Coffee Economics: the Role of Coffee in Economic Development

2359 Words Dec 17th, 2012 10 Pages
Coffee Economics:
The Role of Coffee in Economic Development

Contents

INTRODUCTION Purpose of Report Scope of report Definitions

Background

International Coffee Trade Price Stabilization in the Coffee Economy The International Coffee Organization International Coffee Agreements

Labor & Technology in Coffee Production

Summary & Conclusions

References

Figures & Tables

Figure 1. Map of production r: cultivation of Coffea Robusta, m: cultivation of Coffea Robusta and Coffea Arabica., a: cultivation of Coffea Arabica.

Figure 2. Green coffee bean cash and future price from 1995 - 2005 Source: Leibtag et al., 2007, p. 2

Table 1. Coffee
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(Source: Wikipedia 2008)
International Coffee Trade “Coffee price and coffee-price terminology change along the market chain.
The price that a consumer faces at a supermarket or other food retailer is termed the ‘retail price,’ the price charged by coffee manufacturers to retailers and wholesalers is the ‘manufacturer price,’ and the price of green coffee beans on commodity exchanges is the ‘commodity price’ or ‘commodity cost’.” (Leibtag et al., 2007, p. 1) Although this report deals primarily with commodity prices, it is important to note the large number of transactions that take place from grower to the final retail market. Historically, the commodity price of coffee has been extremely volatile due to both supply shocks (like poor crops, bumper crops, and new competition) and demand shocks (like changes in consumer tastes, and consumer unease regarding the health effects of coffee consumption). Figure 2 shows a clear example of the volatility of the commodity prices for coffee over a ten-year period. Figure 2 “also shows the behavior of coffee futures prices over the last 10 years from the [New York Board of Trade] NYBOT. Coffee futures indicate the expectations of market participants.” (Leibtag et al., 2007, p. 3)

[pic]
Figure 2. Green coffee bean cash and future price from 1995 - 2005 The futures prices in figure [2] are for prices 13 months in advance. Source: Leibtag et al., 2007, p. 2

Price
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