Coffee Commodity

Although there are many different varieties of coffee plant, only two species are of major economic importance. These are Coffea Arabica and Coffea Robusta. Today, more than 60 per cent of the world’s coffee output is produced from Arabica beans. The Arabica bean is considerably more demanding than Coffea Robusta. Coffea Arabica originates from what is now Ethiopia, whereas the Robusta bean comes from Indonesia and can be cultivated even at heights of between 200 and 600 metres. Besides these two main species there are also other exclusive bean species such as Liberica and Excelsa.

The Arabica species is cultivated and processed primarily in Brazil and Columbia. Coffea Arabica is also produced in Costa Rica, Mexico and Guatemala, however. The most important producers of Coffea Robusta are Africa and Asia. In 2005 around 28.2 per cent of the world’s harvest of green coffee beans came from Brazil, making the country the world’s largest coffee producer. In recent years world production has increased further from 90 million bags to 100 million bags. Coffea Robusta accounts for around 40 per cent of this.

Coffee is regarded as the most important export commodity after crude oil, and is therefore of high economic importance for the coffee producing countries. More than 100 million people earn their living from the production and processing of coffee and many countries in the third world depend entirely on the coffee trade. Because the market prices for coffee have fallen considerably in recent years, however, the proceeds from coffee sales are frequently no longer sufficient to cover the production costs, something which hits small farmers particularly hard.

Coffee originates from the Ethiopian region of Kaffa, where it was discovered in the 9th century. Slave traders brought the coffee to Arabia in the 14th century, from where the drink spread throughout the world through trade. The main trading venue for coffee was the town of Mocha. The first coffeehouse was opened in London in the 17th century and was known as “Penny University” because customers could purchase a cup of coffee for one penny. The English coffeehouses led to the establishment of the London Stock Exchange, which developed from one of these original houses.

As an export commodity, coffee is normally transported in the form of green beans which are only roasted to form the familiar brown coffee beans once they reach their destination. The largest coffee roaster is located in Berlin and is operated by Jacobs (Kraft Foods). The demand for coffee is relatively constant, as a result of which the price for the black beans is influenced primarily by the weather conditions and the political situation in the producer countries.

The most important trading venues for coffee are the London International Financial Futures Exchange, the New York Board of Trade, the Bolsa de Mercadorias & Futuros and the Tokyo Grain Exchange.