To conclude, thisessay stated that coffee market is a very sensitivemarket due to loads of factors which have an impact on coffee productions and coffee export. The mostimportant factors are climate change and price fluctuations.Overall, coffee production takes place in developing countries but consumption basicallytakes place in developed countries. However, coffee market has many challengesto deal with. The most complicated problem nowadays is a shortage of supply dueto political, economic and environmental reasons.
Political and economicreasons mean an unstable situation in producing countries especially when itcomes to government intervention. Environmental reasons, in turn, have asignificant impact on supply because to grow coffee beans need certain weatherduring the year but nowadays problem of global warming leads to large changesin weather conditions.Conclusion There are many ways to reduce or limit pricefluctuation on coffee market. The most effective way is a governmentintervention. The most striking example of it is subsidies, subsidies are avery effective way to reduce price fluctuation because the purpose of it is tohelp producer when its shortage of supply or demand. For countries which don’tproduce coffee the best way to limit price fluctuation is to increase storagecapacities and to buy coffee in advance therefore when there is a shortage ofsupply on a market, sellers don’t need to increase prices. Fluctuations in coffee market is avery important challenge for the global economy and for the economy ofparticular countries. Latest research carried out by TraideFair.
org showedtoday around125 million people worldwide depend on coffee for their livelihoods and 25million smallholder farmers produce 80% of the world’s coffee. Therefore, fluctuations in a market might have a devastatingimpact on all players and especially on small farmers. The second effect offluctuation in a market is a low demand for coffee because changes in the prices can increase ordecrease demand. Economiceffects World demand for coffee beans ispoised to hit a record this year. Global coffee consumption is expected to grow1.2% over the next year.
Coffee has also reached peak popularity in China,Japan, and Indonesia, which are expected to demand more coffee than ever. Experts believerising consumption means global production also needs to rise. Analysts predictin order to meet the growing demand productionneeds to rise by 40 to 50 million bags in the next decade.
However, 2018 will be the third year of supply shortage in the global coffee market,according to the International Coffee Organization (ICO). Due to a poor globalharvest of robusta beans,coffee pricesare rising. Bad weather caused by storms hurt robusta beanproduction by the world’s top two producers, Brazil and Vietnam.(theepochtimes.
com,2017)The interaction between demand and supply Top 10 coffee producing nations Pricesof coffee are very unstable, throughout a yearfluctuation of prices might be up to 20%. The main cause of this situation isfactors which have an influence on the coffee market. The most important factoris the weather. Therefore, if the price of coffee goes up, demand decrease.Likewise, a very important factor of supply is the cost of coffee production. According to International Coffee Organisation (ICO) figures,Brazilian natural Arabica cultivation costs are now $136.13 per 60kg bag.Labour (seasonal and fixed) costs are $84.
71 per bag, Brazilian Robustaproduction costs are $91.52 with cultivation costs of $59 (including labour at $26.36) and fertiliser at $16.21. Coffee market changesevery year and 2017 is not an exception.There are few new trends have appeared this year.
The most important is more countries have begun exporting coffee. Traditionally,global coffee production has been dominated by Brazil, Colombia and Ethiopia. While countries like Vietnam and Indonesia produce huge quantities ofcoffee, they are rare in the United States and European markets. This isexpected to change in 2017, with countries like Vietnam, Indonesia, Australia,Thailand and Taiwan exporting much morecoffee into the USA and Europe (limitlesscoffee.com, 2017). The second trend is a stronger focus on the quality of water. According to ChristopherH. Hendon and Maxwell Colonna-Dashwood Consumersare now aware of the importance of the water in their coffee.
In 2017,many consumers will expect coffee shops to use purified and filtered water. The expert team saw an increased number of companies brewing cold brewcoffee in coconut water or specialized juices.Whatdetermines supplyTop 10 coffee drinking countries Today, coffee is the most popular drink in many countries and popularity is still risingyear by year. Climatechange has a big impact on almost allaspects of our life and coffee production is notthe exception. Climate change isthreatening coffee crops in literaryevery major coffee producing region of the world. The main causes are high temperatures, long droughts punctuatedby intense rainfall, more resilient pests and plant diseases—all of which areassociated with climate change- have reduced coffee supplies dramatically inrecent years. Because coffee varieties have adapted to specific climate zones,a temperature rise of even half a degree can make a big difference.Thereis no single solution to this problem, but there are technologies andapproaches available now that can reduce global warming emissions by at least80 percent by mid-century (ucsusa.
org, 2015) Coffee has few substitutes. The mainsubstitute is black tea. Generally, tea costs less than coffee. Forexample, the most common sort of blacktea is mighty Leaf Organic Breakfast.This sort costs $65.89 per kg to compare with Sightglass El Salvador, Santa Ana, SiberiaEstate – $81.40/kg (hudin.
com, 2016). The second alternativeis green tea. An Average price of green tea is 71.53$/kg.
In last twenty years, the demand forcoffee has increased all across the world. For instance, in Russia consumptionof coffee has raised by 20% in last ten years. On average one person in Russiaconsumes 1.
71 kg per year (ntv.ru, 2016). Gdp of Russia is 1.283 trillion USD and the averageincome is 540 euro per month (gks.ru, 2016). Another striking example isFinland.
In this country, the average person consumes12 kg per year which makes Finland top 1 coffee- drinking country in the world. Gdp of Finland is 236.8 billion USD andthe average income is 3,300 euro per month.
(yle.fi,2016)What determines demand for the coffeeCoffeeis a very important good in a modern world. For some countries, it is the most profitable resource and maincommodity of export. The key date forglobal trade of coffee is 1963 when TheInternational Coffee Organization (ICO) was established.
TheInternational Coffee Organization (ICO) is the main intergovernmentalorganization for coffee, bringing together exporting and importing Governmentsto tackle the challenges facing the world coffee sector through internationalcooperation. 1963 is a starting point of international trade and also the year of thefirst agreement between members of ICO. The last agreement which acts to thisday was dated 2007. Today this organization includes 78 Membercountries as at 17 March 2017 which represent 98% of world coffeeproduction and 83% of world consumption (ico.org, 2017). Nevertheless, pricesof coffee have been unstable throughout allhistory. The peak was in 1977 when prices reached the mark of 3,500$ per pound.
The lowest mark was in 2000 prices dropped to 380$ per pound. Nowadays pricesrange between 1700- 1200$ per pound (macrotrends.net, 2017). Thisessay will examine the global coffee market, analysis of supply and demand, recenttrends and economic relations between exporting and importing countries.