A Crisis in the World of Coffee Essay

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Coffee is the second largest export commodity in the world after oil and is exported from 52 countries in the south. The current crisis has evolved through a series of changes in the industry. Since the liberalization of the coffee market, the price volatility has amplified. The world production of coffee has risen dramatically in the past three years mainly due to the production increase in the two world leading countries Brazil and Vietnam. Vietnam has for example increased production by 1400 % between 1990 and 2000, and Brazil has contributed even more than Vietnam to the global oversupply during the past five years. Both countries also have large numbers of trees in development, which will lead to an overproduction for at least the…show more content…
These factors together have driven the price in the first months of 2002 down to a 100-year low. The global retail market value for certified sustainable coffee was in 1999/2000 around US$ 455 million. By including non-certified products, sold with a sustainability label, the figure reaches US$ 530 million. Approximately 15-18 million pounds of certified organic coffee were exported globally, and including the trade of non-certified organic coffee, the amount is 21.2 million pounds. Sustainable coffee gives a considerable price premium to the farmer. The willingness of the consumer to pay extra for products that are produced in an environmentally and/or socially sustainable way is transferred to a premium for the producer. The total world production of coffee is estimated to reach 117 million bags in 2002/2003, while the world consumption will only reach 108 millions bags. With an oversupply of 8 million bags, the future market for conventional coffee is problematic and there is a large incentive for entering niche markets (PROCAFE 2001). The US National Coffee Association considers that sustainable coffees are important niches, but does not believe that it can be applied to the whole industry (Nelson 2002). The sales of organic products in Europe are, however, increasing by 23% per year and the WTO has
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