Thursday, December 19, 2019

Agriculture terms of trade - coffee and chocolate

It is well-known that farmers get only a small fraction of the full value extracted from a coffee and cocoa bean.

This is the breakdown of the value capture from the cocoa bean supply chain.
The farmer gets just 6.6% of the total value of a chocolate sold. Ivory Coast and Ghana produce two-thirds of the global cocoa beans, but makes just $6 bn in revenues, from a global chocolate industry of $100bn. 

This is the cocoa supply chain.
This is the breakdown of the value capture from the coffee bean supply chain.

The farmer gets a mere 1 pence from a £2.50 cup of coffee! In contrast the coffee maker's profits are twenty-five fold higher!

1 comment:

Anonymous said...

Looking it another way, from the perspective of the coffee maker, the fixed costs (staff and rents) is more than 6 times the profits or the variable costs. We could also say that the variable costs are negligible and the margins are wafer thin. That seems to be a very highly leveraged and risky industry similar to aviation.