The Coffee Crisis Essay Example for Free

The java Crisis EssayTo begin, The Coffee Crisis is about an acute coffee tree crisis and how it threatens millions of dispirited-pitched coffee farmers around the world and is set economic growth, as well as companionable and political stability, at risk in piles of coffee producing countries in Central and South the States, 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 drudgery 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 low since, resulting in real hardship for many farmers. A variety of alternative solutions had been suggested. (Gomez-Ibanez Quinlan, 2004) The International Coffee Organization was advocating change magnitude demand through programs promoti ng coffee uptake the Inter-American Development Bank supported promotion but also thought some high-cost countries should waste ones time out of coffee, while the non-governmental organization Oxfam was pushing fair trade pricing.The coffee crisis is worldwide. It is affecting farmers in Central America, South America, Africa, and Asia. spot the Arabica farmers in Costa Rica may be acquiring 40 cents per poke for their coffee cherries, the Robusta coffee farmers in Viet Nam atomic number 18 only receiving 15 cents a pound for theirs. Even the low cost producers are not benefiting from the current situation. This condition is created because the trade place does not view coffee as a true commodity. It places premiums and discounts on both coffee types and coffee grades.While both grocerys may move up and down in tandem, the arbitrage, or spread between whiz Arabica and Robusta, does not give one farmer an economic competitive advantage over another. This fact t culminations to get glossed over in most economic discussions on the coffee crisis. Many analysts believe that oversupply is at the square up of the present crisis. After the system of coffee export quotas (the International Coffee Agreement, or ICA), administered by the International Coffee Organization, collapsed in 1989, the regulation of coffee production and quality was left to each item-by-item producer country.Almost immediately following the dissolution of the agreement, excessive quantities of coffee entered international markets, prices became quite vaporizable and the overall quality of the coffee began to decline. Many of the coffee producing nations, including Mexico, were simultaneously in the process of deregulating, privatizing, and otherwise liberalizing bucolic production and national agricultural institutions. This had the effect of exacerbating the uncertainties faced by coffee farmers at the end of the 1980s. The coffee crisis is structural.It was not caused by the cycl ical nature of coffee agriculture that has produced the boom-bust cycles of the past. The change in the market place has been brought about by the concentration of buying power in the hands of a some firms that present coffee to the consumer as a blended and branded product, void of any links to type and grade. This has led to intense price competition for market share that has rewarded increased market share to low cost products in the petty run at the expense of stability in the supply concatenation in the long run.Since the crisis is a structural problem and not a cyclical one, remedies are to be found by taking intervening actions. These actions would include a strengthening of coffee institutions, a realignment of market forces, a creation of suitable financial tools, and a promotion of sustainable agricultural practices. It must be emphasise that any direct market intervention, such as quotas or subsidies, would only be short term in effect and would not correct the struct ural problems.It must also be emphasized that what is required is a series of steps in a number of different areas, as no single step will produce the desired structural changes that are needed. The crisis in the coffee area 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 entropy 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 be to the extent needed to make participation in the coffee business profitable for most producers, counterbalance though the crop year 2003-2004 witnessed a worldwide decrease in production. (Central America The Coffee Crisis effectuate 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 then 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 Coffee Crisis Effects and Strategies for Moving Forward, 1992).The crisis has been caused by a large increase in coffee production over the past several years by two countries Vietnam and Brazil. In the end of Vietnam, within ten years this country grew from a relatively insignificant producer to the world second largest ahead of Colombia b ut behind Brazil, now producing well over 10 million bags annually and method of accounting for approximately 12% of world exports. (Central America The Coffee Crisis Effects and Strategies for Moving Forward, 1992) To conclude, without economic remedies to the crisis, it is difficult to bear on sustainable agricultural practices in coffee farming.While niche markets within the specialty coffee attention can provide some relief, the size of these markets makes them too small to be an effective solution.References Central America The Coffee Crisis Effects and Strategies for Moving Forward. (1992, July 19). Retrieved February 4, 2012, from Latin American and Carribean http//web. worldbank. org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/0,,contentMDK20606092pagePK146736piPK146830theSitePK258554,00. html Gomez-Ibanez, J. , Quinlan, S. J. (2004). The Coffee Crisis.