Coffee trade - driving equity and efficiency in the system

Abstract

Coffee is an important commodity in the world economy accounting for an annual production of around 100 -125 million bags world wide. Till 1989, International Coffee Organisation (ICO) controlled the global trade. ICO is an intergovernmental body whose members are coffee exporting and importing countries. It administers the International Coffee Agreement and is committed to improving conditions in the world coffee economy through international co-operation. The ICO operated a quota system, whereby coffee supplies in excess of consumer requirements were withheld from the market, on and off from 1962 to 1989, when the system was suspended because of failure to agree on quota distribution. 1.1 Industry Size With more than 100 million of annual production, coffee industry provides a livelihood for some 100 million people around the world. It is primarily grown in third world countries and consumed in the first world countries (70% consumption). The three major growing regions are Africa, South America and Asia. This pattern of consumption outside where it is grown is unlike any other agri-product. Many of these countries are heavily dependent on coffee, which can account for over 80% of their total export earnings. Among consumers coffee is a universally popular drink, with over US$50 billion in retail sales a year. The present coffee producing belt around the globe encompasses approximately 70 countries. Nearly 7-million tons of green coffee is shipped worldwide each year. The estimated value of the export of green coffee is 10 billion dollar annually. After oil, coffee is the world's second largest traded commodity.