The Coffee Crisis
MBA 6008-Global Economic Environment
December 18, 2011
Coffee was the top source of income for 25 million farmers in Latin America, Africa and Asia. Due to the lack of appropriate compensation for their harvest, communities in coffee- producing countries around the world are suffering. Coffee is a chief export for many developing nations and their entire economies are collapsing with the market. In 2004 the governments of coffee producing countries were adamant in finding the answer to the dramatic decline in coffee prices. Coffee is consumed primarily in the northern hemisphere, particularly in Europe, the United States, and Japan. There are two basic types of coffee: robusta, which is easier to grow but extremely acidic, and arabica, which has a lower yield time but milder in flavor. Robusta is produced mainly in Asia and some countries of Africa. This is primarily an instant coffee for espresso and local consumption. Arabaca is used for roasted ground coffee and compensates for two-thirds of coffee produced. This oversupply of coffee is particularly significant because it’s flooding the marketplace with cheaper, lower quality coffee. The coffee being grown in Vietnam is primarily Robusta coffee, which is substantially less expensive due to less labor-intensive growing requirements and lower elevations. Robusta coffee beans are, by definition, a much lower grade than fine Arabica beans, which are grown at higher altitudes and more carefully harvested and processed. This surplus of less expensive coffee has caused some roasters to lower their quality standards by increasing the quantity of Robusta coffee in their blends, thereby lowering their overall costs. Coffee is the second most traded commodity on the world market. Its production and sale supports millions of families worldwide, but especially in developing countries....
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