JustinWay

HowcanaSouthernAsian,orBraziliandroughtbringimpacttoacommodityproduced
inanothercontinent.
Eventsacrosscontinentscreateadominoeffectonmainproduceanditscoexistingitemsthat
makeproducts.Thisideaofadominoeffectisactuallyatheory.Thetheoryiscalledthebutterfly
effect.Thebutterflyeffectisessentiallytheideathatsmallhappeningscreatebigoutcomes.One
actioncanchangeacourseofeventsentiretynomatterthesizeofthataction.Economically
speakingasmallchangeintheworldcanindirectlyeffectthepricesforconsumerswhichcan
damageincomeandlackofinvestment.Eventuallythingsmayresultinacycle.Adroughtin
SouthernAsiacannotonlyaffectthefarmers/economyofthatcountrybutcanalsochangethe
productionandsalesofsugarcaneworldwide.Thusleadingtolackofsaleorneedtobuy
coffeeinMexico.Coffeemayusesugarandthataffectsavailabilityofproductstomakewiththe
beanswith.

Coffeeisoneoftheworldmosttradedcommodities.Itsbelievedtohavebeenfoundasearlyas
the1400sinlegendsthatproveitspotencyasastimulator.Itissaidthatgoatsatetheberries
ofthecoffeetreeandtheystayedupallnight.Spreadthroughstoriesofitsorigins,itsnotuntil
the15thcenturythatcoffeewasseenanditsusewasdocumentedwithinTheArabian
Peninsula.Arabscultivatedandtradedcoffeetransitioningintothe16thcenturywhenitsgrowth

andpopularitywouldboom.Arabiancoffeehouseswerefairlysimilartowhatweseetoday.
ItsspreadwasthroughvisitorsoftheholycityofMecca.Thearrivalofcoffeeineuropean
countrieswouldbringcontroversybutitsoonbecameagotodrinkwithThePope'sapproval.In
Londoncoffeehouseswerebecomingtheplaceforsocialactivityliketodaysshops.Backinthe
oldertimesitsfairtosaytheuseofcoffeewasrathermagicalasitwasanawarenessstimulator
andabitterbuttastydrinkthatwaspreferred.Itsuseshavestayedthesameexceptwehave
furtheredourknowledgebehindthescienceofcaffeineandwaystoenhanceitstaste.Coffee
hasbeenusedinGersonCancerTherapyandforhealthbenefits.Thoughtheseareimportant
useswecan'tforgetitscapitalistuse,tomakemoney.ShopsandBusinesseswillbuyandsell
forprofit.Coffeebeansasofnoware163.35centsperlbandalargecompaniessalesare165$
perstockshare.ItismainlyproducedinBrazil,Indonesia,andVietnam.Likeanyother
agriculturalproduce,itismanuallyandmechanicallyproduced.Theberriesarepickedandits
beansareroastedwhereitwillsoonreturntothehandsofconsumersinyourfavoriteLatte.

Oneofthemostfluctuatingfactorsbetweenintercontinentalcommodityimpactsisscarcity
causedbyweather.Weatherisalwayschangingasdoprices.Weathercansometimesbe
unpredictablewhichiswhypricesmaybehardtoguesswhenitcomestothisfactor.Whenit
comestothebutterflyeffect,eventshappenandhaveanindirecteffectonacommodity.
Weatherismoreofadirecteffect.In1977Brazilhadfacedadevastatingyearforcrops.A
countrywidefrostdestroyedtheharvestofcoffee.Sincecoffeecultivationisrelativelyslowthe
lossofthiscommoditypushestheharvestseasonasfarbackassixyears.TheSouthAmerican
beansweredestroyedaswellasthewalletsofsmallbusinessesandconsumerslookingto
purchasecoffeethatyear.InNewYorkpricesroseto339.86centsperpoundinAprilof1977.
Thisis215.38centsperpoundgreaterthantheaveragefrom19722015.Brazilproduced1/3of

totalcoffeeproductionin1977andwithexpectedscarcity,pricesbeganincreasingtokeepup
withmarginandprofit.Nowincurrentdays,widespreadnewsthroughsocialmediaalmost
benefitsnobody.Anyrumorednaturaldisasterspreadsthroughthenewsinsecondsasdo
anticipationsandprices.

Thistakesusintotheideaofanotherfluctuatingfactor!Socialmediahasnolocationbut
rathereverylocationandthisinstantlyimpactsacommoditiesdemand.Sincesocialmediahas
norealphysicalnature,itisdifficulttoexplainandthereforeshouldbetackledintheory.Two
waysthedemandofsomethingcanbechangedbysocialmediaisthroughdevastationand
promotion.IfapublicfiguresuchasOprah,weretotweetaboutthegreatnessofacertaincoffee
brand.Theinterestwouldriseandsmallercompanieswouldhaveafrenzytoaccommodateto
thispopularitem.In1994therewasaspikeinCoffeePrice.Inthebeginningoftheyearthe
priceofcoffeehadbeenaround60centsperpoundbutbysummerthepricehadroseto175
centsperpound.Aneventordisastersotospeakwastheburnsof79yearoldStellaLiebeck
whospilledcoffeefromMcdonaldswhichcaused3rddegreeburns.Liebeckwouldultimately
winthelawsuitagainstMcdonaldsandsettleforaconfidentialamount.Thisspreadthroughout
thenewsatatimewhenTelevisionswerereachingitspopularity.Peoplebecamescaredto
purchasethecontroversydrinkthatcouldgetthemsewedandforthecompaniesthatstill
wantedpartoftheaction,pricesincreaseddrasticallytomakeupforthemissingbuyers.The
demandofaproductcanbechangedbythehypesurroundingit.

Likethescarcityofsomething,thesurplusofsomethingcandirectlychangepricesallover
theglobe.Asurplusofcoffeewouldbehavingtoomuch,anexcessamountthatgoespastthe

demands.Itistheexactoppositeofhavingtoolittleofsomething.Bothsocialmediaand
disastersplayaroleinthis.Havingasurplusofsomethingwillbringpricestodownasoppose
todraggingthemuptoreachgoalsandbreakeven.Whensugarcanesareunexpectedly
destroyedinThailandduringanwhat'sexpectedtobeagreatyearforcoffeetheymaynot
matchup.TheamountofCoffeemightpassuptheamountofitspartnerintastyaddiction.
ScarcityandSurplusareoppositesthateffectpricesinthesameway.

Predictingthesepricescanbeverycomplicated,whichiswhyitisalwaysimportanttobrush
uponeconomicvocabularyandseethetheoryofthebutterflyeffectinyourownlife.Things
happenthatcanchangethegreaterschemeofthings,butitisalwaysdebatablehowrelatable
theactionsare.Claimsthatbugslandingonasandwichseemfarfetched,butthechangesin
weather,media,perception,andtimingcanallbeusedtomakeagoodorbadinvestment.
Predictingcomesinhandywhenplanningforthegrowthofafranchiseourgrowthinthestocks,
butpredictionsgoeitherway.Youcanberightorwrong.Studypatterns,changesandletthat
bethedecisionformorechange.

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"TheHistoryOfCoffee."
NationalCoffeeAssociation.
N.p.,n.d.Web.10Mar.2015.

"FearsofFreezeinBrazilPushCoffeePricesto20YearHigh."
TheNewYorkTimes.
TheNew
YorkTimes,28May1997.Web.22Mar.2015.

"TheMcdonaldsHotCoffeeCase."
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