Why are world coffee prices low?
World coffee prices are low because there is an oversupply of coffee, the world’s second most valuable commodity after oil. Many coffee growers across the developing world have produced too much coffee which they have simultaneously released into the world market. The global supply is estimated to be about 8% above demand, according to Oxfam. This has depressed world prices. Why have the coffee exporters flooded the market? Coffee producing countries used to control the supply and the price of coffee, in accordance with the International Coffee Agreement. But in 1989, coffee exporting states failed to agree on quotas. This happened partly because countries that never used to produce coffee begun to grow the crop, thus adding to an already mature market. Subsequently, many countries flooded the market with reserve coffee that had previously been held back to keep world prices high. At the same time, consumers’ demand for coffee fell in many parts of the world, in part due to competition
