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Extreme Water Shortages are Expected to Hit These Countries by 2040

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The commodity markets have taken a pounding over the last few years, but there is one invaluable commodity that is getting a higher profile these days. While you may be able to get it right out of your kitchen sink, there are many places in the world that may not be so lucky. For this reason, some have speculated that we may be on the path to peak water.

Based on recent data from the World Resources Institute, here are the countries that are expected to get hit the hardest by water shortages in the coming decades:

Water Shortage Stress Map

The report notes that more people continue to move to cities and that this can put stress on the established water supply. Combine this with growing population and consumption, and some regions will struggle more than others to replenish water when it is needed. Circumstances are also exacerbated by changing climates: some areas that are wet are becoming drier, and vice versa.

A total of 167 countries were examined for “water stress” which is considered by the report as a combination of depletion and competition for surface water. Of the nations examined, there are 33 countries that are expected to have extremely high water stress by 2040. Here’s some that will feel it the most:

Water Shortage Stress by Country

In particular, life will not get any easier in the Middle East: 14 of the 33 countries with extremely high water stress are in the region. Nine of those countries scored a five out of five for water stress: Bahrain, Kuwait, Palestine, Qatar, United Arab Emirates, Israel, Saudi Arabia, Oman and Lebanon. The Middle East relies heavily on groundwater and desalinated sea water, and such ongoing water challenges could amplify volatility in the area.

The largest economies in the world, such as the United States, China and India, will also face stress in particular regions. For example, WRI notes that the southwestern United States and China’s Ningxia province could see water stress levels rise 40% to 70%.

Here’s a previous map we have shown that covers water withdrawals and deliveries in the United States:

Water Use in the United States

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Agriculture

The Economics of Coffee in One Chart

What makes your cup of coffee possible, and how much does it really cost? Here’s how the $200B coffee supply chain breaks down economically.

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Coffeenomics-shareable-v2

Breaking Down the Economics of Coffee

What goes into your morning cup of coffee, and what makes it possible?

The obvious answer might be coffee beans, but when you start to account for additional costs, the scope of a massive $200+ billion coffee supply chain becomes clear.

From the labor of growing, exporting, and roasting the coffee plants to the materials like packaging, cups, and even stir sticks, there are many underlying costs that factor into every cup of coffee consumed.

The above graphic breaks down the costs incurred by retail coffee production for one pound of coffee, equivalent to about 15 cups of 16 ounce brewed coffee.

The Difficulty of Pricing Coffee

Measuring and averaging out a global industry is a complicated ordeal.

Not only do global coffee prices constantly fluctuate, but each country also has differences in availability, relative costs, and the final price of a finished product.

That’s why a cup of 16 oz brewed coffee in the U.S. doesn’t cost the same in the U.K., or Japan, or anywhere else in the world. Even within countries, the differences of a company’s access to wholesale beans will dictate the final price.

To counteract these discrepancies, today’s infographic above uses figures sourced from the Specialty Coffee Association which are illustrative but based on the organization’s Benchmarking Report and Coffee Price Report.

What they end up with is an estimated set price of $2.80 for a brewed cup of coffee at a specialty coffee store. Each store and indeed each country will see a different price, but that gives us the foundation to start backtracking and breaking down the total costs.

From Growing Beans to Exporting Bags

To make coffee, you must have the right conditions to grow it.

The two major types of coffee, Arabica and Robusta, are produced primarily in subequatorial countries. The plants originated in Ethiopia, were first grown in Yemen in the 1600s, then spread around the world by way of European colonialism.

Today, Brazil is far and away the largest producer and exporter of coffee, with Vietnam the only other country accounting for a double-digit percentage of global production.

CountryCoffee Production (60kg bags)Share of Global Coffee Production
Brazil64,875,00037.5%
Vietnam30,024,00017.4%
Colombia13,858,0008.0%
Indonesia9,618,0005.6%
Ethiopia7,541,0004.4%
Honduras7,328,0004.2%
India6,002,0003.5%
Uganda4,704,0002.7%
Peru4,263,0002.5%
Other24,629,00014.2%

How much money do growers make on green coffee beans? With prices constantly fluctuating each year, they can range from below $0.50/lb in 2001 to above $2.10/lb in 2011.

But if you’re looking for the money in coffee, you won’t find it at the source. Fairtrade estimates that 125 million people worldwide depend on coffee for their livelihoods, but many of them are unable to earn a reliable living from it.

