Abstract
This section discusses market developments for coffee, tea, and cocoa.56 In the short run, demand for these three commodities tends to be stable and strongly price inelastic. Supply, however, is subject to cyclical fluctuations owing to the perennial nature of the three crops and the resulting lagged response of production to prices. In addition, the three commodities are vulnerable to weather-related short-run supply fluctuations. Consequently, supply changes tend to be the main determinants of price fluctuations. On the demand side there is little substitution in consumption among the three commodities, except during periods of very large price movements, when there has been evidence of limited substitution between coffee and tea in some consuming countries.