Pricing

According to the Composite Index of the London-based coffee export country group International Coffee Organization the monthly coffee price averages in international trade had been well above 100 US cent/lb during the 1970s and 1980s, but then declined during the late 1990s reaching a minimum in September 2001 of just 41.17 US cent per lb and stayed low until 2004. The reasons for this decline included a collapse of the International Coffee Agreement of 1962Ц1989[8] with Cold War pressures, which had held the minimum coffee price at US$1.20 per pound. The expansion of Brazilian coffee plantations and Vietnam's entry into the market in 1994 when the United States trade embargo against it was lifted added supply pressures to growers. The market awarded the more efficient Vietnamese coffee suppliers with trade and caused less efficient coffee bean farmers in many countries such as Brazil, Nicaragua, and Ethiopia not to be able to live off of their products, which at many times were priced below the cost of production, forcing many to quit the coffee bean production and move into slums in the cities. (Mai, 2006). A coffee plantation on a hill near Orosi, Costa Rica. The decline in the ingredient cost of green coffee, while not the only cost component of the final cup being served, occurred at the same time as the rise in popularity specialty cafes, which sold their beverages at unprecedented high prices. According to the Specialty Coffee Association of America, in 2004 16% of adults in the United States drank specialty coffee daily; the number

f retail specialty coffee locations, including cafes, kiosks, coffee carts and retail roasters, amounted to 17,400 and total sales were $8.96 billion in 2003. Specialty coffee, however, is frequently not purchased on commodities exchangesЧfor example, Starbucks purchases nearly all its coffee through multi-year, private contracts that often pay double the commodity price.[9] It is also important to note that the coffee sold at retail is a different economic product than wholesale coffee traded as a commodity, which becomes an input to the various ultimate end products so that its market is ultimately affected by changes in consumption patterns and prices. The market for soft drinks has been steadily climbing, passing the consumption of coffee in terms of mass of product consumed in the early 2000s. In 2005, however, the coffee prices rose (with the above-mentioned ICO Composite Index monthly averages between 78.79 (September) and 101.44 (March) US Cent per lb). This rise was likely caused by an increase in consumption in Russia and China as well as a harvest which was about 10% to 20% lower than that in the record years before. Many coffee bean farmers can now live off their products, but not all of the extra-surplus trickles down to them, because rising petroleum prices make the transportation, roasting and packaging of the coffee beans more expensive. Prices have risen from 2005 to 2009 and sharply in the second half of 2010 on fears of a bad harvest in key coffee-producing countries, with the ICO indicator price reaching 231 in March 2011.