What do coffee and chocolate have in common? Coffee beans and chocolate aromas are, of course, a brilliant match per se. But apart from the perfect interplay in your latte macchiato, coffee beans and cocoa are raw materials that are currently becoming cheaper again.
Even if cheaper sounds good at first, others pay the price for falling green coffee prices. And in this case, that is the coffee farmers in the producing countries. However, the "coffee crisis" is not new. For more than 20 years, the market has been moving somewhere between overproduction and environmental crises, including price fluctuations.
On my coffee blog, I have been sharing everything about coffee, from fully automatic machines to special roasts, with you since 2008 in my Coffeeness coffee bean test. It is particularly important to me that you, as a consumer, can make the most transparent purchasing decision possible. The problem: The coffee market is complex and its problems are self-inflicted.
That is why in this article I am taking a look at the development of green coffee prices since 1990 and whether there is a way out of the vicious circle of coffee price development.
A small disclaimer in advance: There is no such thing as the one global green coffee in this form, because the coffee varieties, agreements with farmers, or regional conditions are far too different. Nevertheless, the ICO (International Coffee Organization) has been calculating an average value in US dollars per pound (approx. 450 grams) for orientation since 1990.
The 1990s: How to make politics with coffee
Coffee arrived in Europe at the end of the 17th century. However, buying it just like that at the supermarket around the corner has only been possible since the beginning of mass production in the 1950s. Even back then, coffee beans were mainly produced in developing countries, above all Brazil, Indonesia, and Colombia.
To stabilize coffee production worldwide, the International Coffee Organization (ICO) introduced an agreement in 1962 that regulated production volumes and thus protected the market from a price collapse. The USA, in particular, supported the coffee agreement to guarantee the producing small farmers a stable income.
That sounds noble at first, but the contract was less socially motivated than it was by a political agenda. During the Cold War, it was intended to prevent farmers from joining communist groups. After the end of the Soviet Union in 1989, the USA no longer supported the agreement, so it was finally dissolved.
After that, one thing led to another:
- Coffee consumption rose all over the world; coffee became a cultural and lifestyle product
- Cultivation methods and machines developed further and enabled better harvest yields
- The producing countries could grow as much coffee and throw it onto the market as they wanted
In addition, a new player entered the coffee business. The World Bank promoted coffee cultivation in Vietnam to pay off the country's foreign debts with "black gold."
Besides political factors, the climate also plays an important role in coffee cultivation. Especially too much or too little rain can lead to harvest failures and affect supply. Less supply, rising price? Yes, at first. The green coffee price rose from 0.7 US dollars in 1990 to a maximum of 1.4 US dollars in 1995.
However, coffee farmers expanded cultivation further and further – to benefit from the high price or to compensate for the low one. The result: A market situation emerged with more supply than demand and correspondingly falling prices.
The 2000s: Market recovery thanks to coffee instead of tea
At the beginning of the 21st century, the situation did not look good. While Vietnam had meanwhile managed to secure around 50 percent of the global market share together with Brazil, the green coffee price was at a historic low of 0.4 US dollars in 2001, and thus even lower than in 1990.
This had far-reaching consequences for many small farmers in the producing countries, who had been completely economically dependent on coffee cultivation for about 10 years. Both the increase in child labor on coffee plantations and famines, e.g., in Ethiopia, are direct consequences of the rapid price collapse.
In the mid-2000s, however, a turnaround began to emerge and the market started to regulate itself again. Coffee began to gain a foothold even in classic tea countries like China, which led to higher demand. Specialty coffee also became a hype product and ensured more consumption.
In 2005, the green coffee price in Germany rose by a full 25 percent. Added to this were a series of weather events, which in turn restricted supply so much that the green coffee price survived even the 2008 financial crisis relatively stably and leveled off between 1.1 and 1.2 US dollars between 2008 and 2010.
Coffee prices since 2010: Can coffee also be sustainable?
After the 2008 global economic crisis, green coffee prices started the new decade relatively stably. After coffee no longer had to make politics and demand continued to rise, another problem came to the fore: the weather.
Apart from the 2020 pandemic and the war-related inflation in 2022, the major fluctuations in the green coffee price after 2010 were almost all due to extreme weather events. Coffee is a sensitive plant that only grows well in a (sub)tropical climate with consistent temperatures and precipitation. Not good conditions with advancing climate change.
