WHY HAS THE COFFEE PRICE FALLEN AND WHY DO THE COFFEE FARMERS RECEIVE SUCH A SMALL SHARE OF THE FINAL RETAIL PRICE?
The low coffee prices on the world market are mainly due to oversupply of coffee caused by two key factors: Firstly, since 1962, the International Coffee Agreement controlled the coffee supply onto the international market. The agreements included both importing and exporting countries, limited excess supplies using a quota system, implemented price controls and promoted an increase in coffee consumption. The first agreements helped to strengthen the economies of coffee-producing countries in Africa and Latin America. The success of the International Coffee Agreements was owed in part to the United States, who helped to enforce the quota system in an effort to prevent communism from destabilizing poor Latin American countries. But when the U.S. pulled out from the agreement in 1989, coffee prices plummeted. Secondly, increased production and export of coffee has been strongly encouraged by international donors as a way for developing countries to earn much needed foreign exchange in or
