The international coffee economy with special reference to international coffee marketing schemes

Abstract

Coffee has been known to be an agricultural product of considerable remunerative value in international trade. The dispersion of the Coffee industry in the last four centuries or so has been associated with the empire expansion of the European nations and the comparative advantages possessed by various regions, which have consequently persistently maintained competitive production costs. In the 1950s the industry became the key industry in the agricultural sector of at least a dozen developing countries. The chief source of foreign exchange earnings of these countries is the agricultural sector and therefore dominance of the Coffee industry in the sector made it the chief source of foreign exchange earnings. For the same reason the role of agriculture in economic development in these countries is heavily dependent on the Coffee industry. The past connections between these developing countries and the former colonial powers have left inevitable political and economic interdependence. For this reason the former colonial powers and their allies have recognised the importance of the viability of the Coffee industry in their general policies of maintaining the political and economic interdependence. The Coffee industry is complicated by risks and uncertainties on the supply side. The chief sources of uncertainty are associated with long production periods and physiological vegetative cycles of the Coffee plant. Besides these the supply response is further complicated by the fact that one third of total world production is accounted for by peasant producers. These live under conditions of high levels of unemployment and disguised employment. For these reasons the chief source of labour in peasant production is the family unit. Unlike this type of production system, two thirds of the world Coffee supply is produced in larger farms and plantations which depend heavily on paid labour. In this system of production, the level of capital investment per unit of output is much higher than in the peasant system. Because of the nature of the production systems, the industry has varied response to economic stimulus, but the response tends to be high in the production systems with high capital investment and low in the peasant production system where capital investment is comparatively low. The demand side of the industry is discouraging to the producer, because, typical of the agricultural industry, gains from technological advance are almost entirely passed on to the consumer in the form of low prices, thereby leaving little benefit to the Coffee planters in form of higher real incomes. Typical of primary production too, the Coffee producers are "price takers" and not "price makers". Besides these impediments, the economic viability of the industry is influenced by levels of total coffee consumption in the principal markets.