Musings on a coffee world that is shifting fast

THE GLOBAL COFFEE LANDSCAPE IS CHANGING MORE QUICKLY AND MORE QUIETLY THAN MOST PEOPLE REALISE. COFFEE STILL FEELS ABUNDANT, YET FOR THE FIRST TIME IN HISTORY THE WORLD IS DRINKING MORE COFFEE THAN IT IS PRODUCING. THIS SHIFT IS ALREADY SHAPING HOW COFFEE IS GROWN, TRADED AND CONSUMED, AND IT SIGNALS DEEPER MOVEMENTS TAKING PLACE ACROSS THE GLOBAL COFFEE INDUSTRY.

A SURGE IN DEMAND ACROSS ASIA AND BEYOND

ACROSS ASIA, COFFEE CULTURE IS EXPANDING AT REMARKABLE SPEED. REGIONS LONG ASSOCIATED WITH TEA ARE EMBRACING COFFEE MORE EACH YEAR. CHINA IS THE CLEAREST EXAMPLE, WITH LUCKIN COFFEE NOW OPERATING MORE THAN TWENTY FIVE THOUSAND STORES. THE UNITED STATES HAS ALSO SEEN A NOTABLE RISE IN COFFEE CONSUMPTION OVER THE PAST TWO YEARS.

MANY COFFEE PRODUCING COUNTRIES ARE DRINKING MORE OF THEIR OWN COFFEE, WHICH REDUCES THE VOLUME AVAILABLE FOR EXPORT. MORE PEOPLE AROUND THE WORLD ARE SEEKING QUALITY SPECIALTY COFFEE, WHILE FEWER EXPORT READY BEANS ARE ENTERING GLOBAL MARKETS.

CLIMATE PRESSURE ON ARABICA PRODUCING REGIONS

CLIMATE VOLATILITY IS ADDING PRESSURE TO THIS NEW BALANCE. BRAZIL, THE LARGEST PRODUCER OF ARABICA COFFEE, HAS FACED DROUGHT, FROST AND EXTREME HEAT IN RECENT SEASONS. THIS YEAR'S HARVEST CAME IN WELL BELOW EXPECTATIONS, AND HIGH TEMPERATURES DURING CHERRY DEVELOPMENT MAY AFFECT THE TWO THOUSAND AND TWENTY SIX CROP.

WHEN A PRODUCER OF BRAZIL'S SCALE STRUGGLES, THE EFFECT RUNS THROUGH THE ENTIRE SPECIALTY MARKET. LOWER YIELDS MAKE CONSISTENT SOURCING MORE DIFFICULT, AND GLOBAL PRICES BECOME MORE SENSITIVE TO EVERY CHANGE IN WEATHER OR OUTPUT.

WHAT THIS MEANS FOR THE PRICE OF A CUP

PRESSURES LIKE THESE HAVE ALREADY LED TO HIGHER COSTS. COFFEE PRICES HAVE RISEN BY AROUND FOURTEEN PER CENT THIS YEAR, EVEN THOUGH GREEN COFFEE OFTEN REPRESENTS ONLY A SMALL PORTION OF THE TOTAL COST OF A CUP.

CAFES AND ROASTERS IN AUSTRALIA HAVE ABSORBED MUCH OF THIS INCREASE WHILE OTHER INPUTS CONTINUE TO RISE INCLUDING MILK, LABOUR, RENT, PACKAGING AND FREIGHT. EVEN SO, AUSTRALIA STILL ENJOYS SOME OF THE MOST AFFORDABLE SPECIALTY COFFEE IN THE WORLD, WITH AN AVERAGE PRICE AROUND FIVE DOLLARS COMPARED WITH HIGHER AVERAGES ACROSS EUROPE AND THE UNITED STATES.

THE CONSTANT MEDIA FOCUS ON COFFEE PRICES HAS ADDED ANOTHER LAYER. EACH MONTH BRINGS NEW HEADLINES ABOUT THE COST OF A FLAT WHITE, OFTEN FOLLOWED BY COMMENTARY FROM ROASTERS AND INDUSTRY FIGURES INTERPRETING MARKET MOVEMENTS. SOME OF THESE INSIGHTS ARE INFORMED, OTHERS LESS SO, AND MUCH OF THE NOISE CAN DISTRACT FROM THE UNDERLYING REALITY. THE GLOBAL COFFEE MARKET IS ENTERING A PERIOD OF GENUINE SUPPLY AND DEMAND PRESSURE, AND SHORT TERM PRICE DISCUSSIONS CAPTURE ONLY PART OF THE STORY.

