Visualizing the Economics of Coffee in One Chart
Connect with us

Agriculture

The Economics of Coffee in One Chart

Published

on

The Economics of Coffee in One Chart

Can I share this graphic?
Yes. Visualizations are free to share and post in their original form across the web—even for publishers. Please link back to this page and attribute Visual Capitalist.
When do I need a license?
Licenses are required for some commercial uses, translations, or layout modifications. You can even whitelabel our visualizations. Explore your options.
Interested in this piece?
Click here to license this visualization.

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.

Click for Comments

Agriculture

What are the Most Produced Cash Crops in Africa?

From wheat to cassavas, also known as yuca, here are the top cash crops in Africa and their share of global production.

Published

on

Cash Crops

What are the Most Produced Cash Crops in Africa?

Agriculture makes up nearly 20% of Sub-Saharan Africa’s economy—a higher percentage than any other region worldwide.

From Nigeria to the fertile land across the East African Rift Valley, the continent is home to 60% of the world’s uncultivated arable land.

Given the massive role of agriculture across the region, this infographic from Zainab Ayodimeji shows the most produced cash crops in Africa and their share of total global production.

The Top 20 Cash Crops in Africa

Cash crops, such as coffee or rice, are crops that are produced for a salable market.

With data from the Food and Agriculture Organization Corporate Statistical Database (FAOSTAT), here are the most produced cash crops in Africa:

Cash Crop
Tonnes Produced 2019
% of World Production
Cassava192.1M63%
Sugar cane97.3M5%
Maize81.9M7%
Yams72.4M97%
Rice, paddy38.8M5%
Sorghum28.6M49%
Rice, paddy (rice milled equivalent)
25.9M5%
Sweet potatoes27.9M30%
Wheat26.9M4%
Plantains26.7M64%
Potatoes26.5M7%
Fresh vegetables22.0M7%
Oil palm fruit21.9M5%
Tomatoes21.7M12%
Bananas21.5M18%
Groundnuts, with shell16.6M34%
Sugar beet14.3M5%
Onions, dry13.9M14%
Millet13.7M48%
Oranges9.8M12%

Cassava, also referred to as yuca, is the most produced cash crop by a wide margin. With nearly 200 million tonnes of it produced annually, Africa’s production of cassava makes up a majority (63%) of the global total.

While cassavas are not well known in the Western world, they feed 800 million people globally. Cassavas are an essential root vegetable that has similar uses to potatoes.

Sugar cane, maize, and yams are also significant cash crops.

Notably, Africa’s yam production is 97% of the global total. West Africa is known as the “yam belt,” covering Nigeria, Ghana, Benin, and Côte d’Ivoire. With over 60 million people across the yam belt directly or indirectly involved in its production, yam cultivation is an important component of the region’s economic vitality.

Agriculture Composition of GDP, by Region

While agriculture plays a significant role in Africa’s GDP, what role does it play across other regions around the world?

Agriculture portion of GDP, by global region

Like Sub-Saharan Africa, agriculture is a major part of South Asia’s economy. India produces nearly 24% of rice around the world, while Bangladesh produces over 7% of total global production. Meanwhile, over 14% of the global wheat supply is also produced by India.

On the other hand, agriculture makes up just 1% of North America’s GDP. The number of farms in the U.S. peaked in the 1930s and has sharply declined from almost 7 million to 2 million in 2020.

The Future of Africa’s Cash Crops

Despite Africa’s expansive agriculture sector, there remain bottlenecks to productivity.

In light of these challenges, several technological advances have the potential to improve farmers’ bottom lines. For instance, precision technology measures rainfall, soil information, and soil productivity. At the same time, remote sensing technology can provide information on weather and climate.

This, coupled with the majority of the world’s uncultivated arable land, presents a significant opportunity for cash crops going forward. By one estimate, cereal and grain production has the potential to increase threefold.

Continue Reading

Agriculture

Visualizing the World’s Loss of Forests Since the Ice-Age

How much has the world’s land use changed over the last 10,000 years, and how have forests been impacted?

Published

on

The World’s Loss of Forests Shareable

Visualizing The World’s Loss of Forests Since the Ice-Age

How much of Earth used to be covered by forests, and what portion is covered today?

The effects of deforestation on the climate are already being seen and felt, and these repercussions are expected to increase with time. That’s why more than 100 world leaders pledged to end and reverse deforestation by 2030 at the COP26 climate summit.

As today’s graphic using data from Our World in Data highlights, the world’s forests have been shrinking since the last ice age at an increasingly rapid pace.

Earth’s Surface Area: 10,000 Years Ago

To examine the deforestation situation properly, it helps to understand Earth’s total available surface area. After all, our world can feel massive when glancing at maps or globes. But of the roughly 51 billion hectares in total surface area on Earth, more than 70% is taken up by oceans.

What’s left is 14.9 billion hectares of land, not all of which is habitable. Here is how the land was allocated 10,000 years ago, after the last ice age and before the rise of human civilizations.

Uninhabitable land on Earth (10,000 years ago):

  • Barren land (19% or 2.8bn ha)—Includes deserts, salt flats, exposed rocks, and dunes
  • Glaciers (10% or 1.5bn ha)—The vast majority concentrated in Antarctica

Habitable land on Earth (10,000 years ago):

  • Forest (57% or 6bn ha)—Includes tropical, temperate, and boreal forests
  • Grassland (42% or 4.6bn ha)—Wild grassland and shrubs
  • Freshwater (1% or <510M ha)—Lakes and rivers

By 2018, forests had receded to just 4 billion hectares. What happened?

Forests and Grassland Recede for Agriculture

Once humans figured out how to cultivate plants and livestock for regular sources of food, they needed land to use.

For centuries, the loss of greenery was relatively slow. By 1800, the world had lost 700 million hectares each of forest and grassland, replaced by around 900 million hectares of land for grazing animals and 400 million hectares for crops.

But industrialization in the 1800s rapidly sped up the process.

Percentage of Habitable Land17001800190019502018
Forest52%50%48%44%38%
Grassland38%36%27%12%14%
Grazing6%9%16%31%31%
Crops3%4%8%12%15%
Freshwater1%1%1%1%1%
Urban<1%<1%<1%<1%1%

While half of Earth’s loss of forests occurred from 10,000 years ago to 1900, the other half or 1.1 billion hectares have been lost since 1900. Part of this loss, about 100 million hectares, has occurred in the more recent time period of 2000 to 2018.

The biggest culprit?

Though urban land use has rapidly grown, it still pales in comparison to the 31% of habitable land now being used for grazing livestock. Most of that land came at first from repurposed grasslands, but forests have also been cleared along the way.

Where Will Food Come From?

Countries pledging to stop deforestation have two major hurdles to solve: financial and survival.

Firstly, there are many companies, jobs, and economies that rely on producing and marketing goods made from forests, such as lumber.

But more importantly, the world’s rising use of land for crops and agriculture reflects our rapidly growing population. In 1900, the global population numbered just 1.6 billion people. By 2021, it had exceeded 7.9 billion, with hundreds of millions still affected by food shortages every day.

How do you feed so many without needing more land? Meat’s extremely large footprint makes prioritizing crops more attractive, and research into other solutions like lab-grown meat and grazing erosion prevention is ongoing.

As the effects of climate change become increasingly felt, it’s likely that countries, companies, and people will have to embrace many different solutions at once.

Continue Reading

Subscribe

Popular