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About Coffee (KC)
Coffee trees, or bushes, grow primarily in subtropical climates.
Coffee beans are the seeds of cherry-sized berries, the fruit
of the coffee tree. Coffee is primarily classified into two types
- arabica and robusta. Arabica coffees, which make up the bulk
of world production, are grown mainly in the tropical highlands
of the Western Hemisphere. Robusta coffees are produced largely
in the low, hot areas of Africa and Asia. Their flavors are less
mild than the arabica coffees.
South and Central America produce the majority of coffee traded
in world commerce. Brazil and Colombia, the largest growers of
arabica coffees, accounted for about 43% of world green coffee
production for the 1993-1994 crop year.
Coffee beans are shipped and warehoused in natural fiber bags,
and coffee sales are usually accomplished through the use of inspected
samples offered by importers and brokers.
The supply of coffee is affected by weather conditions, the health
of the coffee trees and harvesting practices. Historically, weather
has played a major role in determining world supply. For example,
production increases after recovery from the 1953 Brazilian frost
induced big price declines; likewise, Brazilian frosts in 1994
and a drought in 1985 caused a sharp drop in coffee production
and similarly dramatic increases in coffee prices.
The internal policies of the governments of producing countries
with regard to number of trees planted, price support programs
and world export quotas have also impacted the amount of coffee
available for world trade. For instance, the collapse of an international
agreement among the majority of coffee producers and exporters
in the summer of 1989 was followed by a price decrease from $1.30/pound
to $0.98/pound in under a month.
The demand for coffee is primarily determined by its price, the
price and availability of substitute drinks and consumers' tastes.
In periods of normal price variation, the demand for coffee is
price inelastic. This means that when coffee prices rise, people
do not reduce their coffee consumption proportionately, and when
coffee prices fall, consumer demand for coffee does not proportionately
increase to any great extent. However, when coffee prices show
big increases, consumers tend to reduce their consumption commensurately.
Thus, the sharp rise in coffee prices in 1976 and 1977 met with
a large reduction in coffee consumption.
In the United States over the last 30 years, per capita coffee
consumption has declined considerably and limited population growth
has led total consumption to decrease over the past decade. Although
high coffee prices were primarily responsible for the 1976-77
cutback in per capita coffee consumption, some studies attribute
the longer-term decline mostly to changing tastes and very little
to price changes. There is some evidence to suggest that changing
American lifestyles have enabled soft drinks to compete effectively
with coffee as a social drink.
The downward trend in the United States' per capita consumption
of coffee has been more than made up for by rising European demand.
While United States coffee imports have dropped from 2/3 of total
world coffee imports in the late 1940s to less than 1/3 of total
world imports in recent years, Europe's coffee imports have risen
sharply. Therefore, consumption trends in Europe will be at least
as important to the analysis of future demand for coffee as like
trends in the United States.
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