WHY AUSTRALIAN GROWN COFFEE MATTERS RIGHT NOW

AUSTRALIAN GROWN COFFEE SITS OUTSIDE THE GLOBAL C MARKET, WHICH MEANS IT IS NOT DIRECTLY SHAPED BY THE VOLATILITY OF INTERNATIONAL COMMODITY PRICING. LOCAL PRODUCTION IS INFLUENCED MORE BY SEASONAL CONDITIONS AND FARMING COSTS THAN BY SPECULATION OR WEATHER EVENTS OVERSEAS.

LOCAL COFFEE PRODUCTION ALSO BRINGS GREATER CONTROL OVER QUALITY, TRACEABILITY AND FRESHNESS. COFFEE DOES NOT NEED TO CROSS OCEANS OR RELY ON UNPREDICTABLE SHIPPING ROUTES. DELIVERY WINDOWS ARE MORE CONSISTENT, AND THE RELATIONSHIP BETWEEN GROWING AND ROASTING IS FAR MORE DIRECT.

IN A GLOBAL MARKET WHERE HIGH QUALITY ARABICA IS BECOMING HARDER TO SOURCE, THIS LEVEL OF LOCAL STABILITY AND CONTROL IS SIGNIFICANT.

A REFLECTION ON LOCALISM

THERE IS ALSO A WIDER PHILOSOPHICAL VIEW WORTH CONSIDERING. MANY INDUSTRIES ARE DISCOVERING THE LIMITS OF TOTAL RELIANCE ON GLOBAL SUPPLY CHAINS. SYSTEMS THAT STRETCH ACROSS CONTINENTS FUNCTION WELL IN STABLE CONDITIONS, BUT THEY ARE FRAGILE WHEN DISRUPTED.

LOCALISM IS NOT A RETREAT FROM THE WORLD. IT IS A REBALANCING. A RECOGNITION THAT STRONG LOCAL PRODUCTION CAN SUPPORT AND COMPLEMENT GLOBAL TRADE WITHOUT REPLACING IT. NO ONE EXPECTS AUSTRALIAN GROWN COFFEE TO SUBSTITUTE THE NEED FOR IMPORTED COFFEE, NOR WOULD ANYONE WANT TO REMOVE ACCESS TO THE FLAVOURS AND STORIES OF OTHER COFFEE ORIGINS. DIVERSITY OF ORIGIN IS ONE OF THE GREAT JOYS OF COFFEE.

BUT THERE IS ROOM FOR AUSTRALIA TO PLAY A LARGER, MORE MEANINGFUL ROLE. LOCAL COFFEE CAN OFFER RELIABILITY, TRACEABILITY AND QUALITY THAT IS NOT SUBJECT TO WORLD MARKET SWINGS. AS THE GLOBAL COFFEE INDUSTRY CONTINUES TO SHIFT, THE VALUE OF THIS BALANCE WILL ONLY INCREASE.

A GROWING OPPORTUNITY FOR AUSTRALIA

THE AUSTRALIAN COFFEE INDUSTRY REMAINS HUMBLE IN SCALE, BUT ITS POTENTIAL IS BECOMING CLEARER EACH YEAR. AS GLOBAL SUPPLY TIGHTENS AND CLIMATE PRESSURE INTENSIFIES, REGIONS THAT CAN PRODUCE CLEAN AND TRACEABLE SPECIALTY COFFEE CLOSE TO HOME WILL BECOME INCREASINGLY IMPORTANT.

LOCAL COFFEE MAY NEVER BE THE ENTIRE ANSWER, BUT IT CAN BE A STEADY, RELIABLE PART OF AUSTRALIA'S COFFEE FUTURE. A FOUNDATION THAT SUPPORTS ROASTERS, CAFES AND DRINKERS THROUGH A PERIOD OF GLOBAL CHANGE.