Coffee market and its challenges
Is it the right time to sell my produce or should I wait a little longer? Will the price go up or down? Can't I get a better price than what they're offering me?
These are some questions that are part of the daily life of a coffee producer and will guide our journey to simplify the coffee market and help you, the producer, make informed decisions about when, for how much, and to whom to sell your production.
Today, we will present an overview of the coffee market. In the upcoming articles, we will dive deeper into each of the topics presented. Let's get started!
The Coffee Market in Brazil and Worldwide
Nearly one out of every two cups of coffee consumed worldwide comes from Brazil. This means Brazil exports the equivalent of a “Maracanã Stadium full of coffee every month”!
Where Does All This Coffee Go?
A large portion of our exports go to Germany and the United States. Besides them, we export worldwide, being recognized for our high quality and competitive prices.
As Brazil is also the second largest coffee consumer in the world, about 40% of the production is consumed domestically. This internal consumption can also impact export prices.
Why Is the Price of Brazilian Coffee Bags Not Among the Highest in the World?
Despite being the largest producers with quality coffee, the export price of our coffee bags is far from the highest. The main factors influencing this reality are:
- Supply and demand
- Climatic conditions in producing countries
- Dollar exchange rate fluctuations
- Futures market
- Marketing and sales
Supply and Demand
The law of supply and demand is the main factor influencing coffee prices. The market self-regulates: in years of overproduction, prices drop, while in periods of lower supply or increased demand, prices rise.
Climatic Conditions in Producing Countries
Undoubtedly, this is one of the factors that has most impacted the price of coffee bags in recent times, especially in Brazil. Every year, frosts have become more severe and droughts increasingly prolonged, leading to a drastic reduction in production for many producers, impacting the availability (supply) of coffee on the market.
On one hand, the price of bags can increase as fewer bags are available on the market, but on the other, these factors can make life even more challenging for the producer—financially and psychologically.
Dollar Exchange Rate Fluctuations
For exporters, the exchange rate is a critical factor. The more devalued the Brazilian Real, the more you tend to receive per exported bag. However, because the Brazilian exchange rate is highly unstable, the biggest challenge is to predict in advance how much you will actually receive for your production, complicating many decisions throughout the year, such as expanding production, improving production processes, acquiring machinery, hiring new employees, etc.
Futures Market
The coffee futures market allows trading the commodity's price before harvest. While useful for predicting earnings, it also involves risks.
Marketing and Sales
To achieve better prices and access higher-value markets, it is essential for producers to invest in effective marketing and sales strategies. A strong brand, authenticity, and direct relationships with buyers help gain visibility in the market and increase profits.
Conclusion
With so many variables, it is very challenging to keep track of everything and still maintain production quality. With that in mind, I am posting daily content about coffee bag prices and market analysis on my Instagram: @felipe.mahlmeister
Next Chapters
In the next article, we will demystify how the price of your coffee bag is set and what you can do to maximize your profits. Stay tuned!
