Coffee is one of the world's most traded commodities, this is second only to crude oil. Moreover, coffee exports alone account for a $20 billion industry and provide livelihood to nearly 25 million people in key coffee producing nations such as Brazil, Vietnam, Indonesia, and Colombia. There are primarily two varieties of coffee and their production in the contemporary world: Arabica and Robusta. While, Arabica is mostly produced in Latin American region; Robusta is produced in the Asian region.
Source: GAIN Report, USDA
Though Brazil continues to be the world’s largest coffee producer (both in Arabica and Robusta), other nations like Vietnam (in Robusta) and Indonesia (in Arabica) have increased their share in world coffee production over the past 5 years. Further, production in Colombia and India remains largely unchanged during the same period. A closer analysis revealed that while the harvested area in Brazil has gradually declined over the last 10 years, the same has increased for Vietnam and Indonesia. Furthermore, harvested area in India increased marginally, whereas, remained unchanged for Colombia during the same time.
Source: GAIN Report, USDA
On the productivity front, yield per hectare has shown upward trend for Brazil, Vietnam and Colombia, whereas, this has remained largely unchanged in India and Indonesia during the past 5 years. The yield in Vietnam improved significantly during the last decade and remained highest among all coffee growing nations, mainly on account of the massive replanting programme, reducing the average age of the plantation. The age of plantation plays a vital role in the productivity of the coffee plantation. The younger bushes yield more crop per hectare of plantation than old bushes.
Additionally, coffee growers or planters do not have much pricing power (being a globally traded commodity, coffee prices are determined by the market forces), ability to manage the cost of production bears a direct impact on the profitability of coffee planters. The cost of production varies with the type of coffee produced as “Arabica” which uses Wet Method to extract beans is costlier to produce whereas, “Robusta” which uses Dry Method of production is cheaper to produce. However, irrespective of the type of coffee produced or production method used, labour expenses are the biggest cost followed by fertiliser expenses. Hence, availability of cheap labour in abundance dictates profitability of coffee growers.
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