Price Change in International Coffee Market

Coffee is always regarded as the most popular beverage in the world, millions tons of coffee beans are processing and billions of dollars are created and flowing into and out in the huge market. Therefore, this drink plays a pivotal role in the international trade. Nowadays, the production and consumption of coffee has a big stake to some extent in many aspects of some countries and international market. The price change in the market will lead to a fluctuation of price of coffee bean, thereby triggering a series of affect on individual, enterprises and countries. The essay will show what factors result in the different trend in the coffee market and analysis of the characteristic of the structure of this market and how to affect a country in terms of income and employment and also highlight the strategies of typical several larger firms to control cost and make profits.

The price change in international coffee market is mainly caused by demand and supply. When the price of a commodity rises, the quantity supplied will also rise (principles of economics). In this case, the price went up tremendously to $180 in 1997. Therefore, more and more companies expanded the supply of coffee, and maybe some new suppliers also entered into the market, for instance, the new factories from Vietnam and Brazil jumped into it, and growth in supply raised by 3.6 % per year overtook the demand with 1.5% ( textbook ) In the next five years there was a dramatically decline in coffee price, however, the main reason is that supply overtake the demand. According to the graph 1 below, as the supply increased, whole supply curve will shift to right. Although the quantity increased, the price went down. After that, due to the higher the price of substitute goods, the people will produce other substitute goods with higher value. (textbook) That is, more and more coffee grower transferred to other substitute goods, for example, many growers in Vietnam made a living out of Coca. (textbook ). Later on, for many farmers cultivated other crops as well as China and