Coffee Prices Essay Sample

The article as stated in the title talks about the increasing prices of coffee beans and the reason for that increase in price. In the first half of the article, the author introduces the topic through discussing the International Coffee Day that has the purpose of raising awareness of coffee and the hardships of the farmers producing coffee beans. Usually, the cheap cost of coffee means low benefits for coffee farmers, but this year it is different because of the rising coffee prices. However, that does not mean the farmers will not suffer because there are different reasons why the prices have gone up. In this case, the reason is because of the drought and frost in Brazil which decreased the supply of coffee beans, thus the increase in price. Furthermore, the author mentioned that it is difficult to harvest coffee beans because it can take up to five years for coffee trees to mature, while the frost may possibly kill two-thirds of the current coffee trees further decreasing the expected supply of coffee in the future. 

In the second half of the article, the author goes on to telling the readers about the volatile coffee prices and how the past coffee prices fluctuated due to different events. Some of the cause and effects the author mentioned were a huge surplus of coffee due to low demands lowering prices, low supplies due to the black frost increasing prices, producer quotas that was set and when removed lead to a surge of coffee beans leading to low prices, and finally when the coffee leaf rust reduced supplies significantly and increasing prices. The author also said that the coffee industry is ironic since only after unsustainable harm does the prices of coffee go up and before that the low prices hurt the farmers who hope to have good yields. Another point the author brought up was the globalization that also reduced the coffee prices, and the pandemic which led to another decrease in supplies of coffee beans because workers are told to stay home. The author ended the article with celebrating the International Coffee Day only if the small farms can survive the impacts of the drought and frost thus earning a higher profit this year.

Analysis

The article focused on coffee prices can be modeled with the supply and demand curves. The article believes that the drought, frost, and future predictions of supplies caused the price change. The author said that due to the time it takes to cultivate coffee trees, the future supplies will be lower and that the drought and frost are hurting both coffee bean yields and the coffee trees themselves. To explain this in terms of the supply and demand curve, the supply curve shifts to the left due to drought and frost that reduced output. That shift brings the equilibrium price higher. What makes the increase in price even higher is the fact that Vietnam cannot produce coffee beans since workers had to stay home and that shifts the supply curve even further left. The demand curve also shifts, but it shifts to the right because people know that the predicted future supplies ought to be low meaning more expensive coffee. A higher expected future price means more demands now, and this shift raises the equilibrium price. Although the higher price means suppliers will want to supply more, but there is only so much they can produce. The higher prices may cause some consumers to not buy coffee; however, there isn’t a close substitute for coffee meaning the demand is inelastic, so the movement along the demand curve is miniscule compared to the leaps in price.

This article is consistent with what I know about supply and demand because when I look at the title, I would think either more demand of coffee or low supplies of coffee. Moreover, this article talks about the whole coffee market instead of just one company which means that the consumers cannot just go to another company for coffee so the demand will not be decreasing dramatically. Reading this article, I know it is consistent with what I learned because the drought and frost means lower supplies and that did contribute to high prices. Another part of the constituency is the possible higher demands due to the high expected future prices of coffee. Nevertheless, there are some evidences I would need to in order verify whether the supply and demand has changed. One statistic I need would be the yield of coffee beans this year compared to before, and I expect the yield to be much lower this year. Another statistic is the amount of new coffee trees planted can be compared to the previous years, and this year that amount may be higher than before. I can also look at surveys of consumer buying patterns in relation to if they know that the expected future prices of coffee to increase. If the consumers know, then they should be buying more coffee than usual. Farmers’ financial information will be another source that can verify if the demand and supply has changed. I expect that the surplus this year to decrease or the shortage to increase, the amount of goods sold should also be higher this year, even with the elevated prices. All of this information should verify that the supply is truly less than needed and the demand is higher than usual.