The prices of green coffee are skyrocketing, the essential raw material for the roasters responsible for the production of the famous drink in its various forms. Espresso and moka, filtered and powdered coffee are destined to become a luxury for a few. Here because.
1) Coffee, prices skyrocketing
Green coffee is divided into two large families, Robusta and Arabica, listed respectively on the London and New York stock exchanges. In the last three years alone, the cost of Robusta has almost tripled (+190% based on the London stock exchange) and that of Arabica has increased by +50% (based on the NY stock exchange. See notes 1,2).
2) Soaring costs, the causes
The soaring costs of green coffee in the last four years – globally, for both the Robusta and Arabica families – derives from the combination of various economic and geopolitical, climatic and regulatory factors.
2.1) Covid effect
The collapse of consumption in bars and coffee shops – due to the lockdowns imposed during the Covid pandemic – has led to a substantial drop in green coffee imports starting from 2020.
Following the recovery, the global need for coffee has exceeded the availability of raw materials. This phenomenon has affected roasting costs and, consequently, retail prices of coffee.
2.2) Logistics
Supply chains of green coffee have also been tested by a succession of logistical problems:
– Covid-era lockdowns had already caused delays and increases in transport costs
– the container crisis and the increase in fuel costs, from 2022, have contributed to worsening the costs of transporting green coffee from producing countries to consumer markets
– the blockades of some maritime transport routes, most recently in the Suez Canal, then dealt the final blow to logistics.
2.3) Climatic events
The climatic conditions adverse events in the main coffee producing countries, from Brazil to Colombia to Vietnam, have further aggravated the situation.
Global oat production of coffee has decreased while demand has increased. And the prices of green coffee, as a result, have skyrocketed.
3) European Union Deforestation Regulation (EUDR)
EUDR – European Union Deforestation Regulation (EU) No 2023/1115 – introduced a series of requirements for producers, importers and users of some critical raw materials (palm oil, soya, coffee, cocoa, beef and their hide, rubber, timber) and products derived from them:
- traceability of the supply chain, starting from the cultivation or grazing land of agricultural raw materials up to the final products
- due diligence, aimed at ensuring that the aforementioned raw materials do not come from areas subject to deforestation after 31 December 2020. (3)
The new rules apply from 30 December 2024, six months later for ‘small and medium enterprises’, also on products referred to in customs code 0901 (coffee, including roasted or decaffeinated; coffee husks and films; coffee substitutes containing coffee in any proportion).
3.1) EUDR, impact on international supply chains
Small coffee producers in some low- and middle-income countries (e.g. Ethiopia), often lacking the resources necessary to implement the new traceability and geolocalization systems, they risk being excluded from the European market and thus to speculation by large importers not subject to the EUDR (e.g. USA, China, etc.). With the real risk of reducing their income and increasing poverty in the producing regions.
Producers in more advanced harvesting areas (e.g. India, Brazil, Vietnam) are vice versa able to easily access the technologies necessary for geolocalization and the organization of the procedures required to access the European market. And the investments made in this sense, obviously, will be passed on to final consumers in the Old Continent through an increase in the prices of ‘deforestation free’ coffee.
4) Financial speculation
International finance intervenes in this context to speculate on the volatility of coffee prices, as already on other commodities and means of production. (4) Thus, in recent years, large investment funds have focused their attention on the ‘futures’ of these commodities, as always to the detriment of the population.
Dario Dongo, Alessandro Toni
Footnotes
(1) Adam Maguire. Bean Counting: The rising cost of a cup of coffee. RTE. 1.5.24 https://tinyurl.com/52pye487
See Marketwatch. Coffee Continuous Contract, Robusta Coffee Continuous Contract
(2) Dario Dongo. Deforestation Regulation. Due diligence on critical raw materials begins. GIFT (Great Italian Food Trade).
(2) Dario Dongo. The tentacles of finance on food sovereignty and our food. GIFT (Great Italian Food Trade).
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
Alessandro Toni
Production Director and Purchasing Manager for Green Coffee at Mokador srl, he boasts long experience in important national and multinational food industries.
