Coffee prices fluctuate based on supply and demand, with Arabica and Robusta beans being traded on futures and commodity exchanges. The recent shift in demand towards Robusta beans has reduced the price difference between the two types, but has negatively impacted farmers who cannot afford to switch crops. Other factors affecting coffee prices include weather and the top coffee buyers and producers are Kraft, Nestle, Brazil, and Vietnam.
Coffee beans are traded on futures and commodity exchanges. The two most important exchanges when it comes to coffee beans are New York and London. As with most other items, coffee prices tend to fluctuate based on the principles of supply and demand. When there are more sellers than buyers, coffee prices go down. When there are more buyers than sellers, coffee prices rise.
Two types of coffee beans are traded: Arabica and Robusta. In general, Robusta beans are sold for 70% of the price of Arabica beans; making them more affordable for major coffee companies. While there used to be a large discrepancy between the price of Arabica and Robusta beans, this is no longer the case.
Since the world’s largest coffee buyers recently started buying mainly Robusta beans, the demand for Arabica beans has been reduced. Therefore, the price difference between the two types of beans has also been reduced. While this price reduction may be beneficial for people buying coffee beans, the recent demand for Robusta beans hasn’t been good for many coffee farmers.
When Arabica beans were in greater demand than Robusta beans, farmers grew large crops of these beans. Now that most coffee buyers want to buy Robusta beans, coffee farmers are scrambling to change the type of beans they grow. Switching from growing Robusta beans to Arabica beans is a timely and expensive endeavor, one that most farmers in developing countries can’t keep up with. While almost any business buying coffee beans would benefit from lower coffee prices, farmers growing coffee beans would benefit from higher prices.
In addition to the supply and demand principle above, there are a number of other factors that affect coffee prices. Time is a natural force that greatly affects the price of coffee beans. If coffee beans are scarce due to bad weather, coffee prices will rise. In the event that one of the largest coffee-producing countries has terrible weather one year, the overall cost of coffee beans will go up.
Companies buying the most coffee include Kraft, Nestle, Proctor & Gamble and Sara Lee. The top five countries that produce the most coffee beans include Brazil, Vietnam, Columbia, Indonesia and Ethiopia. The top five countries that consume the most coffee per capita are Finland, Aruba, Iceland, Norway and Denmark. The countries that import the most coffee worldwide include the United States, Germany and Italy.
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