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The Dramatic Spread Of Coffee Consumption Patterns In Coffee Markets

Coffee bar chains have spread dramatically, although the relative coffee content of the final consumption experience in these outlets is extremely low. Coffee bar chains sell an ambience and a social positioning more than just good coffee.

The global coffee chain has gone through a latte revolution, where consumers can choose from hundreds of combinations of coffee variety, origin, brewing and grinding methods, flavouring, packaging, social content, and ambience. Retail coffee prices continue to rise in the specialty market, and even in the mainstream market they have not decreased nearly as much as international coffee prices have.

Roasters capture increasing profit margins. At the same time, coffee farmers receive prices below the cost of production. The global value chain for coffee is currently characterized by a coffee paradox that is nothing but a coffee boom in consuming countries and a coffee crisis in producing countries. A paradox within this paradox is that the international coffee market is soaked in coffee of low quality, while there is a dire shortage of high quality coffee and it is the latter that is generating sales growth.

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Analysis Made For Depiction Of Current Coffee Market Situation

The initial analysis was made on chronic oversupply that was facilitated by the breakdown of the International Coffee Agreement and arose from increased production in Brazil and Vietnam. Other analysts have explained the coffee crisis in terms of market power. They argue that the growing gap between the price of the raw material like the coffee bean and the final product is the result of oligopolistic rents captured by an increasingly concentrated roasting industry.

Rather than conceptualizing coffee in different markets as beans more or less roasted, we propose to treat coffee as the sum of attributes produced in different geographical locations and by different actors along the value chain. Thus market power is not only a question of market share but also one of capturing the most valuable attributes while undermining the value of the attributes that need to be purchased. If tariff barriers were removed, market access would improve. If we stopped subsidizing developed country farmers, poor farmers in the South would benefit. If technical assistance was provided, non-tariff barriers such as food safety standards would be overcome. If only trade rules were fair, poverty in the world would be reduced. If producers in the South were included in global value chains, they would learn from their buyers and upgrade. Many low-income countries have been producing and exporting tropical commodities, such as coffee, that encountered small tariff and non-tariff barriers, no competition from farmers in the North, and have been part of global value chains. They are still poor.

The Coffee Year Recognized By International Coffee Organization

The Coffee Year is recognized as being the International Coffee Organization’s accounting period of October to September. Where the coffee is harvested across this period is dealt in coffee year, as in case of the United Republic of Tanzania, the crop year is split according to the proportion harvested. Each crop year covers an overlapping 18 month period, starting in April with the Indonesian and Brazilian Robusta crops, and end in September with Central America, Colombia and Vietnam. In coffee year, long term price series are kept consistent.

The Development Of Global Coffee Market In International Trade

Coffee is produced in more than 50 developing countries and involves several million small farmers. Historically, coffee exports have been linked to several development success stories: Brazil at the end of the 19th century, Colombia and Costa Rica in the 1920s, Kenya and Côte d’Ivoire in the 1960s and early 1970s. Some of these stories have been time bound, others have provided the basis upon which further growth and diversification occurred.

International trade has indeed grown dramatically in the global economy, and trade of coffee is an important source of revenue in developing countries. These countries are estimated to generate more than thirty times revenue per capita from exports than they receive in aid since those flows are decreasing. Most low-income countries still depend heavily on exports of primary commodities which have lagged behind the growth of global income. As a result, low income countries account for only three per cent of income generated through exports in the global economy.

In the governance of the global value chain for coffee, producing countries used to play an important role. Governance is firmly in the hands of consuming country based actors in the North, especially roasters. The key issue is not that these countries are not trading, but rather that they are not gaining much from trade. In other words, these countries are stuck in a commodity problem that has made development as an elusive target. They produce similar agricultural products and labour-intensive manufactures that are flooding global markets and depressing prices.