Having discussed the main demand and supply determinants of agricultural products, and the markets for grains, we are now moving on to a set of minor agricultural commodities, which enter international trade quite frequently; coffee, sugar, and cocoa. Apart from their obvious differences – in terms of production and consumption – from grains, these commodities are also special because they are almost exclusively produced in developing countries[1] and are central to the economies of those countries.

In a similar fashion to previous chapters, we firstly discuss the most important physical characteristics of the commodities in question, then we analyse the economics of their supply and demand; and, finally, we take a look at international trade and pricing in the physical markets. We defer the discussion of derivatives markets in these commodities to the final chapter of this textbook, where we look at all agricultural derivatives markets.

Coffee

Coffee is a relatively new crop, which originated in tropical Africa and was first picked from wild coffee trees. According to a 1000-year-old legend, it was a goat-keeper – Kaldi – who first discovered the stimulating effects of caffeine when he observed that some of the goats were behaving very strangely if they ate the red berries of wild coffee bushes. Kaldi told his story to the Abbot of a nearby monastery who decided to test the power of the berry for himself. He poured boiling water onto some berries to make a drink, which he found helped him to stay awake. He and other monks then drank this liquid each night and they no longer felt sleepy during their long hours of prayer.

It was in Yemen, in the fifteenth century, that coffee was first cultivated and also used as beverage. From there it spread to Southeast Asia in the seventeenth century, with the help of Dutch merchants. It was the French, however, who brought the coffee plant to Latin America, the Caribbean and the French territories in Africa.[2] In 1714 the French succeeded in bringing a live cutting of a coffee tree to the island of Martinique in the West Indies, from where it spread to the rest of Latin America. Coffee reached Brazil in 1729, but Latin American countries became prominent producers in the 19th century, with Brazil being the world’s dominant coffee producer since 1840.

Before then, world production originated mainly from South and Southeast Asia, especially Sri Lanka and Indonesia. However,

“... much of the arabica coffee in Asia was decimated by leaf-rust epidemics during the last two decades of the 19th century.”[3]

As a result, most Asian countries introduced the more resistant robusta quality, or even switched altogether from coffee to tea cultivation.

Coffee is currently grown in most tropical countries throughout the world, but it is most widespread in Latin American and African countries. As we will see, this is due to the plant’s physical characteristics and growth requirements, which necessitate warmth and relative humidity.

Physical characteristics

In botanical terms, coffee is the most important genus of the family Rubiaceae, which contains several hundreds of other genera. Officially known as coffea, the genus is further divided into four different species; Eucoffea, Argocoffea, Mascarocoffea, and Paracoffea. Of these only the first species is of commercial significance and it is the plants of Eucoffea that yield the three main commercial varieties of green coffee beans; robusta (C. canephora), arabica (C. arabica), and liberica (C. liberica). Of these three varieties, only the first two are produced and traded extensively; the third one accounts for only about 1% of total world production.

Each species is further sub-divided in cultivars, i.e. varieties which are grown in different countries. Arabica, for example, can be found in several varieties, such as Colombian ‘Medellín’, Jamaican ‘Blue Mountain’, Costa Rican ‘Tres Ríos’, and many more. Canephora coffee also has a few cultivars, the most notable being ‘Kouilou’ and ‘Robusta’; the latter is so significant that the entire species is named after it.[4]

The coffee plant has a yearly cycle which starts with the appearance of white fragrant flowers. During the six or seven months after appearance of the flower, the fruit develops, changing from light green to red and, ultimately, when fully ripe and ready for picking, to deep crimson (see Exhibit 1). The mature fruit is called ‘cherry’ or ‘berry’ and grows in clusters on short stems. It usually contains two seeds, or beans, which are surrounded by several layers of skin and pulp.

The visible cover on the very top of the cherry is called outer skin and is the one that turns from green to red (or sometimes yellow) when the fruit ripens. Below this skin is a slippery sweet and mucilaginous pulp. Each of the two beans is covered by a loose yellowish skin – the parchment – underneath which is a thin tight membrane, called silverskin (see Exhibit 1).

Generally speaking, the soil in which coffee is grown must be rich, moist, and absorbent enough to accept water readily, but sufficiently loose to allow rapid drainage of excess water. The three marketable types of coffee have slightly different growth requirements and, hence, appear in different parts of the world.

Arabica coffee is an upland species, growing between 650-2,800m above sea level. As far as weather is concerned, an average annual temperature of 18-25°C is needed, with temperature extremes not below 13°C or above 30°C. Coffee trees are sensitive to frost; the crop will almost certainly be damaged and if the plant itself is affected, future crops are also in peril. Because of this susceptibility to frost, altitude usually depends on latitude. Near the equator, arabica coffee can even be found as high as 2,500m above sea level.

Rainfall of 1,500-2,500mm per annum is usually required, as the coffee plant is evergreen and needs moist soil all year round. In areas with low rainfall, irrigation is required, or alternative techniques to retain soil moisture are applied. Arabica coffee is also susceptible to certain diseases, like leaf-rust, which necessitates the use of pesticides to fight them off and thus increases production costs.

Robusta coffee is a somewhat hardier species and is more resistant to pests and diseases. It is, however, more sensitive to climatic conditions. Robusta trees require an average yearly temperature of 24-26°C and thrive in low altitudes of 300-800m above sea level.

Required rainfall may vary between 1,000-2,500mm per annum, with an optimum of 1,700mm prevalent for about three-quarters of the year. Robusta trees also benefit from the existence of shade trees, which mitigate extremes of sunlight and humidity. Suitable zones for robusta are found over large tracts of West Africa, the lower regions of Central and South America and in large areas of Southeast Asia.

Around the world ca. 10 million hectares of land are used for coffee plants. Of these, over half are in Latin America, with over one-quarter located in just two countries – Brazil and Colombia. Annual production figures imply that the average yield per hectare is between 700-900 kg. This figure is subject to wide variations which occur among countries, and even among farms in the same country.[5] Coffee yields range between under 100 to over 3,000 kg/ha. Exhibit 4 shows some indicative production yields for several countries around the world.

Supply of coffee

Historically, global coffee production has demonstrated an upward trend, especially after the major crop failure of Brazil in 1977. Yet this trend has been far from smooth. Fluctuations in production still occur on an annual basis, with some years producing bumper crops and others when production fails in some part of the world (notably Brazil) due to extreme weather conditions.[6] In the last decade, production has fluctuated between 140-180 million bags[7] per annum (equivalent to 8-11 million tonnes, see Exhibit 5). Of this, ca. 55% is accounted for by arabicas and the rest by robustas, while liberica coffee has a negligible contribution to world production (see Exhibit 6).

