COFFEE EXPORT CURBS CASE

Business Economics Group-14 EPGDIB-04 1. 2. 3. 4. Alok Shrivastava Kaustubh Mulay Milind Deore Rupinder Kaur

Background
There is fluctuation in the international market about the coffee prices in recent past. Subsequent to that there is price hike in Indian domestic market in coffee ingredients. Also due to auctions of the coffee boards domestic prices of the coffee has been hiked each week. Repurcations of the price hike in domestic market consumption of the coffee in domestic market has reduced. In a wake of another auction of July 13 domestic dealers feel they cant afford for another price hike since it will lead to excess supply to reduction in consumption. With above feeling domestic dealers prevented coffee board auction on July 20 from being held by less note worthy bidding in coffee prices. Government also started think to reduce export of the coffee exports even though comparatively less share of India (2%) in international market to cap the price hike in domestic market. Government also eyes above change in a wake of assembly elections to be held in the states of Karnataka, Tamilnadu & Andra Pradesh who are major coffee consuming states of India.

Price Fluctuations In International Market

Price Fluctuations In Domestic Market

Coffee Market Price fluctuations

-July 6 Auction Details Domestic Market: For July 6 auctions also coffee board auctions had increased prices of 3 commodities from previous auction. Price of plantation A increased by 15% Price for Arabica cherry B increased by 14% Price of Robusta cherry AB increased by 9% Price of pure coffee powder increased by 20% from last auction & more than 100% from January prices in Karnataka. Price of pure Arabica cherry B increased by 25% from last auction & 88% from January prices in Tamilnadu. Subsequent effect of this price hike domestic consumption reduced by 20%.

Coffee Market Price fluctuations

-July 13 Auction Details Domestic Market: Due to price increase in international business domestic prices have also increased. Subsequently coffee board auctions price for Plantation A have increased by 31% Price for Arabica cherry B increased by 35% Price of Robusta cherry AB increased by 28%

International Market: Prices of mild americas by 23% from 191.42 cents on July 8 to 235.92 cents on July 11.

 Above fluctuations in prices from international & domestic market led to domestic dealers
did not took serious participation in bidding & preventing July 20 auctions of coffee board.

Questions:
1. Define the nature of demand Curve in Domestic & International Market:

Answer:
Nature of demand curve for this coffee market is as shown below for aggregate demand which is downward sloping. Both the market position lies along the demand curve but at different positions. Domestic market lies on upper portion of line which implies price hike & reducing consumption. Coffee board need to control prices by increasing out put/ production or reducing export. International market lies on lower portion of line which implies prices are reducing which will increase the production/consumption.

Nature of demand Curve

Domestic Market

International Market

Question 2:What are the decision issue of coffee board Answer:

Three main decision issues of coffee board are as follows: 1. Increase international market share which is only 2% right now by increasing exports. 2. Response to the thinking of government of reducing export of coffee to keep domestic prices low. 3. Reduce domestic prices in the wake of elections in key states with high consumption. Coffee board can increase Indias market share in International business which is only 2% as of now by increasing exports so that country can earn money out of that. Due to price hike, consumption in domestic market has reduced by 20% In a wake of assembly elections in high coffee consumption states like Andra Pradesh & Karnataka (consumption cumulative 37% of total domestic consumption) & Tamilnadu (45% of total domestic consumption) coffee board cant increase prices which will otherwise reduce consumption more & hamper position of the government in that states & whole country.