Commodities in Focus: People to Pay Higher Price for a Cup of Coffee?

It is interesting that health experts still seem to disagree on whether coffee has good or bad effects on people’s health (well, obviously adding sugar is bad). Possibly, it can trigger both effects (depending on the quality, quantity, and the individual), and therefore moderation is always a good advice (“everything in moderation, including moderation”, Irish poet and playwright Oscar Wilde would say).

Just like other commodities (particularly crude palm oil and coal), coffee prices have shown a sharp upward movement in 2021, soaring more than 60 percent so far this year, reaching levels we had not seen since the fourth quarter of 2014.

The coffee price (using Arabica coffee as the benchmark for coffee futures contracts that trade on the Inter Continental Exchange, or ICE) is now around USD $220 per pound (lb), and there certainly seems to be room for further growth. Meanwhile, the chart below shows how steep the coffee price has grown since mid-2020. This timing in fact gives rise to the assumption that the COVID-19 crisis is a key factor behind the price increase as this unprecedented crisis broke out in full force – around the world – in the second quarter of 2020, even though essentially all cafes, restaurants, and hotels saw a huge decline in customers, while many of these places were also forced to temporarily close their doors because of governments’ social and business restrictions. So, it is unlikely that demand for coffee strengthened amid the COVID-19 crisis (although it could be the case that people have started to consume more coffee at home, for example due to work-from-home policies).

Nonetheless, data from Statista.com show a 2.3 percent year-on-year (y/y) decline in global coffee consumption in the 2019-2020 season to a total of 164.53 million bags of coffee (one bag containing 60 kilogram of coffee).

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Order this article (or the November 2021 report in which it is included) – by sending an email to info@indonesia-investments.com or a message to +62.882.9875.1125 (including WhatsApp) – to read the full text. This article about Indonesia’s coffee industry discusses:

– What causes global coffee prices to skyrocket over the past year?
– What is the impact of these high coffee prices on Indonesia?
– How has the COVID-19 crisis impacted on the coffee industry?
– Indonesia’s coffee production, consumption and export performance (2001-2021)
– Indonesia’s specialty coffees

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