The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
It’s often claimed that coffee is the most traded commodity after oil. That’s not true. It’s not even the most traded agricultural commodity (soybeans and wheat have notably bigger markets). But it’s still hugely important — traded by both large institutional investors and amateurs alike. Just in terms of raw beans, coffee is a $30 billion dollar a year industry. But its economic impact is far larger than that as coffee is integrated into many other products.
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Coffee’s importance is even larger for developing economies. It is an important export for the top producing countries Brazil, Vietnam, Colombia, Indonesia, and Ethiopia. But of those, coffee is only a predominant export for Ethiopia, where it represents over a third. On the other hand, coffee represents less than two percent of Brazil’s total exports.
There are a number of things that affect the price of coffee. Weather is one of the biggest. Coffee is extremely dependent on it. This effect is moderated to some extent by the broad geographical area in which coffee is grown.
Another factor is geopolitics. Because coffee is grown so much in developing countries, political instability can have a large effect. Another major, but indirect, factor is energy costs. Other factors include changes in worldwide expendable income and coffee-related medical finds — which can change the total demand for coffee.
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