New arabica plants take about five years to start yielding coffee berries and reach full capacity at about their seventh year. Each tree produces an average of 0.5-1 kg of green coffee, and with spacing of about 10 m2 for each plant, the average yield per hectare is about 750 kg. In contrast, robusta trees are spaced more widely, taking usually 15 m2, or about 650-700 trees per hectare. Plants start yielding coffee cherries after about three years and reach their full production potential in their fifth year.

In either case, growing coffee has one very important difference from growing cereals or vegetables – planting decisions have a long-term effect on supply. Once producers decide to plant new coffee trees, they are faced with two crucial problems: production from the new trees will not reach the market before 3-5 years, when demand/supply conditions are likely to have changed; and once the new plants start producing, they will do so for the next 15 years at least.

Such production characteristics place substantial restrictions on the ability of supply to adapt to market conditions, i.e. supply price elasticity is low.[8] Another important characteristic of supply is its variability, due to the vagaries of the weather. As mentioned earlier, coffee plants are susceptible to frost and it is exactly this that has caused some of the severest supply disruptions in coffee history.

Although weather is a major determinant of coffee supply, it can also be called a ‘wildcard’, implying that the estimation of its effects on annual production can only be ascertained close to harvest. Like any other agricultural commodity, coffee requires three major production inputs – land, labour, and capital. Capital is required for the purchase of fertilisers, pesticides and new trees for planting, and also for the establishment and running of processing facilities on the farm. These costs are usually higher for arabica coffees, as they require more pesticides for protection and are usually processed with the ‘wet’ method, which is more costly. Robusta, on the other hand, requires less investment in processing facilities and, thus, the largest part of the costs are allocated for labour.

Labour costs are incurred mainly during the crop season. Coffee cherries have to be picked by hand from the tree, although sometimes they may be shaken off the tree.[9] The picking season lasts for four months or slightly more, as coffee cherries ripen. Usually, labourers return to a tree every 10-14 days and pick the cherries that have gone from green to red. After collection, labour costs are also incurred for further processing by hand, especially for robusta coffee. Further production costs include, of course, the transport cost from farms to export terminals, the freight from exporter to importer, administrative and set-up costs, and any export tax that may be levied on the commodity.

Coffee processing

As we mentioned coffee processing as a stage in the supply of coffee, it is now the time to take a closer look at what it entails. When the cherries are collected, they need to be cleared of the hull in order to end up with just the green bean, which will be sold for roasting. There are two distinct phases: initial processing and curing.

Initial processing is carried out using two alternative procedures – the ‘wet’ method and the ‘dry’ method. In the wet method, the first stage is to remove the pulp within the first 24-36 hours after harvesting. Subsequently, the beans – called parchment coffee at this stage – are thrown into fermenting tanks where the mucilage is broken down naturally in 2-4 days. The beans are then washed, and dried either in the sun or mechanically. Through drying, the moisture content decreases dramatically from 53% to 12%.[10] It is mainly arabicas which are being processed with the wet method and are, thus, called ‘washed’ arabicas.

The dry method is more suitable for areas with short supply of water and for robusta beans, which have a lower moisture content. In this method, the cherries are left on the tree to partially dry and are subsequently harvested. The cherries are then left to dry further in the sun for 3-4 weeks, or in drying machines for three days. As de Graaff (1986) notes:

“Dry processing after strip picking is common in those areas where the harvesting period is short, e.g. two to three months, as in Brazil and some parts of Central America and where wage rates are relatively high. A large labour force is required for such a short period and cannot always be employed economically in the long period between harvests. Since dry processing is generally cheaper, it is more appropriate for lower-quality coffee, and is therefore usually applied for robusta coffee.”

After initial processing, coffee beans undergo further processing which is known as curing. The first stage involves the stripping of the parchment shell and silverskin. The process is called hulling and is done mechanically. Polishing is also undertaken after hulling, in order to remove any silverskin remains.

Grading is the next phase, whereby the final product (called green coffee) is sorted by hand or machine to remove defective beans[11] and extraneous material[12] and is then graded according to size. The objective of this stage is to create a final product as homogeneous and as appealing to the customer, as possible.

After initial processing and curing, comes blending and roasting. Because of the closer relation of these two processes to consumers’ tastes, and the fact that they usually take place in the importing countries, we will look at both of them in the section on coffee demand.

Policies

Brazil has been dominating the world coffee market since 1840. In fact, before World War II, exports from Brazil represented almost two-thirds of world coffee trade. The market had all the characteristics of an oligopoly with a dominant firm, whereby the dominant firm is the leader in setting quantities rather than prices. This was done through the valoriscão – or ‘valorisation’ – policy, whereby strict control of production and stocks was used to achieve acceptable prices. This often meant that in periods of glut, some of the coffee stocks had to be destroyed, rather than channelled into the market.

During World War II, Brazil traded almost exclusively with the United States. Because of the economic importance of coffee exports, a number of Latin American countries made arrangements before the War to allocate export quotas, so that each country would be assured a certain share of the United States coffee market. The first coffee quota agreement was arranged in 1940 and was administered by an Inter-American Coffee Board.

The idea of establishing coffee export quotas was occasionally put into practice by some countries during the 1950s, but it was adopted on a world-wide basis in 1962, when an International Coffee Agreement was negotiated by the United Nations. The aim was also to establish a buffer system that would help to stabilise world coffee prices through the purchase or release of stocks. During the five-year period when this agreement was in effect, 41 exporting countries and 25 importing countries acceded to its terms. The agreement was renegotiated in 1968, 1976, and 1983. The 1976 agreement was somewhat different, because it came after a severe frost in Brazil, which wiped out a large part of the production and affected crops in the following few years as well. It was, therefore, an agreement much more flexible that the previous two, allowing producing countries to increase their quotas to any extent that would not damage prices.

Participating nations failed to sign a new pact in 1989, however, and world coffee prices collapsed. For about a year – from mid-1989 to mid-1990 – prices remained at desperately low levels, with Brazilian arabicas hardly fetching 10 cents/lb. in the world market. Prices eventually recovered in the second half of 1990 and remained fairly stable for about 3-4 years, although at levels below those achieved in the first half of the 1980s, when the market experienced another long period of relative stability.

