Cocoa and Coffee Today - highest price on the world market in decades!
According to an article in Market Watch updated on 22nd December 2024, cocoa was the best performing commodity of 2024, even beating bitcoin (https://www.marketwatch.com/story/cocoas-the-best-performing-commodity-in-2024-and-even-beat-bitcoin-whats-next-b8daf55d?fbclid=IwZXh0bgNhZW0CMTEAAR1NXJIyij0Y1l7eH-OK5KTUfWmdU7NsIk9NBLkn2JyTXHvxUHSlhXXut1U_aem_xg5B1pKTCJCG3PdyJ-1Y7g&sfnsn=wa) increasing by almost 200% in price in 2024, whereas bitcoin's increase in value in the same period was about 151%...by the way, the closing price of bitcoin in 2024 was about USD124,000/unit. The value of cocoa beans on the world market reached an all time high of USD12, 931/tonne on 18th December, 2024.
In October 2024, the highest recorded price for Robusta coffee futures on the global market was US$5,003 per tonne, observed on 15th October, 2024. By comparison, in October 2024, Arabica coffee prices reached a peak of approximately US$6.102 per kilogram. This translates to about US$6,102 per tonne. This surge was influenced by factors such as adverse weather conditions in major coffee-producing regions and supply chain disruptions. Coffee beans on the world market had its highest increase in price in 10 years according to the Global Coffee Report in its November 2024 edition https://www.gcrmag.com/whats-causing-coffee-market-volatility/).
My concern is that Trinidad and Tobago is not prepared, nor is it preparing to capitalise on the increased prices and high global demand for cocoa and coffee. My understanding is that our local production of cocoa is about an average of 150 tonnes /hectare, compared with about an average of 2,000 tonnes/ hectare in South America. Total production per year in T&T is perhaps less than 500 tonnes/year. There are many reasons for this poor state of affairs, all rather depressing, perhaps I will deal with these at another time.
My main concern is for local coffee production and the lack thereof. Below is a summary of a recent post on my other blog (https://cafevegatt.blogspot.com/) that outlines an opportunity for increasing local Robusta coffee production in T&T.
Trend in Robusta Coffee Prices Over the Past Decade
The price of Robusta coffee on the global market has experienced notable fluctuations over the past 10 years, driven by a combination of climatic, economic, and agricultural factors. Here’s a summary of the key trends:
1. Periods of Stability and Growth
Early 2010s to Mid-2010s: Robusta prices remained relatively stable, supported by consistent production from major producers like Vietnam and Indonesia.
2016–2017: Prices peaked due to lower global stock levels caused by adverse weather in Vietnam, the world’s largest Robusta producer. This period marked a temporary supply shock.
2. Decline and Recovery
2018–2020: Prices fell as global stocks recovered and production in key regions stabilized. This decline was further exacerbated by subdued demand during the COVID-19 pandemic's early phase.
Late 2020: As the world emerged from pandemic-induced lockdowns, Robusta prices began to rise again, driven by increasing demand for instant coffee, which primarily uses Robusta beans.
3. Recent Surge in Prices (2021–2024)
2021: Severe frosts in Brazil and erratic weather patterns in Vietnam led to reduced output, driving prices higher. Supply chain disruptions and rising shipping costs further exacerbated the price hikes.
2023–2024: Persistent weather issues, including drought in Vietnam and shifts in agricultural practices (such as the replacement of coffee trees with durian crops), have significantly reduced Robusta supply. Reports from Vietnam suggest domestic stocks are now completely depleted.
Key Drivers of the Trend
Weather Extremes: Unfavorable climatic conditions in major producing regions like Vietnam and Brazil have repeatedly disrupted production.
Land Use Changes: Vietnamese farmers are shifting away from Robusta coffee cultivation to more lucrative crops like durian, tightening supply further.
Rising Demand: The global demand for instant coffee and lower-cost alternatives to Arabica has sustained upward pressure on prices.
Logistical Challenges: Recent geopolitical disruptions, such as delays in the Suez Canal, have added to costs, indirectly impacting prices.
Outlook
With demand continuing to outpace supply and climate-related risks persisting, the upward trend in Robusta coffee prices is likely to continue in the near term. However, long-term stabilization will depend on improved farming practices, better supply chain management, and addressing climate challenges in key producing regions.
Historically T&T used to produce tonnes of coffee for export to the north. The abandonment and eradication of old coffee estates and the lack of interest in local coffee production by the local agencies entrusted with national agricultural development over the past 3 decades, are key obstacles to increasing coffee production. In comparison, there have been significant efforts in revitalising the cocoa industry over the same time period, by State agencies and others, but those efforts have not resulted in any significant improvement in cocoa production. So what is really the problem? Don't we have enough bright and motivated people in this country to get things right? Perhaps this needs another post as well.