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The world coffee trade

You will find every aspect of the world coffee trade carefully explained.

Supply and demand | Coffee agreement | Export | Cupping | Packaging and transportation | Purchasing green coffee

Supply and demand

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.

Coffee Agreement

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 success.

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.

Export

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. 

Cupping

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.

Packing and transportation

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.

Purchasing green coffee

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

  
  
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