Coffee Supply and Demand

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Supply and Demand of Coffee Coffee is the second traded commodity in the global market behind petroleum (Tazz, 2012). Coffee has been prized for its varying tastes and stimulating qualities for centuries and most recently for its potential health benefits. Legend has it that coffee was initially discovered in the Ethiopian highlands. A goat herder is said to have discovered coffee after he noticed that his goats did not want to sleep after eating berries from a certain tree. The goat herder reported his findings to a local monk who made a drink from the berries. He discovered that it kept him awake and alert through evening prayers. The monk spread the word of the berries. Their reputation grew and spread across the globe. (The History of Coffee, 2012). Today global coffee consumption is forecasted to rise 3 million to 142 million bags (“USDA.gov”, 2012). In the United States “40% of 18-24 year olds said they drank coffee daily, up from 31% in 2010…while 54% of 25-39 year olds said they drank coffee daily, up from 44% in 2010” (Coffee Facts & Statistics, 2012, para 2). The following essay discusses the supply and demand in the coffee industry. Demand is defined as “a functional relationship between the price of a good or service and the quantity demanded by consumers in a given period of time, all else held constant” (Farnham, 2010, p.19). Supply is defined as the “functional relationship between the price of a good or service and the quantity that producers are willing and able to supply in a given time period, all else held constant” (Farnham, 2010, p. 28). In exploring the supply and demand of coffee non price factors will also be examined. Coffee is grown in over 70 countries worldwide with many being in developing nations but over 60 percent of the world’s coffee is produced by just four countries: Brazil, Vietnam, Columbia, and Indonesia

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