INSIGHT SPECIAL: DEbuNkING CoffEE MyTHS - Bijdendijk

COFFEE DIVISION OF ED&F MAN
July 2013
INSIGHT SPECIAL: Debunking Coffee Myths
MYTH #1
Coffee is the second most important
commodity in the world, after oil.”
There are a few statements about
coffee that come up frequently
in articles, presentations and
conversations, but just how true
are they? Volcafe CFO Paul
McNougher applies hard math
and science to these muchrepeated
lines, in an effort to
find out whether they are coffee
fact, or coffee fiction.
This statement is found in many coffee books, including the classic coffee guide,
the green Jobin. It is waning in popularity in newspaper articles, but it used to be
the favourite opening line for any broadsheet glance at our commodity.
Let’s establish some figures first. In 2012 we estimate green exports (excluding
re-exports), were 62 mio bags of arabica, and 34 mio bags of robusta. Taking the ICO’s
composite arabica price of 183 cents/lb for 2012, and robusta price of 102 cents/lb,
we get $15 billion for the value of arabica exports, and around $5 billion for robusta.
So how does $20 billion compare with other commodities?
Oil exports add up to a value to over $2000 billion, so more than 100x the value of
coffee exports. Exports of metals are on a similarly different scale to the value of the
coffee trade (iron ore exports are valued at around $150 billion).
What about comparable products to coffee? The Food and Agriculture Organization of
the UN has compiled export values (including re-exports) of agricultural commodities.
Agricultural commodity exports that outrank coffee in terms of value in 2010 include
soybeans, wheat, palm oil, wine, cheese, soybean cake, maize, natural rubber, and rice.
INSIGHT SPECIAL: Debunking Coffee Myths 1

Coffee is way down the scale – one that doesn’t even include meat - and this has not changed for thirty years. It is only when you go
back to 1980 that coffee is the second most valuable agricultural commodity export, after wheat.
The story changes when we look alone at trade from countries who are coffee producers. If you were a coffee producing nation,
it tended to be your number one agricultural export product in years gone by. Coffee always took centre-stage, hence its political
influence. It is only in recent years that it has been overtaken by palm oil and natural rubber. When we also assemble a table of
agricultural export values in the least developed countries, coffee jostles with cotton and tobacco for the top spot. Coffee is a very
important source of income for the poorest nations.
GLOBAL
2010
Agricultural
Commodity
1 Soybeans
2 Wheat
3 Palm oil
4 Wine
5 Cheese
6 Soybean Cake
7 Maize
8 Rubber Natural
9 Rice
10 Green Coffee
Exports
in billions
$39.7
$32.6
$29.9
$27.9
$23.8
$22.7
$22.7
$21.4
$19.5
$17.9
2000
Agricultural
Commodity
1 Wheat
2 Wine
3 Cheese
4 Soybeans
5 Maize
6 Green Coffee
7 Soybean Cake
8 Rice
9 Cotton Lint
10 Tobacco
Exports
in billions
$14.2
$12.7
$9.4
$9.2
$8.8
$8.5
$6.8
$6.5
$6.4
$5.7
1990
Agricultural
Commodity
1 Wheat
2 Maize
3 Cotton Lint
4 Wine
5 Sugar Raw
6 Cheese
7 Green Coffee
8 Soybeans
9 Soybean Cake
10 Sugar Refined
Exports
in billions
