Coffee Market Price - How sustainable is it?

A post from back in March 2014 - still applies to this day! 

Yesterday was a crazy day in the Coffee Commodity Market. The "C" market increased by almost 10% in one single day! Do not get me wrong, this is wonderful for all the producers - but my intent with this information is to point out the volatility in the price of coffee. Below is a table of the 'C' Contract over the last two years.

To showcase this volatility in more detail, back in May 2011 the commodity price for coffee was shy above $3.00/lb. What a great time for coffee growers, however this price was not due to a sustainable supply and demand market forces but because of uncertainty in other investments, which lead financial houses to speculate in the commodities market - particularly in soft commodities like coffee.

This was then followed by a steady drop, until November 2013, when it reached the bottom at just over $1.00/lb. This decrease had a little bit more explanation - there was more coffee being produced then demanded. This price is, in some cases like Guatemala (where coffee is hand picked and labour intensive) below the cost of production.  

As you can see in the graph above - since then, prices have increased due to two main events: Coffee Leaf Rust in Central America and unfavorable weather conditions in Brazil, both which have resulted in lower productions.

So where does this leave us?

At PrimaVera we take a long term outlook when it comes to high quality coffees. We believe in working on stable relationships, while making the growing of coffee a sustainable occupation. Our producers are protected from the price volatility by securing prices much higher than that of the production. 

This is possible thanks to all of you, the roasters and coffee enthusiasts who are willing to pay for quality and appreciate what it takes to produce a great cup of coffee. If the demand for great coffee stays high, growing quality coffee will become a more sensible and sustainable lifestyle for many families in producing countries.

Thank you for your continuous support!