Demand for coffee

Coffee contains a complex mixture of chemical components, some of which are not affected by roasting. Other compounds, particularly those related to the aroma, are produced by partial destruction of the green bean during roasting. Chemicals extracted by hot water are classified as non-volatile taste components and volatile aroma components. Important non-volatiles include caffeine, phenolic acids, amino acids, carbohydrates, and minerals. Important volatiles are organic acids, aldehydes, ketones, esters, amines, and mercaptans. The principal physiological effects of coffee are due to caffeine, an alkaloid that acts as a mild stimulant.

It is this stimulating effect that makes coffee a desirable beverage, but also a good that may not be necessary for everyday consumption. As such, coffee consumption is very much dependent on the level of income per capita and the extent of income elasticity. As a result, coffee can be seen a luxury in some countries but a necessity in others. In the latter countries, coffee is part of everyday life and any attempt to expand consumption is usually targeted towards new users. In some cases, new occasions for drinking coffee might be promoted, or different ways of consuming coffee might be introduced in order to reduce seasonality in sales.

A slightly different pattern was followed in the United States since the late 1980s, whereby consumers changed their tastes towards ‘speciality’ coffees, which almost invariably imply the consumption of mild arabica varieties. These are produced in Colombia, Central America, Tanzania and Kenya and expanding demand led producers in these countries to demand a proportionately larger share of the export market. It was this shift in consumer demand, many believe, that led to the failure of the 1989 ICA, whose quotas were regarded too inflexible by expanding countries.

The most important consumers of coffee are located in North America and the EU. Of these, the United States and Germany are the two leading consumers, with France, Italy, Spain, UK and Netherlands following suit. In the Far East, Japan is the biggest consumer, while Brazil is the largest consumer among coffee producers. 

On a per capita basis, North European countries are consistently among the heaviest consumers, with Finland, Sweden, Norway, Iceland and Denmark consuming between 10-12 kg/capita/year[13]. In more recent years, Baltic countries have also exhibited a penchant for the drink - see Exhibit 10.

Blending and roasting

Two very important processing stages for coffee are blending and roasting, and they usually take place near the consumption markets, although roasting before export may also take place. There are several reasons why blending is important for coffee roasters:

• expensive varieties are mixed with lower quality beans, in order to control the cost of raw material input;

• beans of old and new crops can be mixed;

• beans with fermented taste can be spread among many consignments, instead of being wasted;

• when a reasonably stable quality is required, a blend with small quantities of many varieties is easier to reproduce year after year, even when there are major changes in the availability of certain beans.

Several varieties of green coffee are usually blended and roasted together to produce the tastes, aromas, and flavours popular with consumers. The diversity of blends can be as large as the number of roasters, but some broad categories have been devised, in order to classify the strength of aromas and flavours. These are cinnamon, medium, medium high, city, full city, french, and italian.

Roasting is undertaken in rotating, horizontal drums that provide a tumbling action to prevent uneven heating or scorching. Temperatures for roasting range from 193° C for a light roast, to 205° C for a medium roast, and to 218° C for a dark roast. The roasted beans are then cooled rapidly. Before World War II it would normally take a full man-day to produce about 800 bags of coffee, with roasting lasting 15 minutes at almost 400°C. Nowadays, continuous roasters are used, which heat the beans for just 5 minutes at much lower temperatures and turn over 1,600 bags of coffee per man-day.

Roasted coffee may be packaged and shipped to retail stores, which custom grind it for the customers on purchase, or it may be ground in before shipment. Alternatively coffee may be further processed into soluble granules. Instant coffee has a very large market around the world and actually makes more efficient use of coffee beans. A blend of arabicas and robustas is used, the first for flavour and aroma, the second for volume. In either case, the production process involves the extraction of liquor from ground roast coffee and the subsequent dehydration of the liquor. Dehydration is achieved by various methods, including the use of spray dryers or high-vacuum equipment. In freeze-dried coffee the coffee extract is frozen, and the water is removed by sublimation. The product is packed in vacuumed, sealed jars or in cans.

A final stage in coffee processing involves the removal of caffeine. Decaffeination can be achieved with chlorinated hydrocarbon solvents. The beans are roasted by ordinary procedures after removal of the solvents. Because the whole procedure removes so much of the beans’ original aroma and flavour, cheaper robusta varieties are used for decaffeinated coffees.

Marketing and trade of coffee

The final product that enters the physical market is called green coffee and is classified into four major categories for trading purposes: Colombian milds; other milds; Brazilian and other arabicas[14]; and robustas. The first three groups are all arabicas, while the last group refers collectively to all the types of canephora coffee. The first two arabicas are also known as ‘washed’ arabicas, while Brazilian arabicas are usually unwashed; robustas are almost exclusively unwashed.

Brazilian arabicas consist principally of Santos, Paraná, and Rio, named after the ports from which they are shipped. Milds are identified by the names of countries or districts in which they are grown, such as Medellín, Armenia, and Manizales coffees from Colombia.[15]

There are several players participating in the market for coffee, both at the cash and the futures level. Before the commodity leaves its country of origin, it is handled by two different types of organisations: marketing boards; and quasi-governmental coffee producers’ associations.

Historically, marketing boards generally had a legal monopoly for purchasing the entire crop. They bought dried coffee cherries directly from local traders and producers, and undertook the responsibility to process, grade and store the commodity. Subsequently, they sold the coffee, through auctions, to registered exporters and local roasters. In more recent years, buying coffee crops at guaranteed minimum prices has proved financially cumbersome. As a result, coffee boards tend to avoid being central buyers and focus instead on other functions, such as: registration and licensing of coffee growers; formulate rules and regulations for the development of the sector; provide advisory services on coffee production and quality enhancement; and collect and analyse data relevant to the production, pricing and marketing of coffee. Some of the countries having such marketing boards include Tanzania, Kenya, Uganda, and India. In francophone countries, the equivalent of the coffee board was the ‘caisse de stabilisation’; examples of such countries are like Cameroon and Côte d’Ivoire. Some ‘caisse’ converted to modern marketing boards, with their role being mostly regulatory and consultative.[16] Others retained part of their price-intervention powers, as well as undertaking the commercialisation of the commodity both domestically and in the export market.[17]

In a similar way, quasi-governmental coffee producers’ associations used to assume a price-setting role, establishing minimum prices at which they will buy coffee from growers. In the 1990s, the role of these organisations was reviewed. Some were abolished altogether[18], whereas others rescinded their price-setting role and focussed on supporting farmers in different ways, such as improving coffee varieties and productivity, helping with export enhancement, collecting data and so forth.[19]

With the withdrawal of most coffee marketing boards and associations from setting prices, the importance of private traders has increased, as they provide the vital link between coffee growers and the international market. The extend to which traders participate in coffee marketing chains depends on the size and bargaining power (or lack thereof) of the coffee producers. 

