Sunday, November 28, 2010
Amid Rising Demand, Price Of Coffee Beans Soars
This article explains that as China becomes more middle class it tries to imitate the European and American ways in several aspects including drinking coffee. This increase of coffee drinkers in China has lead to an increase of the demand of coffee in the world. However, for many reasons including bad weather and the time coffee plants take to grow and mature, the supply of coffee in the world has not increased. This increase in demand with supply staying the same has caused an upward shift on the price of coffee. The suppliers of coffee also realize that the product is such a routine part of the consumers daily lives that they do not fear the increase in price pushing consumers away from purchasing the product.
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It is interesting to learn that coffee growers or suppliers are not affected by the rising prices and the fact that consumers are being pushed away. Tea is obviously the most significant substitute to coffee but for all those who drink coffee to "stay awake", there are so many other options such as energy drinks/shots that will do the same. Will this not affect the demand for coffee ?
ReplyDeleteMany regular coffee drinkers are addicted to the caffeine, so I don't think a price increase would have a big impact on their demand. I don't think that people would substitute tea, soda, or energy drinks for coffee because morning coffee has become so ingrained in American culture and people will still want it out of habit.
ReplyDeleteThis is a classic example of rule supply and demand, shows how the free market works. With demand rising and supply shrinking, prices have increased in the short term. But over the long term supply will once again reach demand and lower prices, as South America still has much more agricultural opportunities (unused land) that can mee this increase in demand.
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