extract of the case study "the global coffee trade"

1. THE GLOBAL COFFEE
TRADE
PRESENTED BY –SYNDICATE 10

3. 0
50
100
150
200
DEMAND
PRICE
Reason being :
1. Entry of Vietnam into the export.
2. Coffee business and production increases in Brazil
GRAPHICAL REPRESENTATION OF “HIGH PRODUCTION – HIGH SUPPLY
LEADS TO
LOWER THE PRICE
More production increases, thus SUPPLY increases
there fore the price decreased.

4. As shown in case coffee is having inelastic demand
1. Absence of close substitute.
2. Differences in income.
PRICE ELASTICITY OF DEMAND

5. INSTITUTION INVOLVED
1. ICA – International coffee agreement , they set up a ICO to
overseas the agreement
AGREEMENT= was signed by which countries could not export more
than some fixed quota.
2. NGO- Non government organization, NGO worked to changed the
global coffee market. They started a FAIR TRADE MOVEMENT in
1940’s.
Started following criteria to meet fair standards-
1. Price- one fair price for farmers
2. Democratic organization
3. Direct trade and long term relations
4. Access to credit
5. Environmental protection.

6. CORPORATE RESPONSES
1. STARBUCKS – purchased fair trade early but In early 1995,
before the coffee crisis, Starbucks announced a code of conduct
setting minimum standards for working conditions on farms that
supplied the company’s beans.
2. SARA LEE- The company said that it also tried to buy at least
10 percent of its coffee from small planters and cooperatives.
3. PROCTER AND GAMBLE – resisted using fair and trade.
4. NESTLE - Nestle publicly stated that low coffee prices did not
work in its favor, due to the high fixed costs of factories
producing soluble coffee as compared with the low costs of its
competitors who sold ground coffee.
5. KRAFT - Kraft’s public position was that its responsibility in the
coffee crisis was to increase consumption

7. QUES1: WHY DOES THE PRICE OF COFFEE
FLUCTUATE SO WIDELY?
Answer:
1. Supply was more than the demand.
2. Variation in income.
3. America Withdrawal from ICA
4. Entry of NGO

8. QUES2: HOW CAN FARMERS RESPOND TO A CHRONIC OVERSUPPLY PROBLEM?
HOW DO POLICIES OF CONSUMING NATIONS IMPACT THE POTENTIAL
EXPORTING-COUNTRY RESPONSES?
Answer:
1. The farmer should have alternatives for their livelihood.
2. They should stand for their rights and demand for fare
price.
3. They should also be aware of the retail coffee prices
and their share in it.

9. QUES3. CAN SUPPLY AND DEMAND BE OVERRULED BY A
SUITABLY DESIGNED INTERNATIONAL ORGANIZATION, OR IS
AN ORGANIZATION LIKE THE INTERNATIONAL COFFEE
ORGANIZATION DOOMED TO FAILURE?
Answer:
Yes, it can overruled .
1. Strict policy for the producers and exporters to produce and export the best
quality.
2. Should form strict policies for the countries who are not under the ICO norms.
3. Quota fixation should be there.
No, ICO can’t doomed to failure as the policies are beneficial to both farmers and
retailers.

10. QUES4: EVALUATE THE NGOS’ PROPOSALS FOR
IMPROVING THE MARKET. ARE THEY WORKABLE?
Answer:
Yes, NGO’s are workable .They started a FAIR TRADE
MOVEMENT in 1940’s.
Started following criteria to meet fair standards-
1. Price- one fair price for farmers
2. Democratic organization
3. Direct trade and long term relations
4. Access to credit
5. Environmental protection.

11. QUESTION 5. VIEWING YOURSELF AS A TECHNOCRAT WHOSE JOB IS
TO REVAMP THE GLOBAL GREEN-COFFEE MARKET SO THAT IT
OPERATES MORE IN THE GROWERS’ FAVOUR, WHAT CHANGES TO
THE RULES OF THE MARKETPLACE AND/OR NATIONAL POLICIES
WOULD YOU RECOMMEND?

12. THANK YOU