Growing Inequality in the Coffee Global Value Chain: A Complex Network Assessment

Following the liberalization of the coffee sector, governance and power balance in the international coffee trade has changed, with associated impacts on livelihoods in producing countries, most of which are middle- and low-income countries. Drawing on trade data for the period 1995–2018, we examine the dynamics and evolution of the international green coffee market to shed light on the re-distribution of value in the coffee supply chain. Data analysis shows that, over the studied period, the green coffee trade has increased considerably while the number of countries with a relevant role in trade has decreased, so that large exporting countries cover a higher share of trade, to the detriment of small exporting countries. We analyzed various properties of the global coffee trade network to provide insight on the relative contribution of countries not only in terms of their export value but also in terms of other selected features. The green coffee trade has gone from being distributed in many traditionally coffee-producing countries to concentrating mainly on the major coffee producers, as well as in some non-producing countries. These changes in the structure of the international green coffee market have led to greater inequality between producing and importing countries.

Rhizo Coffee A Novel Fermented Coffee Product

<p>The aim of this project was to discover whether there is a market for fermented specialty coffee beverages, as the niche for fermented products is expanding, due to people becoming more health conscious and aware about their health (Mellentin, 2017). This fermented beverage could potentially be less bitter due to lower acidity levels and easier to digest then most coffees due to its lower caffeine content. The coffee product would be made from high quality Arabica coffee beans, to ensure the best possible flavour characteristics (Driftaway Coffee, 2018) and ethical sourcing and sustainable practices would be implemented during the coffees development and fermentation processes. As the specialty coffee industry is expanding globally (Lee W. , Cheong, Curran , Yu, & Liu, 2015), it brings about the opportunity to disrupt the specialty coffee market with this fermented product through the collection of evidence-based qualitative and quantitative research, to build a strong business case for its commercialisation. The key market research findings from this study show that people generally like to experiment with their coffee and are willing to try fermented coffee beverages. Qualities that the majority of respondents look for in a coffee brand are good taste and flavour, ethical sourcing of their products and the use of high-quality coffee beans. Other findings suggest that the specialty coffee industry is a very saturated market (The Register Team (TRT), 2017) and in order to stand out in this market the product needs to have a strong point of difference, a good brand and an interesting story. Good taste and high quality are two traits that seem to be the baseline for coffee products in the New Zealand specialty coffee market (Anthony, 2014). The key scientific findings are to be confirmed in subsequent laboratory trials, which will aim to validate the science in the papers by Lee, Wai Cheong , Curran, Yu, & Shao Quan, 2016b; Lee, et al., 2016c further. The results from this project have enabled the development of a business strategy that primarily targets those who earn between $50,000-$99,999 New Zealand Dollars (NZD) per annum (p.a.) in the age range between 18-34 years old. This subgroup could be expanded to those who earn $50,000+ NZD p.a. and target millennials (born between 1980 and 2000 or 18-38 years old) in future research (Goldman Sachs, 2018). In the early stages of the project if the science is validated on a small scale, capital could be raised through a crowd funding platform like Kickstarter, so that subsequent trials can continue (Kickstarter, 2018a). When the business case for the product is strong, key investors will be targeted for their assistance in future product development, verification and market validation. This strategy is a part of the business model for the project that outlines the best course of action given the current market research and scientific evidence that is available. If this project were to be successfully funded and a minimum viable product were to be developed, large scale laboratory trials could be conducted bringing the product one step closer to commercialisation. If the product were to reach this stage, it would allow specialty coffee consumers the opportunity to experience a fermented coffee beverage that uses ethical and sustainable practices and potentially contains unique flavour nuances, health benefits and less bitter compounds.</p>

