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Commodity
COFFEE
Description | Overview | History | Cultivation pattern | Grading | Coffee producing countries | Indian coffee market | Major trading centers | Contract specifications
Description

Coffee plant is a shrub, which is a native to Africa and southern Asia, and whose seeds are used in preparing a sweet smelling drink which itself is known by the name of the plant itself. It is a bushy, evergreen plant is cultivated in the areas that lie in the tropical and semi-tropical belt ranging from 25 degrees north to 25 degrees south of the equator. Winter frost acts as a hindrance in the growth of this shrub. That is why it is generally found at places that are at heights.

Coffee belongs to the genus ‘Coffea’. Its seeds are dried, roasted and then grinded to make coffee powder, which again is used to make coffee drink

Overview

Coffee is a world famous beverage and it is widely drunk in almost every part of the world. The seeds from which this drink is made are actually seeds of the fruit borne by the coffee plant and are called ‘beans’ in trading terms. These coffee beans stand at the 3rd place in the list of legally traded products in the world and are considered to be a very important commodity in terms of trading.

The world’s total production of coffee is around 6 million tons and is leaded by Brazil which has more than 30% share in the world’s total production. Vietnam and Columbia follow Brazil regarding production respectively. The major consuming and importing countries of coffee are

  • United States

  • Canada

  • Japan,

European countries like

  • Germany

  • Italy

  • United kingdom

  • Poland

  • Spain

Other than the above mentioned countries it is also imported by the African countries. The net imports of coffee figures around 4.5 million tons. The export scenario is that the major share of exports in the world is also held by Brazil and is followed by the other leading production countries.

There are around 25 varities of coffee under ‘Coffea’ known to the world. But two of these varieties are very much popular and are widely used throughout the world. These are coffea arabica and coffea canephora (or coffea robusta). Commercially too, only these types are traded in the various commodity markets. Around 70% of the coffee production is constituted by coffea arabica and 25% by coffea robusta.

Coffea arabica is largely produced by brazil and columbia is said to be of best quality. Some of the popular sub-varieties of this type of coffee are Typica, Bourbon, Caturra, Mundo Novo, Tico etc.

Coffea robusta is cultivated in the areas of West and Central Africa, Southeast Asia, South America including Brazil. It is said to be a more economical variety of coffee as compared to the other one as it can be grown on moist lands having low altitudes. And also it is harvested 3-4 times a year that leads to a higher production level and lower cost level.

 

History

The history of the origination of coffee is quite interesting and has got many legends behind it. It is said that the coffee plant grew naturally in some areas of Ethiopia and was first observed by a sheepherder when his sheep ate the coffee fruit and became hyperactive. He then consumed the fruit himself. The plant was later taken to Arabia and there it became so popular that people there started relating it to their religious sentiments and made it monopolized. After year 1600, it started reaching the nearby countries like India through smuggling practices. The Turks first adopted coffee as a drink.

This is how coffee was popularized as a drink in the rest of the world and people started planting coffee as a crop.

 

Cultivation pattern

As mentioned above, coffee crop is cultivated in the semi tropical areas of the world having a good amount of rainfall. Coffee plant grows to a height of about 3 metres and its commercial life is around 50 to 60 years. The fruits start to grow in 3 to 5 years of time and take 9 months to ripe. Harvesting of coffee is done by either by hand picking process or by stripping process or by mechanical process. The harvesting periods of various coffee producing countries are different as it is harvested during the dry season. The harvesting time of the coffee crop in different countries are: -
  • Brazil – March to October
  • Columbia – October to February and April to June
  • Mexico – November to January and August to November
  • India – November to February
  • Guatemala – October to January
  • Ethiopia – August to January

Processing

After the fruits are harvested from the coffee plants, the soft flesh of the fruit is removed and the seeds undergo the following processes: -

  1. Firstly the seeds are fermented in water from 10 to 36 hours.

  2. Washing of seeds is done after fermentation.

  3. Seeds are then dried in the sun.

  4. Then finally the seeds are roasted at around 200°C

Grading of coffee



Coffee beans are graded on the basis of various factors. The most important of all factors are the size of beans and the level of imperfections. These grades are described below: -

  1. Specialty grade – This grade has no primary defect and it is selected keeping in mind a specified size with 5% variation. The beans in this classification show 1 or more different characteristic in either of these – taste, acidity, or size. No Quakers are allowed in this grade and a limit of 0 to 3 full defects.

