Coffee: market setting and policies.

high altitudes in Latin America (including Brazil) and northeastern Africa, accounts for two-thirds of total world output. It has a strong aroma and low level of caffeine. Robusta, with a much stronger taste than arabica, is grown in humid areas at low altitudes in Asia, western and southern Africa, and Brazil. During the last decade, production of robusta, which is particularly suitable for instant coffee, has increased (table 16.1). During the last decade, the coffee market has gone through a number of structural changes. On the supply side, Brazil’s production capacity expanded enormously, with new plantations in the north that are less affected by frosts and, because of irrigation, not affected by droughts. Vietnam entered the coffee market in a major way in the 1980s—it currently supplies more than 12 million bags, making it the world’s second-largest coffee exporter. On the demand side, consumption of specialty coffees has expanded, currently accounting for an estimated 6–8 percent of total consumption. Demand for low-quality coffee beans has also increased, primarily reflecting new technologies that enable roasters to remove the harsh taste of robustas for normal coffee while continuing to All coffee is produced in the tropics, primarily by smallholders. Most is consumed in high-income countries. Latin America accounts for 60 percent of global output, followed by Asia (24 percent), and Africa (16 percent). More than half of global coffee output is accounted for by the three dominant producers: Brazil (33 percent), Colombia (10 percent), and Vietnam (10 percent). Some other African and Latin American countries, however, are heavily dependent on their exports of coffee, despite their low share in global output. For example, coffee accounts for more than half of total merchandise exports in Burundi, Rwanda, and Ethiopia and more than 20 percent in Guatemala, Honduras, and Nicaragua. More than 80 percent of coffee production is traded internationally. Historically, coffee is the second most traded primary commodity after crude oil, generating more than $15 billion in export revenue (evaluated at 1997–98 average prices and volumes). Overall, consumption volumes have stagnated in the mature markets, in which the United States accounts for about 18 percent, followed by Brazil (10 percent), Germany (9 percent), Japan (6 percent), and France and Italy (5 percent each). However, consumption has been increasing in some new (especially transition) markets.