Introduction
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Small Farm 1
Small Farm 2
Commercial Farm
Non Trad' Farm
Issues
Theories
Pov'ty Indicators
Commodities
Poverty
Econ. of Scale(1)
Income Elasticity
Infant Industries
Commodity Mkts
Econ. of Scale(2)
Lorenz Curve
Malthus
Measuring Pov'ty
Perf. Competition
Cycle of Poverty
Price Ceilings
Prod. Subsidies
Coffee Mkt.
Living Standards
Worksheets
Resources

Home Field Trips Rural Life and Agriculture Tour The Coffee Market

Theories

The Coffee Market

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There are two types of coffee - arabica is milder in flavour and more expensive, more difficult to grow and process, and fussier about the climate than its cousin robusta, which is widely used for soluble coffee and stronger roasts.

Like many of the products that Zambia produces, coffee is a primary product and is traded on world commodity markets. The price that Zambian farmers receive for their coffee therefore depends on the level of demand and supply in the world. Though the level of demand for coffee itself may not fluctuate a great deal, the demand for it in the commodity markets will be affected by many factors. These may include the expectations of dealers about the coffee harvest, expectations of the level of world demand, external factors like their expectations of world economic growth and so on. Because demand is so affected by price expectations there may be significant fluctuations in demand. An increase in demand for example will increase the price of coffee on world markets, as shown in the diagram below.

Zambian farmers are powerless to influence the price and are simply price-takers. They have no choice but to accept the price on offer. This will mean that their livelihoods are very dependent on the behaviour of demand and supply in worlds markets, which in turn may depend on the expectations of dealers in world commodity markets.

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Related Theories:
Price Movements in Commodity Markets
Commodity Agreements