There’s a good chance your day started with a cappuccino, or a cold brew, and you aren’t alone. In fact, coffee is one of the most consumed drinks on the planet, and it’s also one of the most traded commodities. According to the National Coffee Association, more than 150 million people drink coffee on a daily basis in the U.S. alone. Globally, consumption is estimated at over 2.25 billion cups per day. But before it gets to your morning cup, coffee beans travel through a complex global supply chain. Today’s illustration from Dan Zettwoch breaks down this journey into 10 distinct steps.
Coffee From Plant to Factory
There are two types of tropical plants that produce coffee, both preferring high altitudes and with production primarily based in South America, Asia, and Africa.
Coffea arabica is the more plentiful bean, with a more complex flavor and less caffeine. It’s used in most specialty and “high quality” drinks as Arabica coffee. Coffea canephora, meanwhile, has stronger and more bitter flavors. It’s also easier to grow, and is most frequently used in espressos and instant blends as Robusta coffee.
However, both types of beans undergo the same journey:
From Factory to Transport
Once the coffee berry is stripped down to green beans, it’s shipped from producing countries through a global supply network. Green coffee beans are exported and shipped around the world. In 2018 alone, 7.2 million tonnes of green coffee beans were exported, valued at $19.2 billion. Arriving primarily in the U.S. and Europe, the beans are now prepared for consumption:
Straight to Your Cup
Roasted coffee beans are almost ready for consumption, and by this stage the remaining steps can happen anywhere. For example, many factories don’t ship roasted beans until they grind it themselves. Meanwhile, cafes will grind their own beans on-site before preparing drinks. The rapid growth of coffee chains made Starbucks the second-highest-earning U.S. fast food venue. Regardless of where it happens, the final steps bring coffee straight to your cup: The world’s choice of caffeine pick-me-up is made possible by this structured and complex supply chain. Coffee isn’t just a drink, after all, it’s a business. on Both figures surpassed analyst expectations by a wide margin, and in January, the unemployment rate hit a 53-year low of 3.4%. With the recent release of February’s numbers, unemployment is now reported at a slightly higher 3.6%. A low unemployment rate is a classic sign of a strong economy. However, as this visualization shows, unemployment often reaches a cyclical low point right before a recession materializes.
Reasons for the Trend
In an interview regarding the January jobs data, U.S. Treasury Secretary Janet Yellen made a bold statement: While there’s nothing wrong with this assessment, the trend we’ve highlighted suggests that Yellen may need to backtrack in the near future. So why do recessions tend to begin after unemployment bottoms out?
The Economic Cycle
The economic cycle refers to the economy’s natural tendency to fluctuate between periods of growth and recession. This can be thought of similarly to the four seasons in a year. An economy expands (spring), reaches a peak (summer), begins to contract (fall), then hits a trough (winter). With this in mind, it’s reasonable to assume that a cyclical low in the unemployment rate (peak employment) is simply a sign that the economy has reached a high point.
Monetary Policy
During periods of low unemployment, employers may have a harder time finding workers. This forces them to offer higher wages, which can contribute to inflation. For context, consider the labor shortage that emerged following the COVID-19 pandemic. We can see that U.S. wage growth (represented by a three-month moving average) has climbed substantially, and has held above 6% since March 2022. The Federal Reserve, whose mandate is to ensure price stability, will take measures to prevent inflation from climbing too far. In practice, this involves raising interest rates, which makes borrowing more expensive and dampens economic activity. Companies are less likely to expand, reducing investment and cutting jobs. Consumers, on the other hand, reduce the amount of large purchases they make. Because of these reactions, some believe that aggressive rate hikes by the Fed can either cause a recession, or make them worse. This is supported by recent research, which found that since 1950, central banks have been unable to slow inflation without a recession occurring shortly after.
Politicians Clash With Economists
The Fed has raised interest rates at an unprecedented pace since March 2022 to combat high inflation. More recently, Fed Chairman Jerome Powell warned that interest rates could be raised even higher than originally expected if inflation continues above target. Senator Elizabeth Warren expressed concern that this would cost Americans their jobs, and ultimately, cause a recession. Powell remains committed to bringing down inflation, but with the recent failures of Silicon Valley Bank and Signature Bank, some analysts believe there could be a pause coming in interest rate hikes. Editor’s note: just after publication of this article, it was confirmed that U.S. interest rates were hiked by 25 basis points (bps) by the Federal Reserve.
