Date of this Version
Cornhusker Economics, October 7, 2015, agecon.unl.edu/cornhuskereconomics
Two and a half billion cups of coffee are consumed in the world annually making coffee the second-most traded commodity after oil and the caffeine contained in it the most widely consumed psychoactive drug. Coffee is produced in more than 60 countries and provides a livelihood for some 25 million coffeegrowing families around the world. Coffee consumption has been increasing over the past 50 years, but this increase has, for the most part, not been accompanied by increases in raw coffee prices and improvements of coffee growers?lives. After the International Coffee Association (ICA) dissolved in 1989, coffee production increased substantially (mainly due to mass production by Brazil and the entry of new coffee producers in Asia and Africa), and the world coffee prices fell by 50%. While farm-gate prices have been declining during most of the past 25 years, the prices in consuming countries have been soaring, and so have the profits of middlemen ?i.e., intermediaries, processors, exporters, and large international corporations ?who have been retaining the lion's share of the economic surplus generated in the coffee supply channels. These trends have reduced producer welfare and have pushed many coffee growers into poverty.