Coffee second only to oil? Is coffee really the second largest commodity? Mark Pendergrast investigates and finds some startling results.
In the introduction to Uncommon Grounds: The History of Coffee and How It Transformed Our World (Basic Books, 1999), I wrote: "Coffee is the second most valuable exported legal commodity on earth (after oil)." Although I pride myself on my scholarship, I did not bother providing a citation for this assertion. I just knew it was true, since so many people I had interviewed kept repeating it, and I had read it in other books and articles. But guess what? I think I was wrong, and so is everyone else who keeps repeating this myth.
Only recently did I question coffee's relative value in respect to that other black energy-producing liquid and commodities that might be worth more than I had thought. I owe this new skepticism to Josh Tewksbury, a biology professor at the University of Washington, who invited me to Seattle to give a speech about coffee. After he drafted some publicity material, including a statement about coffee-second-to-oil, some of his colleagues in the economics department objected, saying that it didn't sound right to them. So Tewksbury asked me about it. I said, "Well, it's something I wrote in my book, and everyone just knows it, but let me look into it."
So I fired off a bunch of emails, including one to Donald Schoenholt at Gillies Coffee, who usually has coffee answers, historical or current. (He is also a contributor to this magazine.) He immediately granted that it might be a myth and conducted a quick web search, which found many supposed authoritative sources that were repeating this factoid, including the U.N. Chronicle, MIT, Stanford University, public television, Global Exchange and Wikipedia.
Alan Kaiser, the director of external relations and communications at the National Coffee Association, emailed back: "There are many different sources for this information."
Ric Rhinehart, the executive director of the Special Coffee Association of America brought up the issue of better defining the question. If it was a matter of futures contracts, then "there are other commodities that have more active futures markets in aggregate dollars. Oil, aluminum, coal and wheat have all traded more actively than coffee since the mid to late 1990s."
If you are looking at the value of green coffee beans, he explained, about 135 million bags of 132 pounds each were produced in 2008, yielding around 18 million pounds. If you take an average of $1.24/1b for the beans, that's about $22 billion dollars. "Here is a place where the math gets interesting," Rhinehart wrote. All that coffee gets roasted, reducing its weight to around 14 billion pounds. Of that, roughly 70% is sold for home consumption at about $4.50/1b, yielding about $45 billion. The balance, representing a little over 4 billion pounds of roasted coffee, is sold as more expensive brewed coffee for another $45 billion or so. So, Rhinehart says, you could argue that coffee is really a $90-billion-a-year industry.
But implicit in the official figures comparing commodities is the idea that you are dealing with raw materials that are traded internationally. If you allow the $90 billion figure for coffee, you would also have to look at the cost of oil after it was turned into gas at the pump and many other products. For copper, you would have to look at the cost of copper pipes, roofing and other uses. And you would of course (in the case of coffee) be ignoring the costs of roasting, overhead, barista expenses and the like.
Jose Dauster Sette, the head of operations for the International Coffee Organization in London, responded with the latest available figures from the UN Food and Agriculture Organization. In 2006 (the latest year for FAO figures), coffee was listed by the FAO as the fourth most valuable agricultural traded commodity, as follows:
1. Wheat & flour: $49.5 billion 2. Sugar (including all products): $28.4 billion 3. Soya $16.1 billion 4. Coffee $14.2 billion 5. Cocoa $8.3 billion 6. Tea $3.7 billion
Those totals are presumably for the raw products, except for flour, which has already been processed. (On the other hand, green coffee beans have been processed, too.) Sette noted that the ICO figure for coffee for 2006 was $17.1 billion, higher than the FAO amount, and that both figures included re-exports. So statistics are clearly somewhat squishy, when they can differ by nearly $3 billion! Also, as Sette pointed out, how does one interpret "wheat and flour"? Does that include flour made from other grains? And the "sugar" figure apparently conflates cane and beet sugars.
Shortly thereafter, Alan Kaiser of the NCA got back to me with the same FAO figures and similar cautions. "On some levels," he said, "it's a semantics exercise. How do you define value? What about the social value? Do the figures take resales into account? It's not really such a black-and-white issue. You are inevitably comparing apples to oranges, so to speak."