Coffee is one of the most actively traded commodities, with ca. 75% of production being channelled to the export market. As evidenced in Exhibit 13, exports have grown in tandem with production, but have also shown similar volatility. Brazil and Vietnam are by far the largest exporters of green coffee (see Exhibit 14). Brazil has been the world’s largest exporter since the beginning of the industry. Vietnam, on the other hand, has had a truly astounding ascend from complete obscurity before 1990 to overtake Colombia in 2000 and completely dominate robusta exports. In contrast, Africa has decreased in importance since 2000, largely due to under-investment in planting new trees because of the relatively low coffee prices during most of the 2000s.

There are two more observations to make about coffee exports. Global exports are dominated by robustas and Brazilian and other unwashed arabicas, as can be seen in Exhibit 15, with ca. 30% accounted for by mild arabicas, such as the Colombian ones. Finally, Exhibit 16 displays the top exporters of processed coffee, which are led by Brazil once more.

Coffee is available in the spot market and prices are quoted on the basis of quality, origin, bean characteristics, place of purchase, and time of delivery. As mentioned above, coffees are divided into Colombian milds, other milds, Brazil and other (unwashed) arabicas, and robustas. Price quotations for all of the above varieties are provided by the ICO on a daily basis. These include prices for Colombian Mild arabicas, and an average price for Brazilian arabicas. As far as ‘other milds’ and robustas are concerned, quotations reflect changes in a basket of several cultivars from around the world. ICO prices for other milds are based on arabica crops of several countries, in Latin America, Africa and Asia. For robustas, the prices reflect crops from several African and Asian countries, with Vietnam being the most important one because of its large production.[20]

Some of the most important spot markets exist in large ports located in importing countries. In New York, for example, coffee is quoted on a spot basis, as well as on the Intercontinental Exchange (ICE). In Europe, the most respected spot prices are quoted in Bremen and Hamburg and are reached after canvassing a number of brokers in both cities. In London, a coffee contract for robustas is quoted on NYSE-Euronext.[21]

In terms of spot market participants, seven large trading houses handle just over 50% of the world trade in green coffee beans. These are: Rothfos, E D & F Man (who acquired Volcafé in 2004), CoffeeAmerica (who acquired Tardivat in 1997), ECOM Coffee (part of ECOM Agroindustrial, which also acquired Armajaro’s physical operation in 2013) and NKG (Neumann Kaffee Gruppe).

In the retail market the situation is quite different, however. The market is dominated by large roasting companies and, in some cases, by supermarket retailers who roast and grind their own-label coffee. Some of the most well-known participants in the roasted and instant coffee markets include Kraft Jacobs Suchard, Nestlé, Sara Lee/Douwe Egberts, Lavazza, and Tchibo (who now also own Eduscho).

Conclusion

Coffee is one of the most important minor agricultural commodities and, indeed, one of the most actively traded. Like several other minor agricultural commodities, it is produced in developing countries which rely on exporting it to developed consumers. Due to its high value, coffee is important for the economies of the producing countries, especially the smaller ones.

Following the early domination of Brazil, the market is nowadays competitive, with the important functions of price discovery and price risk hedging being carried out by commodity exchanges in New York and London.

Control along the marketing chain changes as the commodity moves from the farm to the roaster and then to the final consumer. Governments, plantation owners, coffee traders, roasters and retailers, all play important roles in the marketing chain for coffee.

Cocoa

Although the history of cocoa is somewhat different to that of coffee, the economics of these two commodities are remarkably similar. Historical evidence suggests that beans of xocoatl had religious and pecuniary significance in the Aztec civilisation and, according to myth, it was bequeathed to people by the Quetzalcoatl – the Aztec god of air. It was this religious connotation perhaps that led Linæus to name the plant theobroma cacao (food of the gods), in the 18th century.

It was in the court of Montezuma that Cortes encountered the beans of the cocoa tree for the first time. He also saw how the beans were roasted and subsequently ground, in order to make a drink. The pulverised beans were often mixed with spices and adulterated with maize to reduce cost. It was the discovery of this drink, rather than the beans themselves,[22] that made the product popular in the Spanish court. The recipe remained a closely kept secret and the drink remained very much a drink for the royalty. It was more than a century later, in the 1650s in England, that chocolate became available in the market, and then again it could only be afforded by the rich.

The new drink became popular in Europe in the mid-17th century, when it was offered alongside coffee in the very popular coffee houses. Chocolate, however, remained a drink for the few, and for several decades it was mainly available from apothecaries and prescribed for medicinal purposes. A fading memory of that use today is the small proportion of cocoa for the production of theobromine, a mild heart stimulant which is contained in the bean.

The first signs of cocoa’s future success were on the horizon when the first chocolate factory was opened in Bristol in 1728 by Joseph Fry. It was soon followed by shops which offered their own grindings of cocoa, like Rowntree’s, Terry’s and Cadbury’s.

The consumption of chocolate as a drink continued spreading in Europe and the Americas throughout the eighteenth century. The drink, however, had a somewhat fatty and gritty taste and, as a result, research continued in finding ways to improve the palatability of the drink. Two advances in the preparation and use of chocolate became milestones in the history of cocoa. In 1828 CJ van Houten discovered that by pressing the ground cocoa beans he could get rid of a significant amount of fat – the cocoa butter – leaving a powder that produced a much lighter and more palatable drink. He also discovered that by adding a small amount of alkali in the cocoa powder he could enhance its flavour.[23]

The new process of extracting fat from cocoa grindings left manufacturers with an expensive residue – cocoa butter. It was Fry who experimented by mixing cocoa powder, sugar and cocoa butter, to make the first commercially available eating chocolate, in 1847. This new development created two quite separate processes, with the manufacturing of eating chocolate taking its own way and developing in subsequent years. It was this form of chocolate consumption that ended up as more popular and became more readily associated with the use of cocoa beans. Several further improvements were recorded after the commercialisation of eating chocolate: Fry once again innovated by introduced the first filled chocolate  bars with a non-chocolate centre, in 1866; milk chocolate was developed in Switzerland in 1876 by Peter and Nestlé; in 1879 Lindt introduced a chocolate with a much smoother texture by repeatedly rolling the mixture with a grinding stone – called conching – until the particles of cocoa and sugar were finely ground and fully covered with the butter.

