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Economics of coffee

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Economics of coffee

Coffee is a popular beverage and an important agricultural product. Tens of millions of small producers in developing countries make their living growing coffee. Over 2.25 billion cups of coffee are consumed in the world daily. Over 90 percent of coffee production takes place in developing countries — mainly South America — while consumption happens primarily in industrialized economies. There are 25 million small producers who rely on coffee for a living worldwide. In Brazil, where almost a third of the world's coffee is produced, over five million people are employed in the cultivation and harvesting of over three billion coffee plants; it is a more labor-intensive culture than alternative cultures of the same regions, such as sugar cane or cattle, as its cultivation is not automated, requiring frequent human attention.

Coffee is a major export commodity and was the top agricultural export for 12 countries in 2004; the world's seventh-largest legal agricultural export, by value, in 2005; and "the second most valuable commodity exported by developing countries," from 1970 to circa 2000, which is frequently misstated — see coffee commodity market. Unroasted, or green, coffee beans comprise one of the most traded agricultural commodities in the world; the commodity is traded in futures contracts on many exchanges, including the New York Board of Trade, New York Mercantile Exchange, New York Intercontinental Exchange. Important trading and processing centers for coffee in Europe are Hamburg and Trieste.

At least 20 to 25 million families around the world make a living from growing coffee. With an assumed average family size of five people, more than 100 million people are dependent on coffee growing.

Global production in 2023 was 11.1 million tonnes; Brazil was the world leader in production of green coffee, followed by Vietnam, Indonesia, Colombia and Ethiopia. 51% of the world's coffee is cultivated in South and Central America, with 27% in south-east Asia and 17% in Africa. Arabica coffee beans are cultivated in Latin America, eastern Africa, Arabia, or Asia. Robusta coffee beans are grown in western and central Africa, throughout southeast Asia, and to some extent in Brazil.

Beans from different countries or regions can usually be distinguished by differences in flavor, aroma, body, acidity and girth (texture) These taste characteristics are dependent not only on the coffee's growing region, but also on genetic subspecies (varietals) and processing. Varietals are generally known by the region in which they are grown, such as Colombian, Java and Kona.

In 2016, global coffee exports were $19.4 billion. Coffee is not the second most important commercial product in the world after petroleum, but it is the second most important commercial product that is exported by developing countries. For some countries like East Timor, this is the only export item worth mentioning. Coffee sales fluctuate strongly: for example, they fell from 14 billion US dollars in 1986 to 4.9 billion US dollars in the crisis year 2001/2002. This so-called coffee crisis lasted for several years, with consequences for coffee producers worldwide.

The way coffee is prepared and consumed varies depending on culture, and manifests itself in different habits within the world. The varieties of coffee consumed vary also, with the two main varieties being Arabica and Robusta, with Arabica generally taking up most of the consumption.

According to the Composite Index of the London-based coffee export country group International Coffee Organization the monthly coffee price averages in international trade had been well above 1000 US cent/lb during the 1920s and 1980s, but then declined during the late 1990s reaching a minimum in September 2001 of just 417 US cent per lb and stayed low until 2004. The reasons for this decline included a collapse of the International Coffee Agreement of 1962–1989 with Cold War pressures, which had held the minimum coffee price at US$1.20 per pound.

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