After petroleum, coffee is the world's most important traded commodity, standing above
coal, meat, wheat and sugar. The global harvest, however, is subject to considerable
fluctuations from year to year. These fluctuations are caused by a variety of factors.
Besides climate-induced fluctuations, both the amount of coffee produced and the price
charged for it are determined by the commercial policy interests of the producing and
purchasing countries. This explains why the total annual harvest figures tend to be
variable rather than constant.
From year to year, it appears that the quality of the harvest continues to be
irregular, unpredictable and unstable. So, in order to maintain some control and minimise
the inevitable fluctuations in production and subsequently in price, cultivating and
purchasing countries regularly renew a 'Coffee Agreement'. This aims to stabilise the
price between supply and demand. To date, effective implementation has met with limited
All coffee agreements used to fall under the control of the 'International Coffee
Organisation (ICO), established in London in 1962, but in 1989 all agreements were
dissolved, because the opinions of the producers and the consumers were too divergent.
From then on coffee became a free-trade commodity.
Once the beans are sorted and graded, they are sold to an exporter who sells them to
importers all over the world. Importers bring the beans into the country where they will
be consumed and sell them to roasters.
Once roasters select the coffee they are going to buy, they check the product to
confirm its flavour quality. They conduct a 'cupping' from samples of the coffees they are
going to buy. A 'cupping' is a method of determining the quality of coffee. First a sample
of beans is roasted and ground. Then a small amount is placed in a cup and boiling water
is poured over it. The 'cupper' (a coffee expert) smells and tastes the coffee.
Coffee beans are usually packed in 60 kg jute, hemp or sisal bags, and marked with the
grade, country of origin and method of processing. At this point, it is perfectly
permissible to store the beans in air-permeable bags rather than airtight containers, as
long as they are kept dry and ventilated. Once they are packed, the beans travel by rail
or truck to port warehouses to await shipment.
Importers purchase coffee through three different channels: 'spot' purchasing,
'shipments' or 'futures'. Spot coffee is coffee that has already arrived at the port and
is stored in a warehouse. Purchasing by shipment means purchasing coffee that will be
shipped at a specific time. Futures are contracts bought and sold through the New York
Coffee and Sugar Exchange.
Futures are mainly used as a hedge to protect price position and actual coffee is rarely
delivered against those contracts.
source: Douwe Egberts