I sat with a co-op manager in Guatemala years ago while he walked me through why the price he’d been paid for that season’s harvest had almost nothing to do with the quality of the coffee itself, and almost everything to do with a global market most drinkers never think about. Coffee is one of the most heavily traded commodities on earth, and a small handful of international institutions genuinely shape what both farmers and drinkers pay. Here’s what the International Coffee Agreement actually is, and two myths about it worth clearing up.
What the International Coffee Agreement actually does
Before 1963, coffee prices swung wildly with supply and demand, with real consequences for the millions of smallholder farmers whose livelihoods depend on the crop. That year, the United Nations established the first International Coffee Agreement, creating the International Coffee Organization (ICO) to bring producing and consuming countries together in one forum. Since 1994, the agreement has not contained price or export-quota regulation clauses; its current focus is supporting a stable, sustainable coffee economy in producing countries through initiatives around sustainable farming practices, education, and technical assistance to farmers.
The scale involved is genuinely enormous: over 25 million small farmers, mostly in developing nations, produce roughly 70 percent of the world’s coffee, and for many of those countries, coffee represents a meaningful share of total export earnings. On the consuming side, coffee also supports hundreds of thousands of jobs across transportation, retail, and roasting in importing countries. For more on how dramatically coffee prices have actually swung over the decades, including the real price collapse of the late 1990s and the sharp reversal happening today, our coffee crisis piece covers that history in depth.
Myth 1: The agreement regulates coffee prices and exports
This hasn’t been true since 1994. The ICO today functions as a forum for dialogue and a source of technical support, not a price-setting or quota-enforcing body. Governments and coffee producers use it to coordinate on sustainability initiatives and resolve disagreements, but it has no regulatory teeth over what coffee actually sells for on the world market.
Myth 2: Wholesale coffee prices are the main reason your cup gets more expensive
The raw coffee beans in your cup are one of the smallest costs in what you actually pay at a coffee shop, typically a matter of cents per cup. The bulk of the price you pay covers transportation, packaging, roasting, retail overhead, and labor, several links in a supply chain the beans pass through before ever reaching your cup. If you want to understand why coffee shop prices actually rise, transportation and energy costs, and broader input costs across that whole chain, explain far more of the swing than the wholesale price of green coffee beans does on its own.
Why any of this matters if you just want your morning cup
A collapsed coffee economy doesn’t stay contained to farmers on the other side of the world. When wholesale prices crash below what it costs to grow coffee sustainably, farmers cut corners on quality, switch to lower-grade beans, or abandon coffee farming for other crops entirely, all of which eventually shows up as worse, less consistent coffee on your own shelf. A framework that helps keep the coffee economy functional, even one with no price-setting power, is ultimately part of what keeps good coffee available and improving rather than degrading over time.
Frequently asked questions
Does the International Coffee Agreement set the price of coffee?
No, not since 1994. It functions as a coordination and support forum for producing and consuming countries, without regulatory authority over prices or export quotas.
If wholesale coffee prices dropped to zero, would my coffee shop drink get much cheaper?
Not dramatically. The raw bean cost is a small fraction of what you pay at a coffee shop; transportation, roasting, retail overhead, and labor make up the majority of the price, so wholesale bean prices moving up or down has a smaller effect on your cup than most people assume.
Why this article changed
The original version of this article explained the agreement’s mechanics well but didn’t connect them to the bigger, ongoing story of coffee’s price swings. This rewrite keeps the original myth-busting structure intact and links it to the site’s fuller coverage of coffee’s actual price history, including the dramatic reversal happening in the current market.
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