Global demand for coffee keeps growing

The global demand for coffee keeps growing. Over the last 12 months the price has doubled but the demand still remains unsupplied.

 

According to the International Coffee Organization, in 2010 the global consumption of coffee grew by 2.4% up to the record volume of 134 million bushels (1bushel = 60kg). It means that the market of coffee keeps rallying despite high prices.  According to the ICO’s chief economist, the average pace of consumption growth seen over the last 10 years is 2.5% a year. He says that the tendency will probably continue in the future.

In some countries drinking coffee is a tradition and people won’t abandon it just because of high prices.

 

John Calvert, President of Starbucks Coffee International (SBUX.O), said that the world’s biggest coffee-house network was planning to triple the amount of its coffee houses in China from 450 up to nearly 1500 by 2015.

The price growth also failed to reduce the consumer demand in India even though some expensive kinds of coffee (like Arabica) were replaced with cheaper ones like Robusta. The consumption of coffee in India grew mainly because some Indians reduced the consumption of tea.

The Scandinavian countries are currently the main coffee consumers per capita (especially Finland) while the USA and Brazil are the leaders in terms of the net consumption of coffee.

The demand for coffee remains high in the traditional markets such as Germany, where the consumers haven’t seen a significant price increase thanks to the tough competition between the local retailers.

However, it should be noted that only a small part of the increase in the price on coffee beans penetrated into the retail prices on coffee products.

For example, in early May Nespresso Nestle increased its prices only by 6% while Tchibo, Germany’s biggest roaster, announced that the high prices on coffee beans would probably reduce its profits in 2011.

The global production of coffee tried to catch up with the growing demand for it. It was especially difficult for Brazil and Columbia to supply the high-grade coffee “Arabica”.

At this point any major rally in the market of coffee is hardly probable as the market is waiting for another harvest campaign in Brazil, which is the world’s leading coffee producer and exporter.  Now the most probable scenario is a flattish movement in the 260-280 price range. A retracement is probable in long-term perspective, which will be caused by new supplies of coffee.