Coffee beans are traded on future and commodity exchanges. The two most important exchanges in regards to coffee beans are New York and London. As with most other items, coffee prices tend to fluctuate based upon supply and demand principles. When there are more sellers than buyers, coffee prices drop. When there are more buyers than sellers, coffee prices rise.
Two types of coffee beans are traded: Arabica and Robusta. Generally, Robusta beans are sold at 70% of the price of Arabica beans; making them more cost-effective for major coffee companies. While there used to be a large discrepancy between the price of Arabica and Robusta beans, this is no longer the case.
Since the world's largest coffee buyers have recently begun to purchase mostly Robusta beans, the demand for Arabica beans has been reduced. Therefore, the price difference between the two types of beans has also been reduced. While this reduction in price may be helpful for people who purchase coffee beans, the recent demand for Robusta beans has not been a positive one for many coffee farmers.
When Arabica beans were in higher demand than Robusta beans, farmers were growing large crops of these beans. Now that most coffee buyers wish to purchase Robusta beans, coffee farmers are scrambling to change the type of beans that they grow. Switching from growing Robusta beans to Arabica beans is a timely, and costly, endeavor, which most farmers in developing countries cannot keep up with. While nearly all companies that purchase coffee beans would stand to benefit from lower coffee prices, farmers that grow coffee beans would benefit from higher prices.
In addition to the supply and demand principle mentioned above, there are numerous other factors that impact coffee prices. Weather is one natural force that greatly impacts that price of coffee beans. If coffee beans are sparse due to bad weather, then coffee prices will rise. In the case that one of the largest coffee producing countries has terrible weather one year, the overall cost of coffee beans will increase.
Those companies that purchase the most coffee include Kraft, Nestle, Proctor &Gamble, and Sara Lee. The top five countries that produce the most coffee beans include Brazil, Vietnam, Columbia, Indonesia, and Ethiopia. The top five countries that consume the most coffee per capita are Finland, Aruba, Iceland, Norway, and Denmark. Countries that import the most coffee worldwide include the United States, Germany, and Italy.
