Coffee Industry and Todays Economics Demands - Term Paper Example

Running head: Coffee industry and today's economics demands Coffee industry and today's economics demands In APA Format Abstract The beginning of 1999 saw a rapid fall in the prices of coffee and the same has adversely affected the producers of coffee. Coffee is the largest imported commodity which is second only to oil. This commodity is the source of living for as many as 20 million people all around the world. There are two major types of coffee beans, namely Arabica and Robusta.

Arabica is a better brand than Robusta and is basically grown where there is high elevation and optimal climatic condition for the same to grow. This paper is going to deal with the coffee industry and its effect on the market. So this is going to involve microeconomics as well, the concept of demand and supply is also included. Coffee is more than just a drink; it has become a global commodity over the years and contributes immensely to a countries economy which produces it. "Coffee has been a valuable international trade commodity since the 1800s.

Established in 1963, the International Coffee Organization (ICO) has operated under the International Coffee Agreements of 1962, 1968, 1976, 1983, 1994 and 2001. The agreements were negotiated under the authority of the United Nations." (PBS. ORG, August 29, 2008). 2001 saw the decline of the coffee prices rapidly and coffee prices touched it's lowest in the very same year. Several factors contributed in this fall, some of them were fluctuation market, the market power was exploited by the retailers and the roasters, too much growth but very less demand, which ultimately resulted in the fall of the coffee prices.

The production was too much but the consumption was very less and the result of all this was the fall in the coffee prices. During this time Vietnam became one of the largest producer and exporters of coffee. "Economists posit that increased supply control, price regulation and fair trade initiatives could help solve the current coffee crisis. Fair trade guarantees farmers a fixed minimum price for their coffee, which can equal nearly two or three times the unsubsidized market price. Fair trade also eliminates the middlemen exporters involved in the coffee trade, who often pay farmers below market rates and then sell at the rates set by the New York Coffee Exchange, pocketing the excess money for themselves." ( PBS. ORG, August 29, 2008).

The decline of the coffee prices is the worst news for the farmers but it is not as bad news in United States of America as in any other part of the world because they are the largest consumers of coffee. The world trade organization also plays a key role in determining the price of coffee. The policies of the world trade organization supports free trade which benefits both exporters and importers but at the end who is benefited largely depends on the price of the coffee. Because of the fall in demand the price of coffee has also fallen, which is quite natural considering the demand and supply function of the microeconomics.

If there is less demand, the price of that particular commodity takes a toll and the price automatically falls. The price of coffee has taken a toll because of the decrease in demand, the only way out for the farmers and for all other people who want coffee to generate much more profit is to promote coffee and make sure that more and more people across the globe drink coffee. "Coffee industry has been and continued to be the single most important and dominant cash crop in major producing provinces, particularly, in the highlands region.

The industry is made up of about280, 000 smallholder household growers, 660 blocks ranging from 1 - 30 hectares, 65 plantations, 18 registered exporters, 51 registered processors and over 6,000 roadside buyers. Total estimated are a planted to coffee is about 87,000 hectares." (Unctad. Org. August 29, 2008). (Coffee Industry corporation limited, Retrieved on August 29, 2008 from; http://www.unctad.org/infocomm/Diversification/nadi/gimbol.PDF) The above graph shows the value of agricultural exports and coffee has always been a dominating commodity and it has always contributed immensely in the value of the agricultural exports.

Conclusion The price of coffee has fallen down over the years but it is expected to pick up in the near future as more and more people start tasting this tasty temptation, So many things have been done to promote coffee and the results will soon be in front of us all. References Coffee industry. In Unctad.org. Retrieved on August 29, 2008 from: http://www.unctad.org/infocomm/Diversification/nadi/gimbol.PDF The Economics of coffee. In Pbs.org. Retrieved on August 29, 2008 from: http://www.pbs.org/independentlens/blackgold/economics.

html Difficult times for Coffee industry. In Query.nytimes. Retrieved on August 29, 2008 from: http://query.nytimes.com/gst/fullpage.htmlres=9A05E4D71E3BF936A15752C1A9659C8B63&sec=&spon=&pagewanted=2