Coffee Producers Cartel Essay

961 words - 4 pages

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 oversupply of cocoa has caused
this to a large extent.

A cartel has several interests for consumers yet can be analysed and
be concluded that by creating a cartel it may cause problems for
consumers. Firstly by creating a cartel it will mean that the
consumers will be purchasing products in order to save the livelihoods
of poor Brazilian farmers. Although this can be argued that it is not
in the interest of consumers it must be considered that consumers
would feel better if the purchased a product that saves a farmers life
for a whole month providing them food and water.

Another factor contributing to the interest that cartels would provide
consumers would be the fact that...

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