coffee importer, wholesale coffee trader

Market

According to the Composite Index of the London-based coffee export country group
International Coffee Organization, the monthly coffee price averages in international
trade had been well above 100 US cent/lb during the 70s/80s, but then declined
during the late 90s reaching a minimum in September 2001 of just 41.17 US cents
per lb and stayed low until 2004.

The reasons for this decline included a collapse of the International Coffee Agreement
of 1975-1989 with Cold War pressures, which had held the minimum coffee price at
USD$1.20 per pound. Moreover, the expansion of Brazilian coffee plantations and
Vietnam's entry into the market in 1994 when the United States trade embargo against
it was lifted added supply pressures. The market awarded the more efficient Vietnamese
coffee suppliers with trade and caused less efficient coffee bean farmers in many countries
such as Brazil, Nicaragua, and Ethiopia not to be able to live off of their products, which at
many times were priced below the cost of production, forcing many to quit the coffee bean
production and move into slums in the cities. (May, 2006).

The decline in the ingredient cost of green coffee, while not the only cost component of the final cup being served, occurred at the same time as the rise in popularity specialty cafés, which sold their beverages at unprecedented high prices. According to the Specialty Coffee Association of America, in 2004 16% of adults in the United States drank specialty coffee daily; the number of retail specialty coffee locations, including cafés, kiosks, coffee carts and retail roasters, amounted to 17,400 and total sales were $8.96 billion in 2003.

Specialty coffee, however, is frequently not purchased on commodities exchanges—
for example, Starbucks purchases nearly all its coffee through multi-year, private
contracts that often pay double the commodity price . It is also important to note that
the coffee sold at retail is a different economic product than wholesale coffee traded
as a commodity, which becomes an input to the various ultimate end products, so that
its market is ultimately affected by changes in consumption patterns and prices.

The market for soft drinks has been steadily climbing, passing the consumption of
coffee in terms of mass of product consumed in the early 2000s.

In 2005, however, the coffee prices rose (with the above-mentioned ICO Composite
Index monthly averages between 78.79 (September) and 101.44 US Cents per lb).
This rise was likely caused by an increase in consumption in Russia and China as
well as a harvest which was about 10% to 20% lower than that in the record years before.
The “good news” is that many coffee bean farmers can now live off their products, but not
all of the extra-surplus trickles down to them, because rising petroleum prices make the
transportation, roasting and packaging of the coffee beans more expensive. Prices are
expected to either remain constant or rise in 2009. (May, 2009)