Politics, Logistics and Direct Trade

The coffee market has always been susceptible to fluctuating prices. Prices ebb and flow based on global political atmosphere, supply and demand and economic stability…or instability.

Take for instance, we are likely to see coffee prices affected by Donald Trumps failed Nuclear negotiations with North Korea.

It seems completely unrelated but consider this… Investors in US Currency may feel that the USD is a riskier option now, therefore they move their investments to safer commodities…like coffee! The more this happens the more activity there is in coffee trading. Increased demand for coffee contracts leads to an increase in the price.  Whilst this is a very simplistic example, it demonstrates the workings behind the coffee market system.

But what about Quality? Doesn’t that affect the price? Good quality makes a coffee more desireable, which increases the demand for it. However, supply is always limited therefore, price goes up!

In a nutshell, coffee prices are determined by the interactions between SUPPLY and DEMAND, with quality a determining factor on the demand side of the equation. Frosts, natural disasters and economic instability can all affect the Supply side of the equation.

Today, we see Ethiopia faced with political turmoil and logistics difficulties…resulting in a strain on coffee exports. It is unlikely we will see coffee leave Nicaragua until July, which will impact roasters who are counting on those coffees.

However, by pursuing direct trade opportunities in coffee growing regions and working with the coffee farmers to match supply with demand, in terms of quality and quantity, we can mitigate these risks.

Our Green Bean Specialist Jesse and Raihaan lead this process.It’s mutually beneficial: we secure the variety of green beans our customers require, and the farmer secures our investment in their crop. The farmer now knows exactly where his product is going. They can plan their crops for the longer term and secure higher returns, allowing them to concentrate on producing quality.

Now, while external pressures such as the situation in Nicaragua may delay crops, having access to The ICT network of countries with similar flavour profiles can be a life saver.

It means roasters can devote twice as much time and energy to roasting quality to meet their customers’ needs, and we at International Coffee Traders are rolling on with our strategy that goes directly to the origin of our product, solving a problem for Our customers before it becomes critical.

While this is obviously a more extreme example, I hope it has inspired you to consider your business risks and see where you could make even the smallest improvements to safeguard your future success.