|Key Words||World price, harvest, consumers, prices, global supply, producers, suppliers, overproduction, incentive to cheat, cartel|
The world price of coffee has fallen to 67.7 cents per pound, the lowest level since November 1993. The cause is a record harvest in Mexico and a better-than-expected crop in Brazil. Consumers are starting to see lower prices in stores: for example, Procter and Gamble has reduced the price of Folgers coffee three times since August 1999, the latest time by 8 percent.
However, the Association of Coffee Producing Countries (ACPC), representing 70 percent of global supply, is meeting to discuss withholding as much as 15 percent of the coffee crop until prices rise, perhaps to as much as $1.20 a pound. Brazil and Columbia, the two biggest producers, are behind the plan.
Previous attempts since 1993 to manipulate the market have failed. Suppliers are fragmented and are generally small and poor. There is chronic overproduction. Coffee costs a lot to store in warehouses. There is a significant incentive to cheat. Also, up until now, the third-, fourth-, and fifth-largest producers - Mexico, Guatemala, and Vietnam - have decided not to join the cartel.
(Updated June 1, 2000)
|Source||Chris Kraul, 'Cartel may withhold coffee beans to hike price,' The Tampa Tribune, April 21, 2000.|
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