The Coffee Crisis

1069 Words5 Pages
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Tamara Young

To begin, The Coffee Crisis is about an acute coffee crisis and how it threatens millions of small coffee farmers around the world and is putting economic growth, as well as social and political stability, at risk in scores of coffee producing countries in Central and South America, Africa and Asia. In 2004, the governments of coffee producing countries were considering how to respond to the dramatic decline in coffee prices caused in part by a large increase in coffee production in Brazil and Vietnam. Coffee was the main source of income for roughly 25 million farmers, mostly small land holders, in Latin America, Africa, and Asia. Coffee prices had hit 40 year lows in 2001 and had remained
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The crisis in the coffee sector continues. Its impact cannot be understated, since coffee constitutes the livelihood of an estimated 25 million families around the world. In world trade, coffee is the second leading commodity, after petroleum. The worldwide coffee market spans some 71 countries, of which 51 are significant producers and 20 are key consumers. Prices have not kept up with production costs to the extent needed to make participation in the coffee business profitable for most producers, even though the crop year 2003-2004 witnessed a worldwide decrease in production. (Central America - The Coffee Crisis: Effects and Strategies for Moving Forward, 1992) In coffee producing countries, which account for over 26% of world consumption, the situation is more diverse. In some countries, prices of coffee have fallen in local currency and consumption may therefore be stimulated. In Brazil, the largest coffee market among producing countries, the devaluation of the real has maintained prices of green coffee at pre-crisis levels. As a whole, consumption in these markets is not expected to suffer any major negative impact. The root cause of the coffee crisis can be linked to three factors: over production; under consumption; and market oligopoly. In short, these are all problems associated with the economics of coffee farming. Without resolution, they will lead to both social and environmental breakdowns. (Central America - The

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