$16.0
$9.8
$8.4
$8.1
$7.9
$7.7
$7.0
$5.9
$5.3
$5.0
1980
Agricultural
Commodity
1 Wheat
2 Green Coffee
3 Maize
4 Sugar Raw
5 Cotton Lint
6 Soybeans
7 Rice
8 Sugar Refined
9 Wine
10 Soybean Cake
Exports
in billions
$16.8
$12.1
$12.0
$9.6
$7.8
$7.1
$5.0
$4.9
$4.4
$4.2
LEAST-DEVELOPED COUNTRIES
2010
Agricultural
Commodity
Exports
in billions
1
2
3
4
5
6
7
8
9
10
Tobacco
Green Coffee
Sesame Seed
Cotton Lint
Beans, dry
Sugar Raw
Cocoa Beans
Tea
Palm Oil
Rubber Natural
$1.4
$1.3
$0.7
$0.7
$0.5
$0.4
$0.4
$0.3
$0.3
$0.3
2000
Agricultural
Commodity
1 Green Coffee
2 Cotton Lint
3 Tobacco
4 Beans, dry
5 Sesame Seed
6 Cashew
7 Tea
8 Sugar Raw
9 Groundnut Oil
10 Rubber Natural
Exports
in billions
$0.7
$0.6
$0.4
$0.3
$0.2
$0.2
$0.2
$0.1
$0.1
$0.1
1990
Agricultural
Commodity
1 Cotton Lint
2 Green Coffee
3 Tobacco
4 Groundnut Oil
5 Tea
6 Beans, dry
7 Jute
8 Sesame Seed
9 Raisins
10 Vanilla
Exports
in billions
$0.8
$0.7
$0.3
$0.2
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
1980
Agricultural
Commodity
1 Green Coffee
2 Cotton Lint
3 Jute
4 Tobacco
5 Tea
6 Cocoa Beans
7 Raisins
8 Rubber Natural
9 Cloves
10 Sorghum
Exports
in billions
$1.6
$0.6
$0.2
$0.2
$0.1
$0.1
$0.1
$0.1
$0.1
$0.1
COFFEE-PRODUCING COUNTRIES
2010
Agricultural Exports
Commodity in billions
1 Palm oil $27.3
2 Rubber Natural $19.7
3 Green Coffee $15.6
4 Sugar Raw $12.9
5 Soybeans $12.7
6 Rice
$11.8
7 Soybean Cake $7.5
8 Cocoa Beans $6.9
9 Sugar Refined $6.7
10 Tobacco $6.4
2000
Agricultural
Commodity
1 Green Coffee
2 Palm oil
3 Rice
4 Rubber Natural
5 Bananas
6 Soybeans
7 Sugar Raw
8 Tobacco
9 Soybean Cake
10 Cocoa Beans
Exports
in billions
$7.6
$4.0
$3.7
$3.2
$2.8
$2.6
$2.5
$2.4
$2.3
$1.9
1990
Agricultural
Commodity
1 Green Coffee
2 Sugar Raw
3 Rubber Natural
4 Soybean Cake
5 Bananas
6 Palm oil
7 Cotton Lint
8 Cocoa Beans
9 Rice
10 Tobacco
Exports
in billions
$6.2
$6.0
$2.9
$2.3
$2.1
$2.0
$2.0
$2.0
$1.8
$1.7
1980
Agricultural
Commodity
1 Green Coffee
2 Sugar Raw
3 Rubber Natural
4 Cocoa Beans
5 Rice
6 Soybean Cake
7 Palm Oil
8 Cotton Lint
9 Tea
10 Tobacco
Exports
in billions
$11.1
$7.1
$4.0
$2.5
$2.0
$1.5
$1.5
$1.4
$1.3
$1.2
Source: FAO, includes re-exports
Conclusion
“Coffee is the second
most-traded commodity
in the world, after oil.”
FACT / FICTION
Coffee is certainly not the second most important commodity in terms of total value
of trade, nor has it been in the last fifty years. However, coffee trade is an extremely
important export-earner for those countries that do produce it, and for the poorest
members of that fraternity too. The “reach” of coffee earnings is generous;
this cash crop penetrates to the poorest farmers, not just large companies and
government institutions.
2 INSIGHT SPECIAL: Debunking Coffee Myths

MYTH #2
“There are 25 million coffee farmers in the world.”
Coffee is a smallholder crop. In every country except Brazil, farms of less than ten
hectares account for the majority of area under coffee. In various countries, farms
of less than one hectare are the norm – a coffee garden rather than a farm. Millions
of rural families rely on coffee for their livelihood. The number of 25 million is
frequently quoted, but it seems a touch high.
