In last week’s return of the new-look “Coffee Economics with Karl,” Karl jumped right into the concept of green coffee price minimums, a.k.a. “price floors.”
Host and author of Cheap Coffee: Behind the Curtain of the Global Coffee Trade, Karl Wienhold led with a traditional mainstream economics takedown of the concept of price floors, then questioned many of the underlying assumptions of that takedown.
Further teasing out the concept of price floors in coffee, Karl today examines price control under a monopsony, i.e. a market situation in which there is a single buyer. Like last week, Karl notes that in the green coffee market, the implications of price floors extend well beyond mere economic theory.
“Forcing buyers to pay a little bit higher against their will would do nothing to disrupt the power dynamic that has led to this situation in the first place,” Wienhold says. “This would not change the governance structure, bargaining power asymmetry or the ability to set rules as to how the coffee supply chain works and how terms of trade are established. But that doesn’t mean it would be a bad thing; it might be helpful in the short term until we can get to an actual solution.”
Here’s the video: