WHAT, WOULD YOU SAY, is the fair price for a pound of coffee? The producers are poor countries along the equator; the consumers are the rich countries of North America and Europe. The coffee market is the great example of all the perplexities of the intricate, uneasy relationships that have come to be known, in shorthand, as the North-South dialogue.
Of all the commodities in world commerce, coffee is second only to oil in value. Some $12 billion worth of it was shipped from one country to another last year. It is far bigger than the trade in, say, wheat or corn. More important, wheat and corn are mostly exported by the developed countries of the temperate zone; coffee is uniquely the product of the tropical and developing world, where income levels are perhaps one-fourth as great as here.
The poor countries living on agricultural exports have been demanding for years a worldwide price-stabilization system, to protect their earnings from sudden swings and plunges in the market. In theory, that's simple. But the recent history of coffee pricing suggests the dimensions of the issue.
Several years ago the producing and consuming countries began to negotiate an international agreement to set a floor under the coffee market. But then there was a cold snap in Brazil, killing trees and drastically cutting production. At the same time there was a war in Angola, which is another major coffee producer, and there was an earthquake in Central America. Prices rose. Meanwhile, the negotiators agreed on a plan under which the producers would put quotas on their exports if the price ever sank to a certain trigger level. The trigger, they agreed, should be the average of the 1975 price -- that is, the prices shortly before and shortly after the Brazilian freeze. That came out to 63.5 cents a pound.
But prices kept going up. Early last year, they hit a spectacular $3.45 a pound. Then they plunged, recovered a bit, and are now bouncing around in the vicinity of $2. It is a matter of supply and demand, but there are long lags between wholesale and retail prices. The price in the supermarket tends to follow the price in Brazil only many months later. Prices are still high in American stores, and people are cutting back on purchases. Coffee consumption is down an estimated 15 percent. But the new trees planted in Brazil after the great frost are about to come into production. If the weather is good throughout the summer, there is the prospect of a big crop at the end of the year. If that big crop hits a shrinking market in the rich countries, it could mean a disastrous plunge in earnings for the producers.
In the international coffee agreement, there is a clause reopening the trigger price late next summer. The United States, among other governments, is now beginning to consider where that price ought to be. In this country, consumers want low prices, and the Carter administration is counting on stable food costs to help hold down the inflation rate. But the producing countries depend desperately on their coffee earnings to pay for their own economic progress. Even if the old trigger price of 63.5 cents is adjusted for inflation, it will still be well below $1 and less than half the present price. Should it be over $2? At that level, even some of the producers begin to worry that they would drive too many of their customers away permanently. Somewhere in between? Billions of dollars depend on precisely where. Nobody yet has a persuasive and durable formula to offer. But in a cup of coffee you can see, with a little imagination, the colliding interests of the world's rich and poor.