Coffee among the chief produce traded on the global market. Germany and the United States are the major buyers. The trading in coffee and its products are regulated by various bodies. The principal legal entity in Germany that control the channels and pricing in coffee is the government. It decides the income duty on the product. There is no import duty on green coffee while the roasted coffee is charged 2 euros per kilo. The Federal preserve committee is another group charged with the management of the government money. The national central bank is a significant economic player. It determines the interest rates of the financial institutions in Germany (Horst, 2004). Fiscal administration is another prime financial player.
Antitrust agency is another body which is concerned with the control of coffee prices in Germany. It checks the companies and individuals who fix their own prices. It imposes high charges as a penalty to the offender like it did to Melitta and Tchibo. This keeps the level of price of coffee. The federal state monitors the hiking in coffee prices. A lobby group called German national cartel office comprising of four largest coffee roasters in Germany. They play a key role in shifting the prices because of the monopoly they enjoy. The international treaties like the double taxation agreement with the United States government play a decisive role in monitoring the market. It penalizes tax evaders during their trade in coffee. Some investors may hesitate because of the stern measures (Korner M. 2002).
The political wing plays a crucial role in the pricing of the products. The political temperature in the country significantly affects the market especially during elections. The form of liberal government creates an enabling environment for coffee traders because of the peace in the country. This crates favorable conditions for companies and even mid level businesses due to high-capital circulation. This finally increases the demand of a commodity like the coffee.
When the government increases purchase by a unit, then the unemployment is also reduced by a unit. The resultant outcome is an increase in inflation (Michael, 2008). Inflation will affect the cost incurred in the importation of the coffee products thus lowers the profit accrued. The investment ratio of Germany has fallen from 18% in 1970s to stand at 3% currently.
The economic risks of the decisions of the legal bodies are massive. Some rules create unfavorable grounds for trade. Tension during elections may reduce the flow of customers, consequently reducing the profits (Bernd, 2001). Other risks associated with politics are negative rumors about a company or organization.
Monetary policies include two actions by the government. Taxation is where it receives proceeds from the general population. Another fiscal policy is the government spending. The two fiscal rules affect asset movement which at the end affects the coffee market. The policies are fixed for the quality of trade, budget, unemployment, inflation, among other economic aspects. Some government actions lead to inflation. Germany has experienced steady increase inflation from 2004 to 2009 (CIA, 2010).
The German coffee roasters were reluctant to change with the international increase consumption of flavored coffee. Imbalances exist between supply and demand because of the unstable inconsistent consumption of coffee globally. An organization called fair-trade says that coffee price depends on the conditions under which they are produced but not the price. Organizations and companies can formulate strategies to avoid risks of the financial decisions and exchange rates. The company should have enough resources to compete the major rosters like the Melitter and others. The companies should accumulate large sums of a currency to appreciate better rates of exchange and earn bonuses on their currencies. The organizations should have business analysts and advisors to advice on the prevailing economic place of the country. They should know when there is depression, inflation and unemployment.
References
Bernd, W. (2001). Culture and inflation in Weimar Germany. California: University of California Press.
CIA World Fact book (2010). Germany inflation rate. CIA World Fact book. Web.
Horst S. (2004). Germany’s Fiscal Policy Stance. IFW. Web.
Korner M. (2002). Tea and coffee in Germany, old and new cultures thrive. Web.
Michael C. (2008). Inflation and unemployment in monetary union. Heidelberg: Germany.