Physical characteristics

The cocoa tree belongs to the family of Sterculiaceae, whose genus theobroma has over 20 other species, one of which is cacao. There are two main types of trees (and beans) – the ‘Criollo’ and the ‘Forastero’. Traditionally, it was the Criollo trees that were cultivated in Latin America and their beans that were exported to Europe and North America. With the introduction of Forastero trees around the beginning of the 19th century, production of Criollo cocoa diminished, and nowadays Criollo trees are very few.

The Forastero sub-species is further divided into two varieties – ‘amelonado’ and ‘trinitario’ cocoa. Amelonado is today the most widespread cocoa variety, due to its better colour and flavour characteristics.

The cocoa tree flourishes best in hot and wet conditions. Temperatures should be between 18°C and 32°C, with rainfall ranging between 1,250 mm and 3,000 mm per annum. Rainfall all year round is preferable, but a relatively dry season of no more than three months can be withstood by the plants.

The cocoa tree is susceptible to a variety of diseases, most of which usually cause the pod to rot and, hence, waste a considerable proportion of production. Most of the diseases are of a fungus nature and some of the most well-known – and dangerous – ones include the black pod rot, and witch’s broom. The second one affects branches initially, but it may extend to the pods and cause considerable losses.

The cocoa tree also requires some degree of husbandry, particularly pruning. Fertiliser application is usually necessary – especially in poor soils – during the initial growth of the new plant, and then after the first or second year of production, when some of the nutrients contained in the soil are likely to have diminished. Most of all, however, the cocoa tree requires shade, in order to avoid extremes of direct sunlight and to have some relative protection from the wind. Because of this requirement, cocoa trees are usually inter-cropped with other trees – like coconuts and pawpaws – or, alternatively, are planted in thinned forests, when the cost of planting other trees is high.

The pods have to be opened by hand and the bean and placenta removed. The next part of the process, which is also the most intriguing, is to store the cocoa beans in heaps and let them ferment. Storage facilities vary from organised fermentaries, in larger farms, to makeshift heaps of beans stored between two layers of banana or plantain leaves. The beans are left there for not more than five days. During these five days, a series of chemical changes take place in the pulp and the beans, mainly with the help of bacterial oxidisation. The end result is that the cocoa beans acquire the colour and – later, after roasting – the distinctive chocolate flavour they are known for. The beans are then dried in the sun, cleaned in special machines, bagged and, finally, prepared for export. It is at this stage that they reach the importer, who is going to process them into the final products.

Supply of cocoa

The economics of cocoa supply are very similar to those of coffee. Cocoa is grown exclusively in developing countries and is an important source of income for thousands of smallholders, and of foreign exchange for the governments of the producing nations.

Central and South America still produce ca. 20% of global output, with Asia accounting for another 6%; the remaining 75% comes from Africa (see Exhibit 23). In Exhibit 24 can be seen the yields in some of the key producing countries, which range between 300-500 kg/ha.

Among African countries, Côte d’Ivoire is the undisputed leader, producing ~40% of total world output. In second place lies Ghana, which produces the best quality cocoa beans in the world – as Colombia does in the coffee market. The remaining places in the league of the ten largest producers are taken by Ecuador, Cameroon, Nigeria, Brazil, Peru, the Dominican Republic and Colombia.

In terms of the microeconomic structure of supply, labour costs play a significant role in the whole production procedure. Cocoa harvesting depends on the availability of cheap and reliable labour throughout the main crop season from October to April. Capital costs are incurred mainly for the production of seed material, the procurement of fertilisers and pesticides, and the construction of fermentaries. Any additional costs that may be incurred are due to taxation and administration charges.

The apportionment of costs and the role of government depends very much on the concentration of production in each country, and this may vary widely. As Dand (2010) notes:

“In the Côte d’Ivoire only 5% of the cocoa grown comes from plantations larger than 40 hectares while in Malaysia the figure is 85%, Indonesia 50% and in Brazil it is above 55%.”

In large farms all stages of production are undertaken on site, leaving only the exports of the commodity to be administered by the state. In Africa, however, where most of the producers are smallholders, the government is involved in production at a much earlier stage. Producers are responsible for collecting the crop, but government may step in to provide proper fermentation facilities that can be used by many small producers. The state also undertakes the responsibility to market and export the commodity; and also provides advice to the farmer regarding production and the choice from several food and cash crops.

Much like coffee, cocoa is a substantial source of revenue for small producers and a considerable source of foreign exchange for the exporting country. Price variability is, therefore, undesirable and attempts have been made to stabilise international market prices through international agreements on production quotas and buffer stocks.

The first International Cocoa Agreement (ICCA) was signed in 1972, and in 1973 the International Cocoa Organisation (ICCO) was set up to implement the agreement. Since then, another six agreements have been achieved, with the most recent one (seventh) signed in 2010 and having come into force at the end of 2012.

Like all typical international commodity agreements, attempts were initially made to mitigate price variability through price controls and buffer stocks. Earlier ICCAs involved a complex system of prices, which triggered different actions from the ICCO. The range of prices that was agreed was denominated in SDRs, rather than US dollars, and included a ‘lower-intervention’ price, a ‘may-buy’ price, a ‘median’ price, a ‘may-sell’ price, and an ‘upper-intervention’ price. Unfortunately, depressed market conditions wiped out any hope of the ICCA for price stabilisation, as the agreement became too expensive for members to maintain.

During the last two decades, agreements have dispensed with trying to mitigate price variability with the use of buffer stocks. Recent ICCAs have a character and tone substantially different to their predecessors. The current agreement aims to strengthen cocoa economies through selecting and financing appropriate development projects; also, through collection of appropriate statistics and promotion of the consumption of cocoa and its products.

Demand for cocoa

Cocoa beans are roasted to bring out the chocolate flavour. This usually takes place in the country of final consumption, although a significant proportion of the beans – estimated at about one third of global production – is roasted and ground in the country of origin (see Exhibit 25). After roasting they are shelled in a crushing machine and ground into chocolate. During the grinding, the fat melts, producing a sticky liquid called chocolate liquor, which is used to make chocolate candy or is filtered to remove the fat and then cooled and ground to produce cocoa powder. Small percentages of various substances may be added, such as starch to prevent caking, or potassium bicarbonate to neutralise the natural acids and astringents and make the cocoa easy to dissolve in liquids. Cocoa has a high food value, containing as much as 20 percent protein, 40 percent carbohydrate, and 40 percent fat.

