Essay on Fair Trade Coffee

Coffee had lots of demand, but little supply. The country that could grow and export the most coffee had a substantial economic advantage over other countries in terms of commerce.

We can understand the relation between commodity and trade development through the study of coffee and it’s origins. Over about 90% of coffee is produced in the South, and consumed in the North. Or a long time Latin America has provided most of the world’s coffee. Coffee comes from a cherry produced by a tree that requires a warm climate without any sudden temperature shifts or frost and it needs plenty of rain. This climate is ideal for coffee between the tropics of Cancer and Capricorn. During the movement of coffee from harvest to export the first step is to separate the coffee bean from the skin and the pulp of the cherry, this results in what is called “green” coffee. Before it is exported the coffee is cleaned and sorted into lots that have different quality attributes, something like the grain elevators. The lots vary as they go from country to country based on the size, the shape shape and the deficiencies it might have or the way it is processed. At this point in the process the coffee still has it’s individual quality and value.

I watched the video “The Coffee Go-Round” which talks about how the cost of coffee seems to be dropping and as a result this has a negative impact on coffee producing countries. One of the strategies mentioned in the video is to grow different crops, this strategy isn’t so great since many of these farmers don’t have enough money to grow different crops. Another strategy mentioned is to move out of the land and go into the city, this is a good and bad option. It’s a good option since in cities there are more jobs being offered. However, it’s not such a great option because many of these farmers have lived their whole lives on their land, and moving to the city is a drastic change especially if they have a family. Lastly, another option is fair

Threat of Substitutes: There are various substitutes for fair trade coffee in the industry such as regular coffee, tea etc but not only coffees but in the general beverages market e.g. Coca Cola, Water etc. As a result of this there is a very high threat of substitutes.

According to Lyon, Bezaury, & Mutersbaugh (2010), Fair-trade is a “process which helps improve the well-being and economic stability of disempowered farmers, by using certified commodity-chains to foster development”. For the KHC company, Fair-trade is essential because they want to provide and endorse exceptional coffee beans that they are proud to use; that means, “using coffee that is good and fair for both our coffee drinkers and for farmers are essential” (Kicking Horse Coffee, n.d.). In fact, over the past 20 years, Kicking Horse won numerous awards in many categories, including Canada’s Fastest- Growing Companies, Canada’s Top Women Entrepreneurs, Canada's Favourite Fair-trade Product and number 15 Best Workplace in Canada (Kicking Horse Coffee, n.d.).

Perhaps if we open a direct line from the U.S to coffee producing farms, allowing the major companies here to choose which source they get their beans from and who produces them. Coffee is “the second largest world

The documentary Black Gold, is about the world coffee market and an Ethiopian fair trade cooperative. Ethiopia being the birthplace of coffee is the largest producer of coffee in the world, producing some of the highest quality of coffee beans in the world, like Harar, Yuban and Sidamo types of coffee. The significant problems pointed out in this documentary show what is wrong in the global trading system. Mainly, while most of us continue have our lattes and specialty coffees, the amount paid to the Ethiopian coffee farmers is so low that a lot of them have been forced to chop down some of their coffee fields and rely on other crops to help them survive. The Ethiopian people are malnourished; they have no clean water, no healthcare, and no schools for their families. As quoted in the film, “They are living hand to mouth”.

insights which have been neglected by the later literature of new growth theory and new trade

Finally, global economic issues have an immense influence on the world of coffee. Throughout history there has been a pattern that coffee producing countries are economically worse off than those that are consuming the coffee. Pendergrast mentions that “in 1950 the average income in consuming countries was three times that of coffee-growing nations. By the late 1960s it was five times great” (270). With that said, many producing coffee countries were facing endemics and malnourished peoples because workers were receiving absurdly low wages thus placing them into poverty and human suffering (271). Specifically, although 90 percent of El Salvador’s exports consisted of coffee in the 1930s, they agonized from “‘low wages, incredible filth…[under] conditions in fact not far removed from slavery’” (168). Global economic issues of these producing countries lead to dictators easily gaining power such as those in Guatemala, Nicaragua, and Honduras (170). Not only was politics a matter that resulted from global economic issues, “the high interest rates from financial institutions and price [squeezes]” lead to the economic struggle of farmers like those from Colombia due to