Between regional harvest slumps due to drought or frost and super harvests in other years, the green coffee price continued to be a rollercoaster ride. Perhaps you are pausing for a moment now and asking yourself why you still pay (more or less) the same for the packet of Melitta Auslese and the bulk pack of Nespresso capsules?
There are various reasons for this:
- Coffee is traded on the stock exchange at a futures price:I.e., buyers and sellers agree on a quantity and a purchase price long before the harvest, which are then only delivered or paid for later. This makes coffee beans an excellent object of speculation and price changes are passed on with maximum delay.
- Green coffee is not the same as ready-to-drink coffee:Green coffee refers to the dried and processed coffee beans after the harvest. Before they end up in your cup, they still have to be roasted and (hopefully freshly in your coffee grinder or your fully automatic machine) ground. Added to this are packaging, transport, and the like.
Especially on the way from green coffee to the ready-to-drink product, so many intermediaries and service providers are involved that the green coffee price is only remotely comparable to the price of the bean packet.
Between 2017 and 2019, the coffee industry even performed a real magic trick: Although the green coffee price fell from 1.3 to 1.0 US dollars and demand even fell slightly, sales of coffee products rose by more than 10 percent. The coffee industry calls this "premiumization" and the idea behind it is not that stupid.
While you simply buy, prepare, and drink coffee at home, the industry can achieve much higher sales with further processed coffee products such as coffee-to-go or capsule coffee with significantly less use of goods. In addition, the business is concentrating on fewer and fewer global intermediaries and exporters, who skim off up to 50 percent of the profit from the entire supply chain.
This widens the gap between the shelf price and the purchase price more and more – while we as consumers perceive relatively stable and sometimes even falling prices.
Coffee farmers earn less and less per pound of green coffee, while they are additionally burdened by the consequences of climate change – to which they also unconsciously contribute themselves. Because when rainforests are cleared in Brazil to expand the cultivation area in the hope of more income, the (vicious) circle closes.
So the big question since 2010 is: Can coffee also be sustainable? And the answer is, yes and no. The coffee industry is complex and globally networked with other economic sectors and systems. Completely sustainable coffee would therefore require a completely sustainable world.
But what has fortunately been discussed more and more loudly and on a broader basis since 2010 is the question of how we can produce coffee more sustainably. And that is a development that we as consumers can (at least in part) help determine responsibly.
Conclusion: My plea for more quality, sustainability & a stable development of green coffee prices
Also a quick disclaimer at the end: The development of green coffee prices is much more complex than I can do justice to in such a short article. Nevertheless, perhaps you don't always need every smallest detail to understand the significance of the global coffee price and that the resulting profits do not benefit the small farmers in Brazil.
So that we can speak of sustainability in coffee cultivation and the development of green coffee prices also reflects reality at some point, sustainable coffee should meet the following criteria:
- Ecological production from cultivation to packaging & transport
- Fair trade incl. fair wages for farmers & fair prices for consumers
- Compliance with social principles, no child labor & safe working conditions
- Fewer intermediaries for transparent & direct trade chains
We should always be aware that coffee is not an agricultural product that we can compare with wheat or potatoes. Special cultivation conditions (e.g., hillside location) do not allow for mechanical harvesting, so coffee cultivation there is pure manual labor. And that is why coffee should also be understood as exactly that – a product that is worth its price.
But the price alone does not necessarily say anything about the sustainability level of the coffee. Unfortunately, this also applies to most seals, such as the UTZ certificate or Rain Forest Alliance. The "stickers for a clear conscience" are usually designed, awarded, and (if at all) controlled by the industry itself. Or they focus on one of the points mentioned above, but neglect the rest.
So instead of staring at the coffee price or rummaging through the supermarket shelf in search of coffee for your fully automatic machine between Schümli and Café Crema, you can also make your purchasing decision based on other criteria:
The more transparently a manufacturer provides data about the coffee and its origin on the packaging, the better you can actually understand the background and more sustainably make a purchase. My tip is small, regional roasteries (or their online shops) that tell you everything from the small farmer to the roast level.
My expectation is that the green coffee price will continue its upward trend in the long term. Even more sustainable coffee production and more responsible consumers will ultimately not stop climate change on a global level.
But at least through an informed purchasing decision, we can contribute to ensuring that coffee more sustainably is produced, the green coffee price remains as stable as possible, and the profit margin on coffee sales benefits the right parties.
