Human Biology and the Energy-Boosting Appeal of Coffee
I am a lucky person because all my relatives on my father’s side have low blood pressure even in old age. My normal blood pressure is 110/70 mm Hg. Some 2 or 3 hours after a run or a workout, it sometimes drops to 95/60 mm Hg. That is why I always thought coffee had such a good effect on me because it was raising my blood pressure. But that is not the whole point (I do not consume sugar and milk at all).
The thing is that coffee contains caffeine. And caffeine, in addition to raising blood pressure, is a light and fast-acting nootropic substance that stimulates mental activity by improving connections between brain nerve cells or neurons. There is not so much caffeine in tea. Black or green tea has no effect on me whatsoever. I drink them like water.
In addition to caffeine, other types of natural and synthetic nootropics are also available today: omega-3s, l-theanine, racetams, gingko biloba, Panax ginseng, rhodiola, creatine.
In Eastern Europe, piracetam (Nootropil, Lucetam) has been actively used for fifty years in order to improve the mental concentration of children during the educational process, for example, when taking exams (!).
It is recommended not only by local family doctors or GPs, but also by neurologists. Its effect is very similar to that of caffeine: your thinking becomes extremely clear.
As far as I know, over the period of fifty years there has been only one case of a significant side effect experienced by an individual who ate more than seventy (!) pills at once. And it was claimed that the effect was rather due to the large cumulative intake of sorbitol in those pills.
It is obvious that omega-3 acids also improve the functioning of your brain. However, it is hard for me to say how fast they act.
But the most interesting thing is that such traditional Chinese remedies as Ginkgo biloba or ginseng are also classified as nootropics. Eventually, China will have to master the cultivation of coffee, while other coffee producers will have to master the cultivation of Gingko biloba and ginseng.
It may seem that these are unfounded fantasies. However, the history of coffee suggests otherwise.
The History of Coffee Cultivation and Consumption
I think many know that the homeland of a coffee tree is Ethiopia that is located in East Africa. However, in the 15th century various coffee drinks began to gradually spread to other regions. First, they moved to Yemen. Then they moved to the Ottoman-controlled Middle East, Persia (modern Iran), India, and North Africa.
With the expansion of the Ottoman Empire’s power on the European continent, coffee drinks were becoming increasingly popular in the countries of Central Europe (Hungary, Austria), as well as in Southern Europe, first of all in Italy. Fairly soon Western European countries joined this trend. This was facilitated by the fact that many Western European countries – the Netherlands, United Kingdom, France, Spain, and Portugal – possessed large colonial empires, particularly in tropical regions. As a result, coffee began to spread in those colonies not only as a drink for everyday use, but also as a plant for commercial cultivation.
Despite the fact that the Dutch were the first who tried to commercially cultivate coffee in the Dutch East Indies, present day Indonesia, it was Brazil, a former colony of Portugal, that came to dominate the world of coffee cultivation in the 19th century and early 20th century, alongside other South and Central American countries (Colombia, Ecuador, and others).
According to the UN Food and Agricultural Organization (FAO), the global coffee harvest was around 10.8 million in 2022, split between the Arabica (60%) and Robusta (40%) variety. The total market share of South and Central American countries amounted to 50%, where Brazil was still the world’s largest producer of coffee beans with the market share of 30%.
Arabica is undoubtedly smoother and milder in taste. But Robusta has twice as much caffeine. Arabica definitely cannot wake me up. That is why I need a cup of bitter, intense Robusta espresso (without any sugar and milk!).
Asia came second in terms of production with 33%, while the homeland of coffee beans – Africa – is only in third place with 17%.
From a country perspective, the story of Vietnam, the world’s second largest coffee producer, is obviously very compelling. Coffee production became a prominent industry In Vietnam when the country was still part of French Indochina. However, the most exciting chapter of this story began in the 1980s and 1990s.
In order to stimulate economic development following the Vietnam War, the Vietnamese government allowed private businesses to operate in the agricultural sector back in 1986. In the 1990s, on the back of Vietnam’s improved relations with Western countries, the World Bank advised the Vietnamese government to develop its coffee industry since coffee was seen as a very promising export commodity that could be easily sold to rich countries in exchange for hard currency. Due to the fact that East and South-East Asian people are famously disciplined and hard-working, Vietnam was able to increase its share of the coffee market from 0.1% to 18% in just 30 years. As a result, it became the second largest coffee producer and exporter in the world (see Picture 1 below).
That is why China, which now ranks 16th in terms of production, has a potential of becoming one of the leading coffee producers if necessary.
As for coffee consumption, the producing countries consume 30% of total production. In terms of coffee imports, developed countries obviously dominate with the European Union accounting for 24% of total global imports, while the United States’ share is 16%.
The average global coffee consumption per capita is about 1.3 kg annually. However, regional consumption trends are very different. According to World Atlas, the Nordic countries are the largest consumers of coffee with Finland coming in first place (see Picture 2 below. Pardon me, Luxembourg! But we need larger countries for comparison purposes). In this country, on average, the annual coffee consumption amounts to 12 kg per capita, that is, four cups of coffee every single day. Furthermore, Finnish legislation stipulates that employees are entitled to 2 coffee breaks, from 10 to 15 minutes each, during the working day. Norway is in second place with 9.9 kg of annual coffee consumption per capita, while Iceland came third with 9 kg and Denmark is in fourth place with 8.7 kg. In general, in terms of per-capita consumption, the European countries are the largest coffee consuming countries. The only exception is Canada that came tenth.
