Why have the coffee exporters flooded the market?
Coffee producing countries used to control the supply and the price of coffee, in accordance with the International Coffee Agreement. But in 1989, coffee exporting states failed to agree on quotas. This happened partly because countries that never used to produce coffee begun to grow the crop, thus adding to an already mature market. Subsequently, many countries flooded the market with reserve coffee that had previously been held back to keep world prices high. At the same time, consumers’ demand for coffee fell in many parts of the world, in part due to competition from other drinks. So world coffee prices halved and have remained volatile ever since. Was this break-up of the coffee-makers’ cartel good news for coffee drinkers? Not immediately: It took four years for the supermarkets to slash the price of coffee, and then only by 20%. And when prices bounced back in 1994, up 50%, the retail price rose immediately and stayed high despite another fall in world prices in 1995. Are the su
