Essay about Coffee Producers Cartel

Essay about Coffee Producers Cartel

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Coffee Producers Cartel


A cartel explained by economists is a method of controlling the supply
and demand effect and restricting prices from continual decrease. A
cartel is an unlawful association or group of manufacturers or
suppliers who get together to maintain high prices and restrict
competition. In its simplest terms, a cartel is an agreement between
businesses not to compete with each other. The agreement is usually
verbal and often informal. Typically, cartel members may agree on:

· prices

· output levels

· discounts

· credit terms

· which customers they will supply

· which areas they will supply

Cartels are most successful in areas where there is little
competition, the product has no commodities, communication channels
between competitors are already established and the industry is
suffering from excess capacity or there is general recession. Although
they can be helpful if you are a member of a cartel, you could be
fined up to 10 per cent of your UK turnover for up to three years.
Most producers are better off agreeing to a tacit agreement where by
there is an agreement between firms on an informal basis where nothing
is recorded officially.

Coffee is currently the second largest commodity market in the world
behind oil. The market expands across the entire globe and its effects
reach the developed and developing countries alike. Most cocoa beans
are grown in the developing countries and have been done so for the
past century but in recent times the cost of cocoa has rapidly
decreased. As the price of the cocoa beans decrease it has caused
large-scale problems in the market and over...


... middle of paper ...


...ers will have no choice to agree and thus
cause problems on a price basis for consumers.

The effect of a cartel from the coffee producers on consumers may also
mean that the quality of cocoa from the countries that produce high
quality cocoa will decrease. This is because as the retailers give in
to the demands of the coffee producers it will mean that the countries
that develop high quality cocoa will see the fact that retailers will
have no choice apart from buying there cocoa. Thus the producers will
start to decrease their work effort, as they will notice that whatever
happens they will get a continual amount of profit. As work effort
decrease it will mean that the producers will care less about the
cocoa and thus the quality of the beans will decrease and thus
directly effect the interest of the consumers.



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