The Several Consequences Of Crisis In The Emerging Coffee Markets

The destabilizing effect of the price crisis sparks in coffee markets concern precipitating bank failures, public protests, and dramatic falls in export revenues. The consequences of the crisis in each country and region have been different according to the industry structure of the country concerned.

A region with relatively larger farms using higher amounts of additional nonfamily labor, there has been high labor displacement, as well as a worsening of poverty levels among smallholder farmers and default problems in the banking sector. The social costs, particularly for smallholder farmers, are also acute, and difficulties are aggravated at the national level due to balance of payments problems and lost revenues, jeopardizing broader government antipoverty measures.

Coffee price volatility has been a fact of life because of weather shocks and is not the sole source of the crisis. In recent years, significant structural changes in the coffee markets mean new and emerging paradigms are likely to dictate coffee’s future, which will have permanent effects on the livelihoods of the millions who depend on it. Another area of structural change is in the nature of supply in coffee markets.

The market oversupply and depth of its impact has been a shock to most participants and observers. A combination of policy and market failures left producers without access to realistic information about developments and it is unlikely that many coffee producers would have the capacity due to their limited resources, lack of viable income alternatives in many poor rural areas.