The Global Coffee Market: Demand and Supply Conditions

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Background Coffee has long been one of the most sought-after commodities. Spreading north from Ethiopia and Yemen, coffee first gained popularity in the Arab world as a stimulant drug that was not banned in the Quran. It arrived in Europe via the Ottoman Empire and quickly became a drug of choice not just in Europe but in the area that the European cultures colonized. Production of coffee soon spread around the world, particularly in regions colonized by the French and Spanish. As a result, it is now a global crop and one of the world`s most popular beverages. This paper will analyze the demand conditions and the supply conditions on the global coffee market at present. Demand Side Conditions In the second quarter of 2012, coffee prices fell 6.8%, as part of a broader selloff in the commodities markets. One of the factors that has led to this decline in the price of coffee is that demand is falling. Coffee has long enjoyed a reputation as a recession-proof commodity, a result of habitual consumption as a low cost per dose. When the recession hit the US in 2008-2009, consumers who could no longer afford Starbucks did not stop drinking coffee, they simply traded down to the cheaper stuff. Cui (2012) notes that in some markets, consumers reduced their coffee consumption. That this occurred in Europe challenges the idea of coffee as a recession-proof commodity, given that some of the steepest consumption declines were in the United Kingdom, Spain and Italy. One
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