
Subscribe to resources like TradingCharts.com if the thought of a monsoon sitting off the coast in Sumatra threatens to ruin your day, or compare the health of other commodities (cocoa, cotton, soybeans, grains, etc.) to see how these futures compare.
It’s wise to consult experts if you get into the game of coffee futures, but if you don’t want to pay a consultant, websites like Zach’s are informative, as are publications like “U.S. News and World Report.” The website WallStreetMojo.com reviews coffee books about commodities trading that can bring you up to speed on coffee fast.
In the end, it’s your future, but if you truly believe that coffee is as good a determinant as any to ascertain how the U.S. economy is faring at any given moment, you won’t be the only one pinning your hopes on those feisty beans.
If you use coffee as a tool for taking the nation’s economic pulse, staying in constant touch with changes related to this dynamic commodity is important. It’s particularly critical to understand the importance of private/public investment in new technology that has the power to keep the coffee growing industry viable well into the future.
What can you do to become more involved in the coffee industry? Pay attention to weather patterns as they impact coffee-growing regions. Don’t ignore agricultural news that profiles movers, shakers, and breeders at the forefront of coffee genetics.
And share your interest with anyone you like, especially if you’ve found a kindred spirit intrigued by the idea that the coffee market has the power to impact the U.S. economy big time.
What’s the best way to stay in the loop? Over a cup of coffee, of course. Growers won’t much care if it’s caffeinated, decaf or a designer brew with a heart carved into the foam as long as this commodity continues to delight the palates of dedicated coffee drinkers across the globe.
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