In contrast to the overall index of non-fuel commodity prices, which rose by 4 percent, the index of beverage prices fell by nearly 13 percent in 1989 (Table 6). The decline, which was the third in as many years, is largely attributable to supply factors. Increased production of coffee and cocoa in lagged response to the high prices of the late 1970s was the main factor contributing to the increase in the overall supply of beverages. After the sharp increase by nearly 11 percent in 1987, which reflected to a considerable degree the recovery of Brazilian coffee production from the severe 1985 drought, the index of world supply of beverages rose by a further 5 percent in 1988 and by 3 percent in 1989. World consumption of beverages is estimated to have increased by 2 percent per annum during these three years. As a result of the widening disparity between world supplies and consumption, the overall level of world stocks of beverages has increased during this period; the index of closing stocks rose by 37 percent in 1987, by over 8 percent in 1988, and by more than 5 percent in 1989.

Market Developments and Outlook