Instead, one of the biggest profit margins is made by the companies exporting the coffee. In 2018 the ICO Composite price (which tracks both Arabica and Robusta coffee prices) averaged $1.09/lb, while the SCA lists exporters as charging a price of $3.24/lb for green coffee.

Roasting Economics

Roasters might be charged $3.24/lb for green coffee beans from exporters, but that’s far from the final price they pay.

First, beans have to be imported, adding shipping and importer fees that add $0.31/lb. Once the actual roasting begins, the cost of labor and certification and the inevitable losses along the way add an additional $1.86/lb before general business expenses.

By the end of it, roasters see a total illustrated cost of $8.73/lb.

Roaster Economics($/lb)
Sales Price$9.40
Total Cost$8.73
Pre-tax Profit$0.67
Taxes$0.23
Net Profit$0.44
Net Profit (%)7.1%

When it comes time for their profit margin, roasters quote a selling price of around $9.40/lb. After taxes, roasters see a net profit of roughly $0.44/lb or 7.1%.

Retail Margins

For consumers purchasing quality, roasted coffee beans directly through distributors, seeing a 1lb bag of roasted whole coffee for $14.99 and higher is standard. Retailers, however, are able to access coffee closer to the stated wholesale prices and add their own costs to the equation.

One pound of roasted coffee beans will translate into about 15 cups of 16 ounce (475 ml) brewed coffee for a store. At a price of $2.80/cup, that translates into a yield of $42.00/lb of coffee.

That doesn’t sound half bad until you start to factor in the costs. Material costs include the coffee itself, the cups and lids (often charged separately), the stir sticks and even the condiments. After all, containers of half-and-half and ground cinnamon don’t pay for themselves.

Factoring them all together equals a retail material cost of $13.00/lb. That still leaves a healthy gross profit of $29.00/lb, but running a retail store is an expensive business. Add to that the costs of operations, including labor, leasing, marketing, and administrative costs, and the total costs quickly ramp up to $35.47/lb.

In fact, when accounting for additional costs for interest and taxes, the SCA figures give retailers a net profit of $2.90/lb or 6.9%, slightly less than that of roasters.

A Massive Global Industry

Coffee production is a big industry for one reason: coffee consumption is truly a universal affair with 2.3 million cups of coffee consumed globally every minute. By total volume sales, coffee is the fourth most-consumed beverage in the world.

That makes the retail side of the market a major factor. Dominated by companies like Nestlé and Jacobs Douwe Egberts, global retail coffee sales in 2017 reached $83 billion, with an average yearly expenditure of $11 per capita globally.

Of course, some countries are bigger coffee drinkers than others. The largest global consumers by tonnage are the U.S. and Brazil (despite also being the largest producer and exporter), but per capita consumption is significantly higher in European countries like Norway and Switzerland.

The next time you sip your coffee, consider the multilayered and vast global supply chain that makes it all possible.

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Energy

Mainstream EV Adoption: 5 Speedbumps to Overcome

The pace of mainstream EV adoption has been slow, but is expected to accelerate as automakers overcome these five critical challenges.

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Mainstream EV Adoption: 5 Speedbumps to Overcome

Many would agree that a global shift to electric vehicles (EV) is an important step in achieving a carbon-free future. However, for various reasons, EVs have so far struggled to break into the mainstream, accounting for just 2.5% of global auto sales in 2019.

To understand why, this infographic from Castrol identifies the five critical challenges that EVs will need to overcome. All findings are based on a 2020 survey of 10,000 consumers, fleet managers, and industry specialists across eight significant EV markets.

The Five Challenges to EV Adoption

Cars have relied on the internal combustion engine (ICE) since the early 1900s, and as a result, the ownership experience of an EV can be much more nuanced. This results in the five critical challenges we examine below.

Challenge #1: Price

The top challenge is price, with 63% of consumers believing that EVs are beyond their current budget. Though many cheaper EV models are being introduced, ICE vehicles still have the upper hand in terms of initial affordability. Note the emphasis on “initial”, because over the long term, EVs may actually be cheaper to maintain.

Taking into account all of the running and maintenance costs of [an EV], we have already reached relative cost parity in terms of ownership.

—President, EV consultancy, U.S.

For starters, an EV drivetrain has significantly fewer moving parts than an ICE equivalent, which could result in lower repair costs. Government subsidies and the cost of electricity are other aspects to consider.

So what is the tipping price that would convince most consumers to buy an EV? According to Castrol, it differs around the world.

