Microeconomics Current events - Assignment Example

Elisabeth Rosenthal in his article “Heat Damages Colombia Coffee, Raising Prices” published in New York Times on 9th March gives a well informed account of the problems that the coffee producers of Colombia are facing nowadays. Between two types of Coffee beans Arabica and Robusta; the first one is considered as superior in terms of flavour and taste. Colombia stands second to Brazil in terms of production of the Arabica coffee that is closely connected with the livelihood of the coffee producers.

Coffee especially the Arabica variant that is produced at Colombia is extremely sensitive to temperature and a rise in temperature in recent times has resulted in massive decline in production. The rise in temperature has also been followed by frequent and erratic rainfall that has created a humid ambience around the coffee producing regions of Colombia. Pests do flourish in this environment and that adversely affects the coffee production. This way the mentioned plantation suffers a double blow.

According to experts this might be the result of global warming. The major coffee producing regions of Colombia witnessed a rise in average temperature by one degree centigrade and a 25% rise in annual average rainfall. Both of these are beyond the normal suitable condition for coffee cultivation. The most severe of the attack is from coffee rust fungus that is taking full advantage of this environment and doing havoc to the coffee fields. The decline in Colombian coffee production can be well grasped from the statistics that in the year 2006 the country produced more than 12 million pound bags of coffee and was optimistic to take this number to more than 17 million by 2014.

However the catastrophe that has been illustrated so far has restricted the Colombian coffee production at nine million pounds bags in the year 2010. This displays a decline instead of much expected rise. Research has been going on to form a suitable Arabic coffee variant with indigenous qualities of Colombia that would be more resistant to pests and would be able to flourish even amidst heavy rain, however the final outcome is yet to be found. Courting this deadline in supply on one hand and rise in global demand for coffee on the other; price of the same is on a rise.

The retail price of coffee coming from famous brands has risen by 25% and the figure in futures market is even higher at 85%. The consequences for the Colombian coffee and the eventual impact on global coffee market from the same are following a simple logic. First of all global warming and erratic climatic condition are mostly due to anthropocentric activities over hundred of years; especially after the industrial revolution. Secondly the decline in supply and rise in demand for the coffee (following an improvement of economic status of the population of the countries like India and China) has quite obviously resulted in a price rise in short run (excess demand).

Again the scenario hovering global warming and the global climatic condition does not seem too bright in future; hence little hope is there that the production of coffee will be blessed with environmental favour once again in near future resulting in higher supply for the same. On the other hand demand for coffee will keep on rising as India, China and Brazil; the countries that injecting fresh demand for coffee will keep on climbing the economic ladder of prosperity. All these combined has turned coffee even more precious in futures market.

Again sufficient government fund might get devoted towards research and development for Colombian coffee one of the most important agricultural produce of the country. This might lead to curtail of other developmental expenditures by the government. Again coffee is an important export commodity for Colombia and a decline in supply might affect the trade scenario of the country in a negative way. References Rosenthal, Elizabeth. “Heat Damages Colombia Coffee, Raising Prices”, New York Times, May 2011, May 5, 2011 from: http://www.nytimes.com/2011/03/10/science/earth/10coffee.html?_r=3&pagewanted=1