The Irresistible Rise of Coffee Prices
As for coffee prices, the current price of Arabica coffee on the New York Mercantile Exchange is around $2.56 per pound ($5.64 = €5.28 per 1 kg), compared to $1.79 per pound ($3.95 = EUR 3.68 per 1 kg) a year ago.
At the same time, the price of Robusta coffee on the Intercontinental Exchange is around $4,376 per ton ($4.38 or €4.10 per 1 kg) rising from $2,697 per ton ($2.70 or €2.52 per 1 kg) a year ago.
In other words, prices for both varieties rose by 43% and 62% over the past year.
In a historical context, though, one should admit that today’s prices cannot be considered extreme. These were higher both in 2011, reaching $3.05 per pound (+19% compared to today’s prices); in 1997, reaching $3.15 per pound (+23%); and in 1986, reaching $2.73 per pound (+7%). Historically, Arabica coffee reached an all-time high of $3.35 per pound back in 1977 during the last major stagflation period (+31% compared to the current price) when prices for many commodities rose drastically over a short span of time. The price of Arabica coffee rose from $45 per pound in 1975 up to $335 in 1977. In other words, it grew almost 7.5 times in just 2 years.
What About Cocoa?
It is interesting to note that coffee is native to Africa. However, it is mostly cultivated in South and Central America today. In turn, cocoa is native to South and Central America, while today it is mainly cultivated in Africa (Ivory Coast, Ghana, Cameroon, Nigeria) that accounts for 67% of world cocoa production according to the UN Agricultural Organization (see Picture 3 below).
This is the result of a process called the Columbian Exchange when populations, plants, animals, minerals, and diseases were exchanged between the Old World (Europe, Africa, Asia) and the New World (North and South America) (see Picture 4 below and The Columbian Exchange: A History of Disease, Food, and Ideas”, Nathan Nunn and Nancy Qian, Journal of Economic Perspectives, Volume 24, Number 2, Spring 2010, Pages 163–188).
Human Biology and the Relaxing Appeal of Cocoa
Why do we like cocoa so much? In addition to caffeine, cocoa beans contain a significant amount of a related substance called theobromine. Theobromine is an alkaloid. Unlike caffeine, it is absorbed much slower. But, most importantly, it has a relaxing effect on our respiratory system and vascular smooth muscles. Therefore, when chocolate, that is made from cocoa beans, is claimed to be a relaxant, there is a certain degree of truth in this statement.
However, Paracelsus, the father of toxicology, insisted back in the 16th century: “In all things there is a poison, and there is nothing without a poison. It depends only upon the dose whether a poison is poison or not…”
That is why cocoa is harmful to humans in large quantities and can be the source of food poisoning. For dogs and cats, cocoa is toxic even if it is eaten in small quantities (!).
Furthermore, its relaxing effect should be used sparingly too. The thing is that theobromine might lead to improper relaxation of the lower esophageal sphincter muscle. And this is one of the main causes of acid reflux and heartburn.
The Tremendous Rise of Cocoa Prices
The price of cocoa on the Intercontinental Exchange is around $7,332 per ton ($7.33 or €6.86 per 1 kg) rising from $4,051 per ton ($4.05 or €3.79 per 1 kg) a year ago. This implies an 81% rise over the past year. Furthermore, the market price of cocoa reached its all time high of $11,878 per ton in April 2024, thus substantially exceeding the previous historical high of $4,541 reached back in 1977.
It is quite possible that if the current trend of high cocoa prices continues, it may be necessary to start growing cocoa in other parts of the world. We’ve seen this movie before, haven’t we…
Coffee and Cocoa as Investment Opportunities
There are several ways of investing in coffee and cocoa. You can certainly do it indirectly by investing, for example, in coffee retailers like Starbucks or chocolate manufacturers like Nestle. However, those companies’ stock prices are influenced by a myriad of other factors that are not directly related to coffee and cocoa.
Fortunately, new financial products are available these days. These are collateralized Exchange-Traded Commodities (ETC) that give you direct exposure to many hard (oil, natural gas, precious and industrial metals) and soft (grains, cotton, sugar, meat, and other agricultural products) commodities, including coffee and cocoa. In fact, these are just commodity exchange-traded funds (ETF). Furthermore, leveraged versions of those ETCs are available too.
For example, you can find WisdomTree Coffee ETC, WisdomTree Coffee 2x Daily Leveraged ETC, WisdomTree Coffee 3x Daily Leveraged ETC, WisdomTree Cocoa ETC and WisdomTree Coсoa 2x Daily Leveraged ETC. These are the baskets of coffee and cocoa futures that are traded on commodity exchanges. These can be used both for hedging and trading purposes.
Predicting Coffee and Cocoa Prices
When I was writing my PhD-thesis in the Netherlands, my Dutch economics professor told me his personal “coffee” story.
Back in the 1990s, a broker advised him to invest in coffee futures arguing that Brazil was experiencing a particularly fierce cold snap and a poor harvest was all but inevitable. As was predicted, coffee prices rose sharply. In fact, these nearly doubled. My professor finally was ready to “exploit” this market bubble and bought coffee futures.
And it just so happened that it coincided with the period when Vietnam began to actively export its coffee to world markets. As a result, the market price of coffee collapsed by 80%. My professor lost a lot of money. But, most importantly, his wife, after all these “investing adventures”, firmly said that she would not follow the advice of economists anymore.