Like coffee, cocoa is a beverage used for the stimulating effects of the theobromine it contains. It is mainly used in the production of chocolate products and may be viewed by consumers both as a necessity and as a luxury, depending on the country of reference. In countries with high consumption per capita, chocolate is largely viewed as a necessity, rather than a luxury. The heaviest consumers of chocolate are in the EU and the United States, averaging about 2 kg/capita/year, while in the rest of the world consumption stands at about 0.5 kg/capita.

True final consumption is rather difficult to estimate. The general level of consumption is usually monitored through cocoa grindings each year; this is also a good indicator of processing activity in a country. Final consumption, however, is not necessarily represented by grindings alone. Imports of processed cocoa products, instead of the beans themselves, might be used, and stocks may also be utilised if needed.

Marketing and trade in cocoa

Cocoa is very actively traded in the international markets, because it is consumed heavily in countries distant from the places of production. Marketing arrangements resemble those for coffee; there are government agencies as well as private companies participating at different stages of marketing. Marketing boards is the most common type of state organisation that gets involved in cocoa exports. Their role is exactly the one described earlier on for coffee.

In countries like Brazil, Malaysia, Indonesia and Nigeria, there is a ‘free market’ system in place. The handling, distribution and pricing of the commodity is left to private traders, but the state is still actively involved in the monitoring of bean quality, in order to ensure the country’s reputation in the international market.

Trade flows in cocoa products are quite straightforward – producing countries consume very little (with the exception of Brazil perhaps) and, thus, export their output to developed consumers. Côte d’Ivoire and Ghana lead the bean exporters, followed by Nigeria, Indonesia and Cameroon. Also in the list of top exporters are Germany, Belgium and France, by virtue of their re-exports of beans, as well as processed cocoa products: paste, butter and cocoa powder (see Exhibit 29).

Importers, on the other hand, are led by the Netherlands, followed by Germany, the United States, Belgium and Malaysia. These are followed by mostly European and also Asian countries (see Exhibit 30).

The total trade in cocoa beans was ca. 3.7 million tonnes in 2024, representing ca. 2/3rds of the world production, which shows how actively the commodity is traded. Trade in cocoa products is equally active, with a total of ca. 3.5 million tonnes entering international trade in 2024.

Sugar

Sugar is believed to be known to humans for some 2,000 years, and is thought to have originated in New Guinea, from where it spread to the rest of Southeast Asia, India and China. The plant was introduced to Latin America during the voyages of discovery at the end of the 15th century, when Columbus brought it with him to Hispaniola. From there, cultivation of sugar canes spread to the rest of the Caribbean islands, Central America and Brazil.

Sugar production was closely linked with the colonisation of the Americas and, during the English domination of international trade, it became one of the region’s main exports and was the main input in rum production. The sector, however, was also linked to the abominable slave trade, which furnished sugar cane plantations with much needed labour.

Physical characteristics

Sugar is a generic term applied loosely to any of a number of chemical compounds in the carbohydrate group that are: water-soluble; colourless; odourless; crystallisable; and relatively sweet in taste. Sugars are divided into several sub-groups, normally distinguished by the number of carbon atoms contained in the molecule. Among the commercially important sugars are glucose, lactose, and maltose; most important, however, is sucrose, also called saccharose or cane sugar.

Sucrose can be also obtained from other plants, including sugar maple and various palms. Sugar beet, however, is the most efficient and most widespread alternative to sugar cane for the production of sucrose. Thus, the sugar industry is quite clearly segmented into two sub-sectors, which revolve around these two sources of the commodity.

Sugar is a relatively homogeneous product, although it might be supplied in several stages of refinement, according to consumer tastes.[24] Cane sugar is produced best in the hot and humid conditions of the tropical and sub-tropical climates, and almost exclusively by developing nations. It is also cultivated, however, in parts of the United States and Australia. Sugar beet, on the other hand, is produced in temperate climates, with the United States, EU countries and East Europe accounting for almost 80% of world beet sugar output.

Sugar cane

Sugar cane is a perennial, monoculture crop, requiring about 1,500 mm of rain per annum and a moderately warm temperature of 20°C. The cane is planted in autumn or spring and takes about 12-16 months to mature. It is capable of producing 8-10 good crops, before yields begin to deteriorate. Cropping is once a year, although in many countries two crops a year are achievable.

Once harvested, sugar canes have to be processed fairly quickly because they are susceptible to rot and to a reduction in their sucrose content. The first stage is to strip the stems from the leaves. The stripped canes are carried to the mill, which is usually located close to the plantation. At the mill, the canes are   cut into smaller pieces and then shredded. The shredded canes are fed into several milling rollers which extract the dark juice containing the sugar. The remaining is known as bagasse and is normally used as a fuel for the mill.

The next stage is to extract the sugar from the juice. First the juice is clarified by adding lime and boiling it under pressure.[25] The clear syrup passes through a number of evaporators, at the end of which most of the water has been removed. The concentrated syrup is boiled again to remove water until the massecuite – a mixture of raw sugar crystals and syrup – is formed. The mixture is placed in a centrifuge turning at a rate of 1000 to 1500 rpm; the centrifuge walls are perforated so that the molasses is forced out during centrifuging. The yellowish or brown sugar removed during the centrifuging process is called first sugar, or raw sugar. The raw sugar is sprayed with water to remove any molasses that may have clung to the crystals and is then moved to the refinery. The molasses may be boiled again and re-evaporated in an attempt to crystallise out some of its rich sucrose content. The molasses is a valuable by-product of the sugar industry, being used in the manufacture of ethyl alcohol and rum, as table syrup and food flavouring, and as animal feedstuff.

At the refinery, the raw sugar goes through a number of further processing stages, similar to the ones described above. The first one – called affination – involves the separation of any remaining impure syrup from the sugar crystals by heating and centrifuging. Carbon dioxide and lime are subsequently added to remove any remaining insoluble impurities. In the third stage the liquid is passed through a series of decolourising columns, until white sugar can be extracted from the liquor. The last stage involves the crystallisation and drying of the sugar and its subsequent grading and packaging.

Sugar beet

The beet is a long white root, which flourishes in cool weather, thus making it most appropriate for temperate regions in northern latitudes. The vast majority of sugar beets is grown in developed countries, mostly in the EU and North America. The beet is planted in the spring and grows for about 5 months, with the harvest usually starting in September. In warmer climates, it may even be planted in early fall and harvested during the spring, thus maintaining round-the-year production. The crop is collected mechanically, and the tops and any surplus dirt are removed.

