Global Coffee Import Demand in a New Era: Implications for Developing Countries

With coffee prices at their lowest in a century, producing countries, which are mostly developing countries, are facing the worst crisis in history. The International Coffee Organization (ICO) acknowledges that poverty and unemployment are growing so rapidly that the consequences would be dire if nothing is done to halt the decline. This study draws welfare implications for producing countries based on import demand analysis for coffee in the three largest importers – the United States, European Union, and Japan. A differential production approach is employed. Results imply that coffee-producing countries will continue to be worse off with the expansion of exports. Hence, we suggest that they attempt new marketing strategies that include consistent provision of higher quality coffees, differentiation with value-adding activities, and campaigns to boost domestic consumption. Producer organizations must be strengthened to provide essential services to farmers. Diversification and increased access to industrialized markets could also help to mitigate the crisis.