The situation of low prices in coffee is not new, it also existed in those times where the quota system operated to supply and buy coffee worldwide, there are those who think that the origin of the low price is influenced by speculators mainly in the bag of coffees in New York and London, this is supported in part because world production is not much greater than the demand for the aromatic.
According to a recent report published by Reuters based on data from the USDA, global coffee consumption will rise to a record in the 2019/20 season while production will fall 3.1% to 169.1 million 60 kg bags basically because Brazil It will enter its biannual cycle of low production, while world consumption will increase to 167.9 million bags.
If we analyze these numbers we might think that prices should rebound since supply is almost the same as demand and coffee production is below equilibrium prices.
However, these data do not show that world coffee reserves are estimated to close at around 33 million 60 kg bags.
The history of prices repeats itself, before with a quota system, price crises occurred approximately every 12 years and began with a decrease in stocks in producing countries that caused the alert in consuming countries, the price began to rise Because coffee plantations take three years on average to enter their production phase, prices remained high for at least a couple of years and rose until customers looked for alternative beverages such as tea or chocolate, as prices rose sharply and There was no way to get the aromatic, in the producing countries, generally less developed and eager for international currency, incentive programs for cultivation were initiated because the "fat cows of coffee" season was coming, of course this soon saturated the international market that in at that time it was regulated by quotas in which each country could only offer a limited quantity of coffee to the market, b seeking thereby regulating supply, demand and therefore prices.
The strong stimulus to the production of coffee originated strong surpluses in the export quotas, forcing the producing countries to consume them internally or to sell them to countries not members of the agreement or to store them because there was no market for the surpluses, finally there was so much coffee in the world that prices fell causing abandonment in the field and the gradual fall in production and decrease in inventories to start a new upward cycle.
Now there is no longer a quota system and inventories are in the developed countries more than in the producing countries, but the same thing happens only that there is no quota system, so the most efficient countries to produce it introduce more coffee and with more success than countries with higher production costs, in this way prices are increasingly lower because the increase in the production technology of some countries together with the exploitation of the soil, leads them to earn money on land where the least efficient cannot .
If we add the incursion of new players to the market such as China that has planted coffee and is not yet in full production, to the surpluses and the need of the countries to cultivate to sell in the global market, we will understand that the low price crisis has not yet it is about to end, unfortunately for our producers.
The decline in Brazilian production this year should not be understood as good news, on the contrary, the coffee trees rested this year after a strong harvest from the previous year and have recovered and will be ready to produce more coffee in the next cycle and less if an ecological disaster occurs, which is increasingly being considered in their planning, the harvest will be greater; Now, large transnationals are blamed for paying starvation prices for their products, this may have some reason, but the current structure of companies is to generate profits, and if these appear, companies will seek to sell more and generate sooner or later more demand, that is one of the reasons that explain the increase in demand, the sad thing about it is the poor distribution of that already moral income with which products are marketed almost always with a socially correct ethic at best cases but not real.
From my point of view, consumers are not in the possibility of paying much more for a cup of coffee, five cents of a Euro per cup transmitted directly to the field would provide the solution to producers who, in the long run, would sow more coffee, again originating a Greater excess supply, but also the owners of bars, cafes and restaurants face a constant increase in costs and the more developed countries are also facing problems in their economies and the population, except in some countries, tends to adjust their expenses.
For me, sadly and against my feelings, we continue to produce the coffee crisis motivators in each cycle, now we are abandoning the crops and in the future the low demand will reach us, with very strong rallies, only this crisis is not seen in the short term, hence the rebound in prices.