CountryEV Adoption Tipping Price ($)
🇯🇵 Japan$42,864
🇨🇳 China $41,910
🇩🇪 Germany$38,023
🇳🇴 Norway$36,737
🇺🇸 U.S.$35,765
🇫🇷 France$31,820
🇮🇳 India$30,572
🇬🇧 UK$29,883
Global Average$35,947

Many budget-conscious buyers also rely on the used market, in which EVs have little presence. The rapid speed of innovation is another concern, with 57% of survey respondents citing possible depreciation as a factor that prevented them from buying an EV.

Challenge #2: Charge Time

Most ICE vehicles can be refueled in a matter of minutes, but there is much more uncertainty when it comes to charging an EV.

Using a standard home charger, it takes 10-20 hours to charge a typical EV to 80%. Even with an upgraded fast charger (3-22kW power), this could still take up to 4 hours. The good news? Next-gen charging systems capable of fully charging an EV in 20 minutes are slowly becoming available around the world.

Similar to the EV adoption tipping price, Castrol has also identified a charge time tipping point—the charge time required for mainstream EV adoption.

CountryCharge Time Tipping Point (minutes)
🇮🇳 India35
🇨🇳 China34
🇺🇸 U.S.30
🇬🇧 UK30
🇳🇴 Norway29
🇩🇪 Germany29
🇯🇵 Japan29
🇫🇷 France27
Global Average31

If the industry can achieve an average 31 minute charge time, EVs could reach $224 billion in annual revenues across these eight markets alone.

Challenge #3: Range

Over 70% of consumers rank the total range of an EV as being important to them. However, today’s affordable EV models (below the average tipping price of $35,947) all have ranges that fall under 200 miles.

Traditional gas-powered vehicles, on the other hand, typically have a range between 310-620 miles. While Tesla offers several models boasting a 300+ mile range, their purchase prices are well above the average tipping price.

For the majority of consumers to consider an EV, the following range requirements will need to be met by vehicle manufacturers.

CountryRange Tipping Point (miles)
🇺🇸 U.S.321
🇳🇴 Norway315
🇨🇳 China300
🇩🇪 Germany293
🇫🇷 France289
🇯🇵 Japan283
🇬🇧 UK283
🇮🇳 India249
Global Average291

Fleet managers, those who oversee vehicles for services such as deliveries, reported a higher average EV tipping range of 341 miles.

Challenge #4: Charging Infrastructure

Charging infrastructure is the fourth most critical challenge, with 64% of consumers saying they would consider an EV if charging was convenient.

Similar to charge times, there is much uncertainty surrounding infrastructure. For example, 65% of consumers living in urban areas have a charging point within 5 miles of their home, compared to just 26% for those in rural areas.

Significant investment in public charging infrastructure will be necessary to avoid bottlenecks as more people adopt EVs. China is a leader in this regard, with billions spent on EV infrastructure projects. The result is a network of over one million charging stations, providing 82% of Chinese consumers with convenient access.

Challenge #5: Vehicle Choice

The least important challenge is increasing the variety of EV models available. This issue is unlikely to persist for long, as industry experts believe 488 unique models will exist by 2025.

Despite variety being less influential than charge times or range, designing models that appeal to various consumer niches will likely help to accelerate EV adoption. Market research will be required, however, because attitudes towards EVs vary by country.

CountryConsumers Who Believe EVs Are More Fashionable Than ICE Vehicles (%)
🇮🇳 India70%
🇨🇳 China68%
🇫🇷 France46%
🇩🇪 Germany40%
🇺🇸 UK40%
🇯🇵 Japan39%
🇺🇸 U.S.33%
🇳🇴 Norway 31%
Global Average48%

A majority of Chinese and Indian consumers view EVs more favorably than traditional ICE vehicles. This could be the result of a lower familiarity with cars in general—in 2000, for example, China had just four million cars spread across its population of over one billion.

EVs are the least alluring in the U.S. and Norway, which coincidentally have the highest GDP per capita among the eight countries surveyed. These consumers may be accustomed to a higher standard of quality as a result of their greater relative wealth.

So When Do EVs Become Mainstream?

As prices fall and capabilities improve, Castrol predicts a majority of consumers will consider buying an EV by 2024. Global mainstream adoption could take slightly longer, arriving in 2030.

Caution should be exhibited, as these estimates rely on the five critical challenges being solved in the short-term future. This hinges on a number of factors, including technological change, infrastructure investment, and a shift in consumer attitudes.

New challenges could also arise further down the road. EVs require a significant amount of minerals such as copper and lithium, and a global increase in production could put strain on the planet’s limited supply.

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