Global Coffee Prices Affecting Farmers Revenue

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Global Coffee Prices Drop, Affecting Farmers’ Revenue Coffee is very popular around the globe, especially in North America. On average, 83% of Americans drink coffee and 63% drink it daily. Yet, coffee suppliers are unhappy, despite the strong demand. Brazil, for example, produces one third of the world’s coffee beans, but its farmers are striking over falling prices. There are two main types of coffee bean: Arabica and Robusta. Arabica accounts for 60% of coffee bean crops around the world and sells for higher prices because of its quality. Arabica beans are seen as a normal good since they “respond positively to an increase in income” (CPE 82). When income increase, so does demand. However, the reverse is possible, “when income goes down, demand goes down as well” (CPE 82). So, Arabica beans are in high demand and therefore should have a high quantity supplied. However, this is not the case. Supply levels for Arabica beans are increasing, however demand is not. Demand for Robusta beans, a cheaper substitute, is increasing quickly, affecting the market equilibrium.…show more content…
Overall, people are making less money and are looking for cheaper substitutes. As a result, the producers of Arabica beans are hurt because consumers are choosing to buy the cheaper Robusta beans as a substitute. Also, falling prices have been matched with rising costs. Since these beans are mostly picked by hand, wages are rising to meet the farmers’ new demands and ideas of fair trade. Producers decided to invest in the production of Arabica beans again because of high prices in 2014, shown in Figure 1. This overproduction lead to an oversupply of beans and further depressed the

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