How Has COVID-19 Impacted the Global Coffee Market?

Even amid the abrupt disruption of commercial activity caused by the coronavirus crisis, coffee demand has remained strong.

In a global pandemic characterized by extreme uncertainty, coffee prices have been understandably volatile, with numerous spikes and significant instability. COVID-19 has resulted in both supply and demand disruptions in the global coffee market, creating significant challenges for coffee farmers, farm laborers, roasters, and business owners. 

Despite the volatility, the International Coffee Organization (ICO) Composite Indicator Price, which is the weighted average of the four different major coffee groups, has had an overall rising trend in the past six months. The upward trend is being driven by Arabica coffee, which accounts for an estimated 75% of coffee traded internationally and is primarily cultivated in Colombia and Brazil. Arabica prices fell in May when investors first worried about lower consumption in cafés during global quarantines, but they remain higher compared to 2019’s average. Since then, Arabica prices have risen as concern has turned towards supply shortages in the face of logistical challenges caused by the pandemic. Analysts from our partner the Green Coffee Company predict Arabica prices will continue to climb in 2020 before stabilizing in 2021. 

Even in uncertain times, here are four reasons we remain confident in the future of Arabica coffee and the international coffee market in the face of the global crisis: 

The Industry Is Evolving

Even as coffee drinkers around the world are barred from cafés due to lockdown measures, the industry is demonstrating resilience and resourcefulness as it quickly adapts to changing times. A report from the Specialty Coffee Association (SCA) and payment platform Square Inc. revealed an exponential upswing in curbside and pickup orders, delivery orders, and equipment sales in the U.S. coffee sector. This includes a 5,380% combined sales increase in curbside and pickup orders, a 340% increase in delivery sales among coffee sellers, and an 11% increase in coffee-making equipment sales. 

In addition to coffee pickup and delivery services, e-commerce has helped keep the coffee market alive. Even as out-of-home consumption falls, quarantine measures spurred a significant rise in online coffee orders and subscriptions. According to the report from SCA and Square Inc., there has been a 109% increase in subscription coffee sales and a 25% increase in the number of sellers offering subscription coffee services.

Pre-COVID-19 data suggest that coffee—particularly sustainably sourced Arabica coffee— is positioned to thrive in a post-pandemic world. Shortly before lockdown measures were enacted in the U.S., a study from the National Coffee Association (NCA) found coffee consumption had hit new highs in the U.S., with coffee consumption up 5% across the country since 2015. Premium coffee beans were behind this trend, with nearly 60% of coffee served in the U.S. being brewed from gourmet premium Arabica beans. Sustainably sourced beans are also rising in popularity, with 53% of coffee drinkers saying they want coffee produced with coffee farmers and the environment in mind. 

Coffee Stabilization Efforts in Colombia

Shortly after the World Health Organization deemed the spread of COVID-19 a global health emergency, the Colombian government announced it would invest 218 billion COP (around $64 million USD at the time of publication) in a Coffee Price Stabilization Fund, or el Fondo de Estabilización de Precios del Café (FEPC). The fund is intended to ensure Colombian coffee farmers receive a fair base price for their coffee so they can focus on production and quality. Industry experts have proposed setting base coffee prices between $1.40 and $1.50 USD per pound (at the time of publication, coffee was trading at $1.19 USD per pound) to help growers meet or exceed the cost of coffee production. 

Since Colombia is the world’s second-largest producer of Arabica beans and the third-largest producer of coffee overall (behind Brazil and Vietnam), higher coffee pricing floors in Colombia are likely to impact coffee prices worldwide if implemented. The hope is that if farmers have the wages and resources they need to deliver an even better product, the global specialty coffee market will rise to the occasion and support the cause.

The Recession-Resistant Nature of Coffee

Finally, we expect the global coffee market to survive and thrive in the aftermath of this global health crisis because of the recession-resistant nature of coffee. There may be no such thing as a completely recession-proof industry, but consumer staples like coffee tend to perform well regardless of what’s going on in the economy. 

As we saw in the 2008 recession, consumers tend to view coffee—even pricier espresso drinks from upscale brands like Starbucks—as a relatively thrifty luxury that offers comfort during stressful times. Coffee plays an important part in many consumers’ morning routine, and they will sacrifice other splurges and put off major purchases before going without their morning cup. 

Coffee’s recession-resistant nature has helped keep demand and pricing strong even amid the abrupt disruption of commercial activity caused by the coronavirus crisis. And when the world emerges from the pandemic and turns its attention to restoring the economy and reopening businesses, coffee consumption is expected to grow even further. 

If you’d like to learn about investing in award-winning Colombian coffee, please visit the Green Coffee Company investment page. Our initial coffee offering successfully raised $5.7M in commitments to acquire, improve, and expand three farms in Colombia’s iconic coffee region of Salgar, home of the world’s best Arabica coffee.

As one of the largest consolidated coffee producers in Colombia, the latest offering gives investors an unprecedented opportunity to generate significant returns from one of the world’s most timeless and in-demand commodities.

You can also fill out the form below and someone from our investment team will be in touch with more information.

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