The comparison with oil implies that we need to take into account not just agricultural products but other mineral commodities. This led me to the UN Comtrade website, which covers many different products (http://comtrade.un.org/pb/CommodityPa ges.aspx?y=2007). Sure enough, for the year 2007 (the latest available Comtrade tables), "petroleum oils and oils obtained from bituminous minerals, crude lead the pack at $1.09 trillion, while petroleum oils (non-crude) amount to $495 billion. Natural gas is $200 billion. Copper is $120 billion, not to mention an additional $38 billion listed under "copper ores and concentrates; copper mattes, copper cement." Aluminum is $116 billion, plus aluminum ores and concentrates for another $16.5 billion. Gold (non-monetary, excluding gold ores and concentrates) is $87 billion.
Eventually we get down to vegetable matter of one sort or another. The Comtrade list goes on and on. "Wheat (including spelt) and meslin, unmilled" accounts for $32.9 billion (but compare that with the FAO figure of $49.5 billion for wheat and flour in 2006). "Cotton fabrics, woven," yield $25.5 billion. Meat (not divided by type of animal) accounts for $43 billion, milk for another $31.6 billion and leather $23 billion. "Sugars, molasses and honey" draws $25 billion.
Finally, there is "coffee and coffee substitutes" for $22 billion. Subtract whatever chicory, barley and other faux coffees sell for, and you have a somewhat lesser figure for pure coffee. Not exactly number two in the world, by anyone's reckoning.
Donald Schoenholt chimed in again. He had found a footnote on page 50 of Grounds for Agreement: The Political Economy of the Coffee Commodity Chain (Rowman & Littlefield, 2004), by John M. Talbot, a sociology professor at the University of the West Indies in Jamaica. "So many people who have written about coffee have gotten it wrong," Talbot wrote. "Coffee is not the second most valuable primary commodity in world trade, as is often stated.... It is not the second most traded commodity, a nebulous formulation that occurs repeatedly in the media. Coffee is the second most valuable commodity exported by developing countries."
I subsequently got in touch with Talbot, who said that he had derived his figures from the UNCTAD (United Nations Conference on Trade and Development) Commodity Yearbook of 1988 and 1990, which carved out figures for developing countries (then called the "Third World"). Those figures for Third World exports, covering 1970-1988, showed coffee a distant second to crude oil, but well ahead of sugar in third place, cotton in fourth, then timber, copper, natural rubber and iron ore.
"The latest UNCTAD Handbook of Statistics that I have is for 2000 (reporting data for 1997-1998)," Talbot emailed, "and it shows that coffee is still the second most valuable primary commodity exported by developing countries." On the other hand, he observed, "definitive statistics on this are no longer so easy to come by.... UNCTAD used to be a great source for this kind of information when it was run by developing countries, but it has become progressively more useless as it has been taken over by developed countries and absorbed into the neoliberal agenda." At this point, I will leave this issue for others to delve into. As Schoenholt wrote, "Did I ever tell you that I hate statistics?"
Schoenholt concluded, "I do not know how this legend began, but it has been around at least since the early 1970s. This on-going apparent misstatement of fact reminds me of that line from the classic John Ford Western, The Man Who Shot Liberty Valance--'When the legend becomes fact, print the legend.'"
Jose Dauster Sette of the ICO observed that it really doesn't matter whether coffee is second or 50th in world rank. "Whatever the relative ranking of coffee in the international trade of commodities," he emailed, "we believe it is more relevant to emphasize the important social role played by coffee in the generation of rural employment and income. Here again no accurate statistics are available."
He's right. In Uncommon Grounds, I stated that "coffee provides a livelihood (of sorts) for over twenty million human beings," but it is probably a lot more than that. Ric Rhinehart thinks that "the number of people who depend on coffee for all or most of their living is in excess of 75 million. Ethiopia alone has nearly 15 million people actively involved in cultivating, harvesting, processing, transporting and commercializing coffee." Would anyone like to tackle that one?
Mark Pendergrast is the author of Uncommon Grounds: The History of Coffee and How It Transformed Our World (Basic Books, 1999). He can be reached at firstname.lastname@example.org.