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Coffee as a commodity

Coffee as a commodity

Coffee as a commodity

World Trade with coffee

Economic Importance of coffee

With a lot of help from the progressing industrialization during the 19th century, coffee developed into a trade good with worldwide importance. Considering the high prices of coffee, it became and for some countries still is the most important trade entity. Through progress in technology, farmers were able to vastly decrease the cost of growing and harvesting and mainly, the risk and cost of worldwide transport decreased dramatically and modern steam and diesel-powered vessels began to roam the seven seas.

Modern washing, drying, and roasting processes make the production of coffee with a consistently high quality possible even for the fast-growing world market. Through modern propelling systems and efficient container cargo, the transport of coffee has been reduced to a couple of weeks versus the many months it had taken before. Today, no one has to live without coffee anymore.

Coffee used to be one of the most important and especially one of the most expensive goods brought over from the colonies. Only the richest and wealthiest could afford the aromatic beans and at times coffee was even prohibited in all of Prussia.  Of course, all of that has changed today. With the coffee culture becoming more and more popular and diversified, Germany is the biggest export country of coffee goods in the world. In 2016, Germany imported 1,14 million tons of raw coffee for processing it into all kinds of goods containing coffee.

About 98% of the nine million tons of coffee harvested every year consist of Arabica and Robusta varieties. The more robust and less picky plant Coffea Canephora (Robusta beans) is mainly being grown in Southeast Asia, India, and Western Africa. The considerably more sensitive variety Arabica is mainly being found in areas located 800 meters or more above sea level. Because of the hilly environments preferred by this variety, Arabica farming usually requires far more labor and more human workforce. In East Africa and South America, most of the Arabica is still being farmed in micro-farms and small cooperatives.

 

Fairtrade

FairtradeSometimes only 5-15% of the retail price for coffee reaches the farmer in the exporting country. The constant price war is making it increasingly difficult for small cooperatives to survive. Fairtrade, whose best-known initiative is the FairTrade label, therefore tries to improve the situation of people at the end of the production chain through a variety of measures.

Around one-third of the world's green coffee production comes from Brazil, which is also the largest coffee-growing and consumer country. There the coffee is grown in fertile areas in different ways and after the harvest, it is usually filled into bags as dried green coffee, nowadays also often as bulk material in sea containers.

Drying reduces the weight and thus the transport costs and prevents unwanted fermentation. It is shipped from major ports such as Santos to Rotterdam or to the largest European coffee import port, Hamburg. In order to avoid the tax on roasted coffee and to guarantee consistently high quality, the actual refining, the roasting, only takes place in Germany and other destination countries such as Italy.

From bushes in Brazil to cups of espresso in cafés, 25 million people worldwide depend on coffee as farmers, plantation owners, cooperatives, traders, importers and exporters, brokers and refiners. In total, they produce 150 million bags of green coffee a year.


Coffee tax - Customs on coffee imports

Customs duty on coffee imports and coffee tax

Germany earns about one billion euros through annual levies on products containing roasted coffee. These enormous revenues come from 2 different sources:

Customs duty on already roasted coffee
Did you know that? There is an import duty on coffee to protect the domestic processing industry because only the import of unprocessed green coffee from all countries is duty-free. Roasted coffee and all other coffee products account for between 7.5 and 9 percent, an instrument that has successfully protected its own coffee market for centuries.

It was only in 2007 that the European import duty of 30% on roasted coffee for Ethiopia and other developing countries was abolished. This meant that for the first time these countries had the chance to keep the whole value chain of their product in the country.

A good example of Direct Fairtrade is the Solino brand. Read more.


Coffee tax in Germany

The state's cashing in. Germany is one of the very few EU countries that still have a coffee tax. For domestic sales, an additional Euro 2.19 per kilo for roasted coffee and Euro 4.78 per kilo for soluble coffee are due.

Coffee prices - Coffee at the stock exchange

The raw material coffee on the stock exchange

The most consumed drink in the world after water. In terms of value, coffee is the most important raw material after crude oil. Major stock exchanges: NYBOT and LIFFE

Fluctuating prices

Despite the efforts of the various players, there are countless natural factors that cause the price of coffee to fluctuate.

Due to the way it is produced, it is difficult, for example, to compensate for peaks in demand, to cultivate more plants and to harvest the first crop takes years. This causes the price to skyrocket.

One indicator for this game of supply and demand is the total of four stock exchanges where coffee is currently traded.

Of particular importance are the Robusta exchange on the London EURONEXT and the Arabica exchange on the New York Trade Board. Here, in addition to normal coffee trading, futures transactions are concluded for large quantities of coffee beans and the price development of coffee is speculated on.

For many, especially smaller customers such as roasters, the exchange, on which only "standard qualities" are traded, is rather a non-binding price barometer. The coffees of this world are far too diverse. Quality, origin and growing conditions, consideration for the environment and secondary factors such as transport costs and exchange rates can vary greatly.

Those who buy from small businesses and value good coffee often buy coffee at a price agreed directly with the middleman or producer.

In order to prevent artificially induced fluctuations in the coffee price, trade agreements, control bodies, and stock exchanges have been set up. Today, the ICO (hyperlink to http://www.ico.org) (International Coffee Organization), which is responsible for compliance with strict hygiene and environmental guidelines, is in charge.

The ICO mediates and negotiates between 77 coffee import and export countries.

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