Assuming that the demand and supply for premium coffees are in equilibrium, the price will be at a constant, without significant pressure from the market. If Starbucks introduced the world to premium blends, this would cause a positive shift in the demand curve. There a higher equilibrium price and higher quantity when demand increases and supply remain unchanged. As prices increase, and the market moves to a new equilibrium, we will see higher wages, more advances and investments in technology and infrastructure, and greater competition. As production become more efficient and competition becomes greater, supply will increase and cause prices to settle back down. There are several factors that will impact the long-term equilibrium, such as changes in supply. For example, if a hard freeze eliminated Brazil’s premium coffee crop, this would cause a negative shift in the supply curve. Assuming demand remains constant a negative shift in the supply curve will cause quantity to decrease and equilibrium price to increase. Research shows that in 2011 a frost occurred in Brazil's southeastern coffee growing belt. Traders worried that next year's yields could be hurt. At the same time, heavy rains during harvest forced Columbia to reduce its crop estimate for 2011. Understanding the impact of problems along the supply chain and how the changes in supply

Coffee is certainly not a drink. It is a global commodity. The coffee industry hires many people around the world for its growing, processing, and trading. The coffee trade is vital in economies in less developed countries and in more developed countries. Every single way the coffee trade works in is vital to economies; from farmers, to consumers.

Stephen Quinlan and Jose Gomez-Ibanez describes, in “The Coffee Crisis”, that in 2004 the governments of coffee producing countries were considering how to respond to rapid decline to coffee prices. In 2001, coffee prices hit a forty-year low, which resulted in extreme hardships for the local farming communities. On that note, this decline in coffee prices was considered “the coffee crisis.” The coffee crisis came to be thanks in part to coffees: overproduction, under-consumption and oligopoly market

These shifts in supply and demand would influence price, quantity, and market equilibrium because of the natural disasters, shift in prices or speculation the supply of coffee decreases, which would cause a significant product shortage for consumers. Due to a shortage, consumers would to pay higher prices in order to purchase coffee and all coffee producers would then demand a higher price in order to produce more products. Higher prices are beneficial to the producers of the product, but consumer would purchase fewer products. Lower product pricing would discourage coffee production, but would benefit consumers. Both supply and demand would balance consumption, which is demand and production, which is supply.

The price of commercial coffee is controlled by the New York and London exchange markets where they decide the prices of coffee(Francis, 2006). Most of the buyers and seller that deal in the trading of coffee usually look at the New York market to make their decisions on the prices. Also the World Trade Organization is involved in controlling trade of commercial coffee, but these decisions and the way stuff is traded is controlled by developed nation and small undeveloped countries in Africa have to say or voice in

In such circumstances, free trade is clearly not a balanced trade, and the guarantees that Fair Trade label offers coffee producers; $1.26 per pound (Fair Trade Advocacy Office [FTAO], 2003) with an additional 10% premium for coffee which has been organically certified clearly do offer a lifeline for those potentially at risk of economic as well as physical exploitation. On top of that, such a concept as Fair Trade also pegs coffee value against the dollar, one of the more stable and globally recognised currencies, and considerably less likely to fall victim to extreme devaluation or inflation. Complications do however arise when raising the issue of remaining poor and in uncompetitive sectors, as shall be further discussed in the following paragraph; on one hand free trade can lead to unfair exchange, where as on the other hand fair trade can lead to farmers remaining in poverty due to a lack of inspiration and/or necessity to better ones existence, as long as one is able to feed the family through cultivating a patch of land less than five hectares (2003)one may be less likely to aspire to further gains, thus remaining relatively poor