Coffee

Coffee is one of the most important “soft” raw materials. There are two varieties of coffee that are negotiated and consumed: Arabic and robust.

The Arabica market is the largest. Coffee is used almost exclusively for human consumption.

It is one of the most popular hot drinks in the world.

Main producers, importers and exporters

The largest coffee producer is Brazil, with almost a third of world production. Other prominent coffee producers are Vietnam and Colombia. These large producers have the common peculiarity that all are located in tropical and subtropical climates, where crops grow. They are also developing countries.

Brazil is the largest producer of Arabica and also one of the most important of robust. Given the dominance of coffee production by Brazil, this market is very sensitive to the factors that affect the country’s supply. Its importance in the coffee market should not be underestimated.

Vietnam is a growing power in the international coffee trade, and is the main producer of the robust variety. The technological advances developed by some of the main producers have made the robusta coffee, cheaper and of lower quality, be grown to produce a softer coffee intended for consumption.

Given its low prices compared to higher quality Arabica coffee, robust demand may exceed demand in the future. Some of the main importing countries are developed economies, in particular the USA. UU., EU, Japan, where it is a very popular drink.

Factors affecting demand

Therefore, the factors that affect the demand of these countries can also have an effect on the markets. Coffee is harvested every year in the dry season. In the world’s largest producer, Brazil, it is necessary to take into account the effect of frost and drought, which can damage crops.

Frost mainly affects them during the summer months, during the southern winter, although they usually occur very rarely, once every five years or so. As regards the robust variety, the factors that affect the weather and the general offer in Vietnam must be taken into account

The reports published by the Foreign Agriculture Service of the US Department of Agriculture should be taken into account. UU., In particular the biannual report Café: Markets and World Trade. The news of the World Coffee Organization, the main intergovernmental organization of this raw material, should not be missed. Offers updates on the prospects for world coffee production.

Sugar

Sugar is the main crop in soft raw materials. It is basically extracted from two sources. The two main types of sugar are produced from sugarcane, which accounts for around 70% of all production, and sugar beet, with the remaining 30% on average in the last three decades.

Sugar from sugarcane is more popular than that extracted from beets. This is because it is cheaper to produce. Sugar is often used for human consumption as food, since it is the most common sweetener, as well as as a preservative.

Both cane and beet sugar have other uses. Sugar pulp can be used to feed cattle.

Another relevant use of this raw material is to make ethanol. Brazil is the world’s largest producer of ethanol from sugar. The production of sugar destined to obtain ethanol is another factor that drives its demand. In turn, this can affect the sugar market, due to the effect that aspects like this can have on demand, so it is important to take it into account.

Main producers, importers and exporters

The world’s largest sugar producers are Brazil, China, the EU and India. The four represent about half of all the sugar produced on the planet. Although most of them are manufactured from sugarcane, in the EU, it comes mostly from beets.

An important factor affecting the price of sugar in the world market is dumping. Brazil usually produces more sugar than is demanded by its internal consumption.

The excess of Brazilian production reaches the market, where a country like this can saturate the world market, imposing excessively low prices. This affects the entire planet’s market, given its high supply levels and the downward pressure that this can exert on prices.

Although it is not one of the largest producers, Thailand is one of the main exporting nations, so it is important to keep in mind the factors that may affect your supply.

In terms of global consumption and demand, large consolidated economies such as those of the EU and the US. UU. They are the main consumer nations and sugar regions. However, it is important to take into account the effect of demand on emerging markets and economies, especially those in China, India and Brazil.

In addition, the limited abandonment of conventional energy based on crude oil in favor of biological fuels has increased the popularity of alternatives to oil, such as ethanol blends. In terms of sources of data on fundamentals for sugar, one of the most important is the World Markets and Trade Sugar report published every two years by the US Department of Agriculture.

This report offers estimates on the supply and demand of sugar derived from the main producing countries, that is, Brazil.

Cotton

Cotton is a seed in the form of fiber from the cotton plant. Cotton fiber is separated from the seed through a process known as disassembly. There are different varieties of cotton that are grown in different parts of the world.

Mountain cotton is the most cultivated species. Others include the Asian, the Egyptian, the American pima and the “sea island”. The cotton seeds are also extracted from the cotton plant. Cottonseed oil is an edible oil that is processed from them.

Cotton is mostly produced in tropical and subtropical regions. Its main use corresponds to the textile sector. The main cotton producers are the United States, China, India and Pakistan. These countries represent more than two thirds of world production.

Although USA UU. It is the largest producer on the planet, it should be taken into account the increase in its production by India, which currently has that first place in the United States.

To this is added the increase in the area dedicated in the US. UU. to grow other more popular grains such as soybeans, corn and wheat.

Although the four countries mentioned above are the largest producers, some of them also register significant domestic demand from their textile factories and buy imported cotton to later export processed products, mainly to the US. UU.

That is why it is essential not to lose sight of some of the more modest producers, such as Uzbekistan and Brazil, as they could have an important impact on export markets. Having said that, it should be noted that the United States is the largest exporter of cotton, while China is the country that imports more of this raw material.

Some of the main reports that should be analyzed include the Prospects for Cotton and Wool published by the Economic Research Service of the US Department of Agriculture. UU.

In the case of these soft raw materials, the weather is an important factor that can have a great impact on demand and, therefore, on prices. An adverse weather may limit or ruin the offer of the three, while a mild climate can make it grow.

Lessons

  • It is necessary to know perfectly the main crops that make up the universe of soft raw materials.
  • As always, it is vital to be familiar with the nature and uses of crops, along with information on the largest producers and consumers, as well as who are the main importers and exporters.
  • You also have to know in what seasons these crops are produced.
  • Finally, it should be attentive to the main reports and published data.