Sugar from beets is produced in a similar way to sugar from canes, but the process is much shorter. Once in the refinery, the roots are cut into cossettes, immersed into hot water, and crushed to remove the juice. The pulp remaining after the extraction of the juice is a rich source of carbohydrates and is used as animal feedstuff, usually mixed with molasses.

After extraction, a mixture of lime, carbon dioxide and sulphur dioxide is added to the juice to remove any impurities. The purified juice passes through a series of evaporators until it reduces to a thick clear liquor. The liquor is subsequently boiled and seeded with pulverised sugar to form crystals. Like with cane sugar, the material is graded, dried and, finally, packaged.

Supply of sugar

As mentioned earlier, the sugar industry is clearly divided into the sugar cane and the sugar beet sector. Sugar canes are grown in developing countries, while sugar beets are almost exclusively cultivated in developed countries. As a result, the economic parameters and policies affecting supply are quite diverse.

World production of sugar canes is dominated by Brazil, which produces nearly 40% of global sugar cane output; other important producers in the Americas are Mexico, Colombia, Argentina, Guatemala, Cuba and the United States, although with comparatively much lower shares. Asian production is also dominated by one major player, India, which contributes ca. 20% of global supply. Other important producers are China, Thailand, Pakistan, Philippines and Indonesia. Finally, Australia is also a substantial producer and exporter in the region (see Exhibit 33).

Sugar beets are predominantly grown in developed countries and they are located, therefore, near the points of final consumption. EU countries and the United States feature as the most prominent producers of sugar beets, although CIS countries – like Russia, Ukraine and Belarus – cultivate the crop extensively, because it is suited to the climatic idiosyncrasy of the region. EU as a block produces ca. 40% of sugar beets. As for the rest of the world, other important producers include the Turkey, China and Egypt, as can be seen in Exhibit 34.

Total world production is roughly split 80-20 between cane and beet sugar, with the latter remaining fairly stable, while most of the variability appears to occur in cane sugar production. The production pattern for sugar beets is reasonably justified by the fact that their cultivation has been substantially subsidised by the EU and is also equally favoured in the United States. It remains upon cane sugar producers in developing countries, therefore, to absorb any supply/demand imbalances that occur in the market.

The distinct geographical and economic split between cane and beet sugar has given rise to two different sets of supply characteristics. The cane sector depends largely on the availability of cheap labour for harvesting and transporting the plants to the processing factories. Costs are predominantly variable, and the main problem is finding abundant labour just for seasonal employment. Another problem imposed by the nature of the plant is that it cannot be stored for long periods; once harvested, the ‘kill-to-mill’ time must be minimised, in order to avoid excessive wastage. In contrast to the first stage, the second stage of sugar processing is capital intensive, and requires considerable investment in plant and equipment.

Quite frequently, owners of large farms set up their own milling operation, thus adding value to the product leaving their premises. This imposes, of course, often conflicting objectives – regular and widespread employment for the local population during harvesting, versus efficient capital-intensive operation of the milling installation with a minimum use of labour.

Practices differ largely from one country to another. Average farm sizes, for example, range from over 40 ha. in Brazil and Australia, but only 2 ha. in most Caribbean islands. Ownership of the farms is another issue; in most producing countries farms belong to the private sector, but several governments take an active role in cane production – like Jamaica and Trinidad, for instance.

Pricing

For most agricultural commodities, prices in the international market display a large variability, which is most undesirable for producers whose income depends on their crops. Sugar is no exception and has been the object of considerable government intervention, particularly in large consuming regions, like the United States, European Union and Former Soviet Union. Since the 1980s, the price of sugar in the open market has been fluctuating between 5-15 cents/lb. ($110-330/tonne), with large drops recorded around the two major crises in 1990 and 1999. It was only from Q2-2007 that raw sugar prices started rising rapidly hit a record of nearly 30 cents/lb in June 2011, before dropping again to 18 cents/lb in April 2014. Prices hit another local high of 22 cents/lb in October 2016 but have since dropped to about 15 cents/lb at the end of 2019, only to rise again to 20 cents/lb by the end of 2021. Throughout sugar’s history, there has been considerable volatility, thus increasing uncertainty for producers’ incomes. This situation led producers in most countries to lobby their governments to operate compensatory schemes and remove some of the uncertainty of the international market. 

Despite this massive degree of intervention, occasionally there is scope for trade creation, even at low prices. The EU, for example, has signed successive Lomé Conventions with a number of African, Caribbean and Pacific Rim countries (ACP), covering a number of agricultural commodities – including a special ‘sugar protocol’ – for which trade barriers are lower. On a global scale, the Uruguay round of WTO (then GATT) also brought agricultural commodities into focus, with the aim to standardise and gradually bring down trade barriers, allowing efficient producers increased access to developed markets.

Attempts to control production and trade of sugar are not recent, however. Production controls date back to the time of the British Empire, when sugar was central to the distillation of rum and, thus, of great importance to the economy. Producing countries (both of canes and beets) have repeatedly attempted to draft international agreements on production and trade since the beginning of the twentieth century. The first international sugar agreement (ISA) dates back to 1931 and grew out of the Chadbourne agreement between Cuba and the United States. Subsequent agreements were signed in 1937, 1953, 1958, 1968, 1977, 1984, 1987 and 1992. The 1977 agreement, however, did not include the EU, while the 1984 and 1987 ISAs were mostly of administrative agreements and statements of ‘good intentions’ for co-operation. The last agreement to be signed and the current one in existence is the 1992 agreement. This includes most of the world’s producers of both cane and beet sugar, although the USA is not a member.

Since 1984, producing countries are less willing to enter new quota agreements and prefer to let market dynamics take care of prices. Moreover, there is a widespread view that no matter what agreement can be achieved, prices will succumb sooner or later to sugar’s cyclical behaviour. This behaviour resembles closely the cobweb model that was described in an earlier chapter. Sugar producers are induced into planting more canes or beets by strong market prices. As they all rush to gain a bigger market share, prices are depressed, until production is reduced. Sometimes production is reduced so drastically that stocks are not enough to meet consumption requirements, so that large price hikes (like the ones in 1974-75 and 1980-81) are not unlikely. In addition to the cyclicality described above, increased weather unpredictability also contributes to this volatility. Both Brazil and India, two of the world’s largest market players, are often affected by extreme weather conditions, which play havoc with production, resulting in either shortages or surpluses from one crop year to the next. Brazil is affected by the El Niño weather phenomenon, which usually results in high temperatures and droughts, and significantly affects crop yields. In Q3-2016 this phenomenon was evident again and pushed prices to 22 cents/lb, and again in 2023 when prices exceeded 25 cents/lb. India’s sugar production, on the other hand, relies primarily on natural rainfall, which is brought by the moist winds of the monsoons. When these winds are interrupted, production may not be enough to cover domestic demand and as a result the Indian government is more likely to restrict or ban sugar exports, thus sending international prices sky-high.

