- Countries became increasingly reliant on one another following the collapse of the Berlin Wall in 1989
- Many economists agree that the world is now undoing the process, accelerated by Covid-19 and war
- Some multinational coffee companies are integrating their supply chains, such as Nestlé’s new manufacturing facility in Mexico
LAST YEAR, in the wake of Covid-19 and Russia’s invasion of Ukraine, the Financial Times published a guide to a “deglobalising world”.
Across six areas, it outlined how the world, after a period of hyper-globalisation since the fall of the Berlin Wall in 1989, was now entering a new, localised era. In this new chapter, countries would buffer supply-chain disruptions, cut transport costs, and reduce geopolitical risk by shrugging off reliance on other nations.
“The pendulum of history is swinging away from global economic integration,” it read. “In our new, deglobalising world, countries that can leverage network power to ensure that they have enough food, fuel, and consumer demand will be best off.”
The FT wasn’t the first to pick up on the trend. Economists have been warning for years that self-sufficiency is on the rise – triggered, in part by the 2008 financial crash, but accelerated by the pandemic and, more recently, by the breakdown of relations between the West, China, and Russia.
After suffering several blows, it is believed that the carefree world of unfettered movement and free trade which characterised much of the 1990s and early 2000s is showing very real signs of disappearing.
Like all major global shifts in history, there will be winners and losers. But while it is immediately obvious which camp some sectors will fall into, the coffee industry is rather more difficult to pinpoint.

Insulating from shocks
The areas suitable for growing coffee are limited and have been since the first plants were cultivated more than 500 years ago.
During that time, coffee consumption spread across the entire globe. In fact, the majority of coffee consumed today is in countries where growing it is unfeasible, with the US, Japan, Germany, and France among the top five.
The coffee industry is therefore unavoidably linked to globalisation. It relies on transportation in containers often spanning several continents and involves input by people from all four corners of the globe. According to recent estimates by the International Coffee Organization (ICO), the total sector generates, in global terms, an annual income of $200 billion, for everyone from pickers and producers to traders, roasters, and baristas.
However, its global connectedness has also made it particularly vulnerable to shocks. For example, the war between Russia and Ukraine has directly driven up costs of production for farmers because of its impact on agrochemicals. This has led some producing countries to follow the deglobalisation trend and explore ways of reducing their external reliance.
“When the war started in Ukraine, there was a lot of discussion about fertiliser,” explains Igor Bragato, a representative of the Coffee Trading Academy. “Russia is a big supplier of fertiliser to Brazil – something like 20%. So government ministers here were taking action to increase domestic fertiliser production to anticipate an interrupted flow from Russia.”
Big coffee corporations have appeared to follow a similar line, increasingly integrating supply chains wherever possible.
In July 2022, for example, Swiss food giant Nestlé invested $340 million in a new Nescafé coffee factory in Veracruz, making Mexico its main coffee producer globally. This followed a $675 million investment to build a new beverage facility in Glendale, Arizona.
Mexico, the US, and Canada already have strong ties that were reinforced in 2020 with the formation of a trading bloc known as the United States-Mexico-Canada Agreement (USMCA).
The idea was to promote trade between the three countries and reduce their reliance on China and Russia. And Ryan Delany who runs the Coffee Trading Academy says the decision by big corporations to shift production to Mexico – and elsewhere – may well be a sign of a larger global trend playing out.
“We might have been living in a golden age of free trade before,” he says. “You could have one thing produced in China, something else produced in Cambodia, another thing in the US. The oceans were safe and you could ship products wherever. Now, we’re moving towards consolidating our supply chains – especially for key strategic resources.”

A new currency?
Although countries appear to be shedding their reliance on others, Ryan doesn’t believe coffee consumption will be adversely affected. As the pandemic and the Ukraine conflict have proved, demand for coffee tends to remain the same regardless of what is happening in the political context of the country.
Instead, he thinks that any impact of deglobalisation will concern currency and, specifically, the US dollar to which the global coffee market is tied.
“Unless things escalate to a world war three scenario of blockades, I don’t see there being any major problems,” he says. “When we think about evaluating what the price of coffee will be, the fundamentals – supply and demand – are essential to us, and then probably second to that are macroeconomics and currencies.
“If there is some kind of tension between the US, China, and Russia that’s sufficient to spark big problems, then the tendency is for the US dollar to rally because that’s the safe haven currency. People see things going wrong, so they buy US dollars, and it goes up in value. In this scenario, with the US dollar becoming expensive, then coffee becomes cheap.”
The value of the US dollar compared to the coffee-producing country’s local currency invariably has a knock-on effect.
“When the local currency appreciates in value, coffee farmers receive less money in local currency for their coffee and they will pull back on selling,” Ryan explains. “If the strength of the local currency persists, production may languish in the country.”
If the local currency depreciates against the dollar, on the other hand, it will make domestic goods relatively cheaper, leading to higher exports as foreign demand rises. At the same time, producing countries will try to export as much coffee as possible to get a lot of foreign exchange revenues for government finance.
However, according to experts, as deglobalisation gathers speed, the US dollar’s role as the world’s reserve currency is set to be challenged. Indeed, Brazil and Argentina have already opened discussions about breaking away from dollar dependence with the formation of a common currency known as the “sur”.
But while this may prevent price volatility linked to the health of the US economy, it is doubtful whether it will lead to better outcomes for coffee producers over the long term. It’s widely believed that a monetary union could actually have the effect of driving down the global price of coffee – and make farming more expensive for Brazilians in turn.
With so much uncertainty, talk of a globalised or deglobalised world means little as far as coffee farmers are concerned. So long as demand stays high and income is sustainable, the pendulum of history can be swinging whichever way it pleases. Others in the industry may hope to take a similar stand.