markets go from one equilibrium to another over time

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Markets Go From One Equilibrium to Another over Time
The market for items or foodstuffs shifts from the equilibrium from time to time due internal; and external factors. The factors influence the supply and the demand for the items. The market of any substance depends on both the supply and demand trends. The demand and the supply of the substance determine the price of the commodities.
For instance, the prices of robusta coffee rose up by 13% in 2012 due to the increase in the demand for the commodity. The prices for the coffee beans rose in the Brazilian and Russian markets. On the other hand, the prices of Arabica coffee went down in the same year in due to the hard economic times in US and European countries. The prices for the two types of coffee were close to each other due to the fluctuations of the demand and effect of economic factors. The average gap between the prices of the robusta and the Arabica coffee was about $1.0972 in 2012 (Harris 1).
The convergence of the coffee prices encouraged the investors to increase the production of the robusta coffee. The food companies opted for the robusta beans due to its low price. The exchange stockpiles for the Arabica type grew by 72% in 2012 which translated to 2.6 million bags each with the weight of 132.0 pounds. On the other hand, the inventories for the robusta type decreased by 55% within the same period. Some of the food companies swapped the Arabica type with the robusta beans due to the effect of the global commodity index (Harris 2).

Global Coffee organisations predicted a rise in the demand of the robusta beans by 6% in 2015. It was due to the increase in the consumption of the coffee by approximately 1%. The climatic conditions were predicted to reduce the rate of robusta production in Vietnam regions due to lack of enough rains. The production of Arabica beans was expected to increase in Brazil. The change of the quantity of production was expected to affect the price gap immensely. The diagram below illustrates the trend of the coffee market from 2005 to 2013.

Figure 1: Coffee market trend (Adopted from: Harris, 2)
The investors also argued that the high price of robusta beans would increase the consumption of Arabica coffee and overturn the demand for the two types by the year 2015. The high consumption of robusta beans was common in Brazil in 2012. The robusta export reduced by 57% in Brazil due to increased domestic consumption. The demand for the Arabica beans was expected to rise in the US by 2015.
Works Cited
Harris, Lawrence, and Eitan Gurel. “Price and volume effects associated with changes in the S&P 500 list: New evidence for the existence of price pressures.” The Wall Street Journal 41.4 (2012): 1-10.
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