Demand for sugar

Sugar is largely utilised for direct human consumption. It is used as a sweetening agent for foods and in the manufacture of sweets, cakes, puddings, preserves, soft and alcoholic beverages, and many other foods.

Although the most common uses of sugar are in home-produced and industrially produced foods, it is also used as the raw material from which fermentation produces ethyl alcohol, butyl alcohol, glycerine, and citric acid. Sugar is an ingredient in some transparent soaps, and it can be converted to esters and ethers, some of which yield tough, insoluble, and infusible resins. Of these products, ethyl alcohol has been the most popular, especially in Brazil. This is also known as ethanol, the biofuel that can be used as a gasoline additive, or entirely on its own in specially adapted car engines and which was discussed in the energy section of this book.

Sugar consumption has the same basic economic characteristics of agricultural commodities, as they were described earlier. Total consumption is largely affected by the changes in total population, as well as by changes in tastes. Population growth after the end of World War II accounted largely for the increase in consumption. Consumption patterns, however, do differ among different groups of countries, and even among countries within the same economic grouping. High- and middle-income countries are large consumers of sugar, but have little scope for increasing their per capita consumption, which is believed to have reached a saturation point of about 45 to 50 kg per annum[26] and have, thus, a low income elasticity of about 0.1 to 0.2.[27] On the other hand, low-income countries have a low level of consumption per capita, with figures as low as 1-2 kg a year in the poorest of them. Income elasticities are estimated to be anything from 0.8 to 2.0, with the lower end of the range in countries with fast rising income and changing dietary habits, which tend to regard sugar less of a luxury and more of a necessity.

On a worldwide basis, a total of ca. 175 million metric tons of sugar were consumed in 2025/26. Of these, 15% is consumed in India, the world’s largest consumer. The EU is the second largest consumption area, with Germany, France, UK, Italy, Poland and Spain being the biggest consumers within this group. Following are China, the United States and Brazil. The remaining countries can be seen in Exhibit 38.

Although sugar is a most efficient sweetener, it has not been without contenders. The most widely adopted alternative source of sugar is high fructose corn syrup (HFCS), which is extracted from corn and is used as a sweetener in foods and beverages. In the United States HFCS has substituted sugar to a great extent, especially in caloric soft drinks. Glucose and dextrose are other sources of caloric sweeteners, while increased demand for low calorie sweeteners has increased the market share of saccharin and aspartame.

Marketing and trade of sugar

Although production statistics usually group together cane and beet sugar under the common title ‘raw centrifugal sugar’, trade statistics distinguish between flows in raw and refined sugar. Between one-quarter and one-third of world sugar production is normally traded internationally. Latin America is the most active exporter of raw sugar, with Brazil being by far the top country in the region, generating over half of the world’s total exports. Thailand and Australia are the next two big exporters, both of them particularly important for the Asia Pacific Region, especially India and China. The EU used to be the largest exporter of refined (beet) sugar and a prominent exporter in general, but in recent years it has dropped down a few notches, as the contraction of the CAP has affected sugar surpluses (see Exhibit 39).[28]

Asia is the largest deficit region in sugar and, hence, the largest importer. The EU and the United States are also net importers, mainly of raw sugar. Africa and the Middle East are two more deficit area and import mostly raw and some refined sugar. Beyond the top 15 importers, there are numerous more countries which import more modest quantities of sugar, so that the grouping 'Rest of the World' accounts for well over a third of world imports (see Exhibit 40).

As in the case of coffee, sugar marketing is handled by different types of operators in the different stages through which the commodity goes before it reaches the final consumer. Although sugar plantations are usually owned by individuals, private companies or sometimes the state, it is government agencies that monopolise the handling and exporting of sugar in most developing and developed countries.

In many countries, state agencies handle the sale, purchase, distribution and exports of sugar. Sugar imports, on the other hand, are predominantly handled by private firms – trading houses, or refiners. Frequently, private firms (especially refiners) undertake to refine and market the sugar on behalf of the exporting country.[29]

In some cases, however, government involvement is also evident in importing countries, especially when purchases are made by public tender, or when long-term supply contracts are negotiated with governments of exporting countries. Despite the existence of inter-governmental deals and the use of public tenders for sugar procurement, there is still scope for the participation of trading houses – either acting as brokers or operating on their own account – which perform the most important role of matching short-term demand and supply through the spot and forward/futures markets.

The most frequently quoted spot sugar prices are in New York (raw sugar) and London (refined sugar). The first reflects market dynamics both for the domestic sugar market and the import market for Central and South American sugar. London quotations mainly reflect the situation in the European market as refined sugar is most commonly associated with beet sugar. Finally, prices are also quoted extensively for Australian sugar, largely reflecting demand and supply conditions in the Pacific Rim. Sugar is also traded in the commodity futures markets, with a raw sugar contract traded in New York and a refined sugar contract traded in London.[30]

Conclusion

Like coffee and cocoa, sugar is an important cash crop for several developing countries. Unlike coffee and cocoa, however, sugar is also produced extensively in several developed countries, which are also the commodity’s biggest consumers. 

Price variability is a major concern for all producers. Developed countries have resorted to a barrage of protectionist measures, while developing countries have favoured restrictive production policies on an international scale in order to mitigate price variability. Neither approach has been particularly successful, however. International sugar agreements have become less and less relevant to the economics of supply and are essentially obsolete. Protectionist measures, on the other hand, are heavily criticised by more efficient developing exporters, and become increasingly difficult to justify to consumers, who have to pay the higher prices and bear the extra cost of administering support to producers.

Trade is handled by a number of different types of operators: state agencies, trading companies, and refiners. State agencies are usually responsible for channelling sugar in the international market; traders negotiate sales and purchases on behalf of their clients or for their own account; large refiners may also conduct transactions directly with producers or may even undertake to refine and market sugar on behalf of producers.

References

Abbot, G.C. (1990). Sugar. Routledge. London.

Dand, R. (2010). The International Cocoa Trade. 3rd ed. Woodhead Publishing. Cambridge.

de Graaff, J. (1986). The Economics of Coffee. Pudoc. Wageningen.

Wellman, F.L. (1961). Coffee: Botany, Cultivation and Utilization. L. Hill. London.