  2. Premium grade – This grade is the same as above except regarding the Quakers and full defects. In this, 3 Quakers and 0-8 full defects are allowed at maximum.

  3. Exchange grade – Quaker limit is 5 at maximum in this grade and 9 to 23 full defects are allowed.

  4. Standard grade – A limit of 24 – 86 full defects is allowed . Off grade – If the beans contain more than 86 full defects, it is called off grade.

Coffee producing countries
 
  • Brazil (33.16% share)
  • Columbia (11.65% share)
  • Vietnam (10.61% share)
  • Indonesia (5.97% share)
  • Mexico (4.59% share)
  • India (4.60% share)
  • Guatemala (rest of the countries have around 28% share)
  • Ethiopia
  • Uganda
  • Honduras
  • Cote d’Ivoire
  • Costa Rica
  • Peru
  • Papua New Guinea
  • Puerto Rico
  • Castalia

The world production of coffee is around 6 million tons annually. Including the above-mentioned countries coffee is produced in 70 countries of the world. The top three producing countries account for over 50% of the total production and hence control the world coffee market. The level of production of these countries is on a declining stage except for Columbia, Uganda and Peru.

Production of coffee in India

The traditional coffee producing areas in India are: -

  • Karnataka – Chikmagalur, Coorg including Mysore, Hassan districts

  • Tami Nadu – Pulneys, Nilgiris, Shevroys (Salem), Anamalais (Coimbatore)

  • Kerala – Wyanad, Travancore, Nelliampathies

The non-traditional coffee producing regions in India are: -

  • Andhra Pradesh

  • Orissa

  • Assam

  • Manipur

  • Meghalaya

  • Mizoram

  • Tripura

  • Nagaland

  • Arunachal Pradesh

  India stands at the 6th position in the list of coffee producing countries. The production of coffee in India fell drastically in 2002-03 like in the other countries of the world. But it has started recovering from that downfall and the production increased slightly in 2003-04. The areas having a good altitude are indulged in cultivating coffea arabica and the low-lying areas having a hot climate cultivate coffea robusta. Robusta coffee production contributes to about 62-65% of the total coffee production whereas Arabica contributes to 35-38%. Karnataka has the maximum cultivated area i.e. 53%.

Indian coffee market

Though India just contributes a mere 4% share in the world’s coffee contribution but still Indian coffee is considered to be one of the most stimulating coffee in the world. India is indulged in producing coffee that is mild in nature i.e. having a low acid content. Most of the coffee grown in India is cultivated under shade. India’s production stands at around 3 lakh tons annually and around 70% of the total production of coffee is exported i.e. around 210000 tons. The countries, which import coffee from India, are: -
  • Italy
  • Russia
  • Germany
  • Belgium
  • Spain
  • Slovenia
  • France
  • Finland
  • Algeria

India produces some specialty types of coffee also namely: -

  1. Monsooned coffee – This coffee is very much popular in the world. Earlier when there were less resources available for transportation, the coffee from India, in transit to Europe, faced humidity and that turned the color of the coffee to pale yellow and the taste also. This was the birth of a new variety i.e. the Monsooned coffee.Even today, through out the months of monsoon, the coffee is left in an open warehouse to make it ‘monsooned’.

  2. Mysore nuggets extra bold – This type of coffee have extra large beans, greenish in color and have quite strong fragrance. Unlike the other varieties produced in India, mysore nuggets has a good acid content.

  3. Robusta Kaapi Royale - Robusta Kaapi Royale is a smooth, less acidic coffee made from Robusta Parchment AB class of coffee. The coffee beans are round in shape and grayish in color.

The Indian consumption of coffee is also increasing with time. India consumes around 30% of the total quantity produced. Before liberalization, the Coffee Board controlled coffee marketing in India but after liberalization that interference of the board was completely removed.

 

Major trading centers of coffee
 
  • New York (Coffee, Sugar and Cocoa Exchange)
  • London
  • Uganda
  • Kenya
  • Brazil (Brazilian Mercantile and Futures Exchange)
  • Singapore (Robusta coffee)

It is also traded at the Indian commodity exchanges like National Commodity & Derivatives Exchange ltd and National Multi Commodity Exchange of India ltd

Future contract specifications of coffee in various commodity exchanges
 
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