The world behind the world coffee market

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Linkages between coffee growing in developing countries and final consumption in developed ones have been frequently under pressure. We apply a global commodity chain framework to understand these problems and to propose possible solutions. Imbalances on international spot markets are related to the easy access to coffee production and trade, climatic drawbacks in large producing countries and supply mismatches with changing consumers' preferences. Hedgers and speculators in futures markets cause additional price volatilities. Big multinational roasters and retailers control the transmission of material, value and information streams in the strategic parts of the chain by their market power and extra-market coordination tools. The outcomes are high consumers' prices and very low growers' prices. A sustainable solution for both the market imbalances and the asymmetric income distribution could not be reached by the present governance structure of the coffee chains. There is a need for the strengthening of vertical coordination by sharing information, reorientation of coffee institutions in producing countries and introduction of intra-chain surplus re- distribution to support the weakest links.