By Dan Bolton
Like their seafaring ancestors, coffee traders can see over the horizon, a skill that combines trading experience with an understanding of market behavior and human insight.
What coffee traders see is trouble ahead.
The annual growth rate in global coffee consumption has averaged 2.3% since 2011, far exceeding production which continues to slump, down 3.5% from 2014/15 at an estimated 141.7 million bags, according to the International Coffee Organization (ICO). Consumption is expected to reach 149.2 million bags this year with arabica comprising 83.6 million bags of the total.
Since stockpiles are falling ICO predicts a spike in prices from a 7.5 million bag shortfall.
This is a problem that is not going away. Demand is strong in many countries, particularly in traditional markets (Canada, European Union, Japan, Norway, Switzerland and the US) but the biggest potential is in emerging markets (Algeria, Australia, Russia, South Korea, Turkey, Ukraine) and the coffee exporting countries such as Brazil and Colombia.
In this issue STiR Tea & Coffee International explores two ways to resolve the crisis.
In our feature on Gender Equity, A Coffee Supply Chain Necessity, Jenny Neill reviews three major papers that describe the impact women’s empowerment has on coffee production. Approximately 70% to 80% of the world’s coffee is produced by smallholders and half of that labor force is female. As Fairtrade International discovered, simply bringing all farmers under one roof to build their capacity, recognizing the fact that women are equal to men, and deserve recognition, and can be credible leaders, yields positive gains.
The expression of pride on the faces of Mayanmar coffee growers Daw Phyu Pu and Daw Mya Hnin, winners of that country’s first cupping competition attests to the wisdom of this approach. See Myanmar’s Arabica Awakening.
Develop coffee producing countries.
Ethiopia is a fine example of what can be done to increase the world supply of arabica. The Federal Democratic Republic of Ethiopia emerged from the shambles of the military junta in 1991 to become the second most populous nation in Africa and the largest economy in East Africa. Ethiopia is now Africa’s largest coffee producer at 6.6 million 60-kg bags, most of which is high quality arabica.
Coffee growing supports more than 10 million households in 25 African countries. Overall Africa’s production rose by 4% in 2013/14 outpacing the global average. In the 1970s Africa produced 27.2% of the world’s coffee but today Africa produces only 13.1%.The World Bank estimates Africa could generate $1 trillion a year in food production and processing, up from $300 billion today.
Companies like Bühler Group are investing in Africa and should be commended for efforts like the newly constructed African Milling School in Nairobi. Employees from General Mills, Cargill, and Royal DSM have joined Bühler staff as volunteers in Partners in Food Solutions, a non-profit that is helping small food producers meet increasingly imposing food quality export requirements.
Finally, China remains a sleeping giant with enormous potential. The Beijing Coffee Association estimates production at 40,000-45,000 metric tons last year (750,000 bags). China has enormous capacity and a growing interest in coffee. China alone could one day produce 3 million bags of arabica, cutting the shortfall by half.