Rhizo Coffee A Novel Fermented Coffee Product

<p>The aim of this project was to discover whether there is a market for fermented specialty coffee beverages, as the niche for fermented products is expanding, due to people becoming more health conscious and aware about their health (Mellentin, 2017). This fermented beverage could potentially be less bitter due to lower acidity levels and easier to digest then most coffees due to its lower caffeine content. The coffee product would be made from high quality Arabica coffee beans, to ensure the best possible flavour characteristics (Driftaway Coffee, 2018) and ethical sourcing and sustainable practices would be implemented during the coffees development and fermentation processes. As the specialty coffee industry is expanding globally (Lee W. , Cheong, Curran , Yu, & Liu, 2015), it brings about the opportunity to disrupt the specialty coffee market with this fermented product through the collection of evidence-based qualitative and quantitative research, to build a strong business case for its commercialisation. The key market research findings from this study show that people generally like to experiment with their coffee and are willing to try fermented coffee beverages. Qualities that the majority of respondents look for in a coffee brand are good taste and flavour, ethical sourcing of their products and the use of high-quality coffee beans. Other findings suggest that the specialty coffee industry is a very saturated market (The Register Team (TRT), 2017) and in order to stand out in this market the product needs to have a strong point of difference, a good brand and an interesting story. Good taste and high quality are two traits that seem to be the baseline for coffee products in the New Zealand specialty coffee market (Anthony, 2014). The key scientific findings are to be confirmed in subsequent laboratory trials, which will aim to validate the science in the papers by Lee, Wai Cheong , Curran, Yu, & Shao Quan, 2016b; Lee, et al., 2016c further. The results from this project have enabled the development of a business strategy that primarily targets those who earn between $50,000-$99,999 New Zealand Dollars (NZD) per annum (p.a.) in the age range between 18-34 years old. This subgroup could be expanded to those who earn $50,000+ NZD p.a. and target millennials (born between 1980 and 2000 or 18-38 years old) in future research (Goldman Sachs, 2018). In the early stages of the project if the science is validated on a small scale, capital could be raised through a crowd funding platform like Kickstarter, so that subsequent trials can continue (Kickstarter, 2018a). When the business case for the product is strong, key investors will be targeted for their assistance in future product development, verification and market validation. This strategy is a part of the business model for the project that outlines the best course of action given the current market research and scientific evidence that is available. If this project were to be successfully funded and a minimum viable product were to be developed, large scale laboratory trials could be conducted bringing the product one step closer to commercialisation. If the product were to reach this stage, it would allow specialty coffee consumers the opportunity to experience a fermented coffee beverage that uses ethical and sustainable practices and potentially contains unique flavour nuances, health benefits and less bitter compounds.</p>

Estimating the Market Power of Traders in the Arabica Coffee Value Chain in Lam Dong, Vietnam

Although some studies have assessed the market power of advanced degrees in Vietnam’s agricultural sector, this research only focuses on analyzing the level of market concentration through CR4 or HHI indexes. The stochastic cost frontier can estimate market power using the Lerner ratio when input price data are not available and with or without constant returns to scale. Thus, the stochastic cost frontier with a maximum likelihood approach of Kumbhakar et al. (2012) is used to assess the market power of traders in the coffee value chain in Lam Dong province, Vietnam. The estimated market power and Lerner rate results are 0.0001. This index shows that the local coffee market is a market with perfect competition. So the traders do not have market power. Thus, there is no collusion between coffee traders to lower the purchase price for farmers or increase the price for processors and exporters. An RTS ratio of 0.96 (less than one) shows that the return to scale for traders is decreasing. This number proves that the degree of competition in the local coffee market among traders is very high.

Indonesian coffee exports and its relation to global market integration

Coffee price is an important indicator that stimulates farmers to advance their welfare. Unfortunately, coffee crisis makes the farm gate price uncertain and volatile. This study aims to explore the Indonesian coffee export situation related to price risks and coffee market integration between Indonesian coffee price and international price. The time series data were the coffee price from 1987 to 2014 in Indonesian domestic market and in global trade in London. Vector Error Correction Model (VECM) approach was applied to test market integration based on Ravallion’s equation. Based on the analysis, the results of the study revealed that Indonesian coffee export performed progressively in the last decade. Export destination countries for Indonesian coffee also developed broadly. There was market integration on the Indonesian coffee market and global price in the London terminal. Although not fully, the shock in the international price was somehow felt in the Indonesian coffee market. There were sufficient shreds of evidence to conclude that the Indonesian coffee market is well integrated with the international market in the long run. The changing coffee price in Indonesia and the International market adjusted in the next three years. In short term, Indonesian coffee price was 76% influenced by international price changes, but not vice versa.JEL Classification D49; Q02; Q17

Hedging with commodity futures: evidence from the coffee market in Vietnam

In July 2018, the Vietnam Commodity Exchange (VNX) was transferred into the Mercantile Exchange of Vietnam (MXV) to hedge price risks through futures on international commodity exchanges. This research aimed to verify the efficiency of futures on ICE EU and ICE US under the perspective of hedging for Vietnamese coffee, determine optimal hedging ratios and the optimal number of each futures contract, and investigate the feasibility of introducing domestic commodity exchanges in Vietnam. Using the Vector Error Correction Model (VECM), the results show that (1) Robusta futures with expiration dates of January, March, May, and July on ICE EU are efficient hedging tools, but the adverse result is justified for Arabica futures on ICE US; (2) Robusta futures with the expiration date of January are the best in terms of risk management for Vietnamese coffee market; (3) optimal hedge ratio of Robusta futures of around 34% is much lower than ratios showed by previous researches; (4) in the short term, introducing coffee futures into the domestic commodity exchanges is still not feasible in the short term, but should be considered in the long term in Vietnam. This is the first study providing empirical evidence about the hedging role of futures contracts on ICE EU and ICE US, contributing to enrich the existing empirical evidence on the hedging role of futures for the agricultural sector.