For millions of consumers, part of the daily routine is to have a cup of coffee or more to start the day and sometimes throughout it. There are multiple coffee shops to choose from, you can buy the beans or instant, coffee products are there to help you. In the depression, there was an expression, brother or buddy can you spare a dime or enough to buy a cup of coffee. Coffee was and is still part and parcel of living in America. Have you ever wonder about why coffee and the business behind it? In a book called Coffeeland by Augustine Sedgewick published by Penguin Press, NY, 2020, the author looks at the history both good and bad of coffee.

In 1928, due to a number of planters including James Hill’s coffee mill, coffee trees covered a 1/4 of El Salvador’s arable land and employed a 1/5 of its population. Salavoran plantations generated per-acre yield 50% higher than Brazil, producing an annual coffee crop than made up of a 1/4 of the country’s GDP and 90% of its exports.

Mr. Hill had arrived in El Salvador in 1889 as a travelling salesman of fabrics from England. He eventually became a tailor and married a lady whose family owned a coffee plantation. Mr. Hill then moved to his farm and became a coffee grower. The next step was to set up a coffee mill and send beans to San Franciso.

400 years ago, coffee was only found in Yemen and controlled by a small group of merchants. The control meant coffee was available in Europe, but it was expensive and not available to the masses of people. In England, coffee and tea were available but they were both expensive because the Dutch through the Island of Java (now days we know it as Indonesia) controlled the spice markets as well as having a monopoly on tea. By 1825, the British East India Company had access to Chinese ports and flooded the British market with inexpensive Chinese tea. Britian became a tea drinking nation, and the Dutch changed Java’s production from tea to coffee.

In the 1700’s and 1800’s, European countries all had colonies around the world. The Europeans moved coffee plantings moved around the world, particularly to Central and South America. Some of the islands of the Caribbean had wonderful soil and weather for coffee plantations and soon the island of Saint-Domingue, which we know as Haiti became the world leader producer of coffee, producing half of the world’s crop. The work was done by slaves.

Haiti had a slave rebellion, and the planters left the country and some of them took residence in Brazil. By the 1830’s Brazil had over 50% of the world’s annual supply with the work of the slave trade.

In the 1880’s the slave trade in Brazil was over and the industry was in disarray because it needed to pay people to do the work and in Java a fungus affected the coffee trees. The production in Java fell from 13% of the world’s market to 5%. This left an opening for other countries who grew coffee, as well as the price of coffee increased 50%.

The largest opening was for Latin American countries to the all-important US market. During the civil war, the military gave its soldiers coffee as well in the 1820’s the US became the first world power to import coffee duty-free or free trade. The free trade in coffee was part of President James Munroe vision of a greater influence in Central and South America or what is now called the Munroe Doctrine. Coffee became a working person drink or there was a growing market in the US as well the US government could influence governments through coffee particularly infrastructure improvements, governance – to ensure US interests are safeguarded and finance – offering loans through development banks to expand coffee production.

Linking to dividend paying stocks, for every commodity, there are multiple stories behind it to be where we see it now. Most of them involve who has the largest market share, who can influence the price and over a period of years can profits be made. After that you can add in government influence, labor markets and booms and busts to shake out the industry. As an investor you need to focus on at what price does the company make money using the commodity.

There are more questions than answers, till the next time – to raising questions.