Historical evidence has shown that increases in coffee prices, though generating a short term gain in export earnings for producers, also lead to increased plantings of the coffee crop. This in turn leads to overproduction and a subsequent drop in coffee prices. The establishment of the International Coffee Agreements was meant to stabilize this fluctuating behaviour in coffee prices. / The purpose of this paper is to present an overall analysis of coffee prices in order to predict the future course of prices under two circumstances. First, when the international coffee market is governed by the mandates of the International Coffee Agreements and secondly, when the market operates under free market conditions. The paper also attempts to draw parallels between the structure and mechanisms of the markets of coffee and tea. The first part of this paper provides a background study of the markets of coffee and tea including a discussion of the commodity cartels which have been signed to date in both markets. Part two provides a historical analysis of prices in both markets, followed by an econometric analysis of the demand for coffee in the largest consuming country in the world, the United States.

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