The following countries publish these official statistics:
Colombia – 560,000 farmers (mean of 1.7 ha per farmer, and 13 bags per farmer)
Uganda – 500,000 farmers (range of 0.5 to 2.5 ha per farmer, and mean of 6 bags
per farmer)
India – 280,000 farms (mean of 1.5 ha per farm, and 20 bags per farm)
Brazil – 200,000 farms (mean of 12 ha per farm, and 285 bags per farm) but 650,000
farmers
We then estimate the following number of coffee farms in Vietnam:
Vietnam – 500,000 (mean of 1.3 ha per farm, and 53 bags per farm)
For the rest of world, as we do not have the cold data, we can reverse-estimate it
using the above figures as a frame of reference. Let’s assume, conservatively, that
the average holding for one farm is 1 ha, and it produces 6 bags. That would mean
that of the 50 mio bags produced in the rest of the world, it is done on 8.3 mio farms.
In Brazil there are 650,000 registered coffee farmers compared with 200,000
registered farms. So within one farm, two spouses and perhaps an adult child are
registered as coffee farmers, on average. Let’s assume this pattern is replicated
across the coffee world, and we should at least count both spouses.
Summing the official number of farmers in Colombia, Uganda and Brazil brings us
to 1.7 mio farmers. In India and Vietnam we see 0.8 mio farms, so 1.6 mio farmers
if we assume, and count, both spouses.
For the rest of the world, we guestimate there are 8.3 mio farms, and 16.6 mio
farmers, following the same assumptions.
Conclusion
“There are 25 million
coffee farmers in the
world.”
UNDECIDED
According to our estimates, there
are less than 25 million coffee
farmers. However, it is hard to
estimate how many people are
economically dependent on the
coffee farm, and could be described
as coffee farmers. It also does not
allow for the number of people
reliant on the seasonal income
from coffee harvesting work etc.
What we can say is that along with
the first comparison of coffee
versus other traded commodities,
the investigation of this “myth”
again shows the comprehensive
reach of coffee, and its potential
to provide a livelihood to huge
numbers of people.
Thus in total we come to almost 20 mio coffee farmers.
INSIGHT SPECIAL: Debunking Coffee Myths 3

MYTH #3
“Coffee is not so good for you.”
Maybe because we’re used to delicious
things being bad for us, many people
assume that coffee is not so good for
you. What have long-term studies
observed about coffee consumption?
Cancer: Studies have observed that
coffee consumption reduces the risk
of liver cancer, mouth cancer, brain
cancer, and colorectal cancer. Current
evidence suggests that moderate coffee
drinking is not associated with increased
risk of cancer at the majority of body sites.
Cardiovascular health: Moderate coffee
consumption does not increase the risk
of coronary heart disease. It has however
been shown to have small effects on
blood pressure and cholesterol.
Neurodegenerative disorders: Studies
suggest that lifelong, regular, moderate
consumption of coffee may slow down
age-related cognitive decline, may
reduce risk of Alzheimer’s disease and
Parkinson’s disease, and may reduce
risk of strokes. The underlying neuroprotective
effects of coffee remain
unclear, and further studies are
warranted to firm up conclusions.
Type 2 diabetes: Coffee consumption is
linked to a reduced risk of developing
type 2 diabetes. It is unlikely that
caffeine is responsible for the effect.
Fluid balance: Natural caffeinated
coffee consumption does not lead to
dehydration. The mild diuretic effect
of caffeine is not strong enough to
counter-balance the fluid intake
contained in the coffee.
Mental Performance: Evidence points to
natural caffeinated coffee consumption
improving alertness and concentration.
Recent studies have shown that caffeine
is not physically addictive.
Sports performance: The European
Food Safety Authority recently stated
that caffeine consumption increases
performance in endurance (aerobic)
sports.
Pregnancy: Current recommendations
for caffeine intake during pregnancy
range from 200-300 mg/day from all
sources. A cup of natural caffeinated
coffee normally contains around 100
mg of caffeine.
Insomnia: Natural caffeinated coffee
consumed late in the evening can stop
some people falling asleep easily, but
other people are not affected at all.
Source: please see more information
from ISIC on www.coffeeandhealth.org
Conclusion
“Coffee is not so good
for you.”
FACT / FICTION
On the whole, studies have
shown that coffee is pretty good
for you, so enjoy that espresso
without guilt!
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4 INSIGHT SPECIAL: Debunking Coffee Myths
Disclaimer: Any comments or opinions in this report are not intended to be an offer to buy or sell commodities or futures
and options thereon as they merely state our views and carry no guarantee as to their accuracy. ©2013 VOLCAFE LTD.