Coffee as a Commodity

In recent years coffee consumption has risen tremendously. This growing demand created an international market where coffee is traded without regard of its origin, just like oil and gold. When this type of trading occurs, it means that the product is a hot commodity. Coffee is now treated has having the same value everywhere in the world, regardless of production or consumption location and its value is defined by markets as a whole. Only specialty or gourmet coffee is treated has a normal agricultural product, and its price does not follow the commodity markets.

Production and markets

Almost all coffee production occurs in developing countries. It is a labor-intensive production that uses little or now machinery for harvesting. Most consumption occurs in the industrialized countries that buy coffee wherever it is available and, for most cases, treat it as equivalent, regardless of origin. Constant demand and supply led to the creating of markets where global prices are set. Like other commodities, futures contracts are also traded for coffee, assuring buyers that they can obtain coffee at an agreed price in the future.

Gourmet exceptions

Trading coffee as a commodity means that it must be treated as equivalent, but not all coffee is equal. There are special coffee beans categorized as gourmet due to their flavour or special processing. These are obviously not equivalent to the bulk coffee production and can only be traded in special terms with most contracts fixed directly between producers and final buyer.

Growing coffee consumption led to the creation of international markets that set global prices and trade it as a commodity; buyers do not distinguish different production sites. Coffee is now regarded much more as a commodity than as an agricultural product. Only specialty coffees that have specific qualities are traded as normal products since they cannot be treated as equivalent.