Coffee Crisis Is a Case Study That Case Study

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Coffee Crisis is a case study that represents the dilemmas inherent in the production of coffee by many developing nations. The coffee market fluctuates with changes in supply and demand. When supply exceeds demand the price or if the demand for coffee weakens in international markets then this can have vast implications on the price of coffee. In 2001, coffee markets were at a forty year low for a variety of reasons. As a result of the low price, many coffee growers in the third world were not even earning what would be considered a subsistence wage and were having trouble meeting their basic needs. Many industries also have to encounter decreases in demand that reduce the products margins; especially with any commodity.

However, coffee is a particularly sensitive issue because many of the coffee producers have little other opportunities and already living in subsistence conditions. One idea presented in the case was that some growers could focus on growing specialty coffees. However, it is unlikely that this would be a widespread solution and would only fit some growers. Some of the coffee farmers were starting to unionize and form an alliance which offered some abilities found within collective bargaining. This group was referred to as "fair trade" coffee and although this strategy showed a lot of promise, it is unlikely that it would provide a comprehensive solution as well. This case represents a complex scenario in which the free market has created a situation in which demand has peaked and there is some industry fall out.

Case Analysis

Coffee grows the best in certain climates and most of these climates are found within developing countries.

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The case estimates that there were roughly twenty five million coffee farmers in Latin America, Africa, and Asia. Of these farmers, when the market price dropped, many were effectively forced to attempt try to make up the financial loss in other ways. Some farmers took their kids out of school and had them help with the coffee growing so that they would make up the price drop with more products. Other farmers switched to different products including specialty coffee and others even switch to coca, which is made to make cocaine, a far more profitable product even though it is illegal.

It is difficult to imagine these macroeconomic changes from the perspective of a poor coffee grower in the developing world. Growing coffee may have been passed down for several generations and could be the only skill that some people have. It is doubtful that they would be able to understand the changes in the market prices. Although many might suspect that they should look for other work opportunities, most will not know how and even if they did there are probably few opportunities that they can pursue. It is likely that many of the coffee growers feel a sense of hopelessness in their situation.

The United States accounts for nearly twenty percent of the entire world's coffee demand. The consumption rate of coffee in the U.S. dropped from thirty six gallons in the early 1970s….....

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