 The coffee market has been very strong in recent years. However, coffee being prices have been highly volatile. In 2013, coffee prices fell by 20%. Since 2011, coffee prices have fallen by almost 50%, the steepest drop in over 10 years. Coffee, in fact, is one of the world's most heavily traded commodities, second only to oil in trading volume. Why are coffee prices so volatile? A story on NPR this morning attributed this volatility to speculators, greedy wholesalers and even greedy farmers trying to make a buck by adjusting their planting to supply and demand, according to the commentator, exacerbating volatility in the coffee market. Actually, speculation has the opposite effect. Speculation tends to decrease volatility. If coffee farmers anticipate that future coffee prices will be high, they begin to expand their output now so that that future demand can be met without a strong increase in prices. Likewise, coffee buyers, if they anticipate that coffee prices will be higher in the future, will begin to buy coffee now, increasing the price today and making more coffee available to be released to the market in the future when the demands were high. In general, speculation is good for the market. Middleman, far from being parasites who make profit at the expense of the rest of us, help to ensure the smooth flowing of markets. And that's true whether the markets be commodity markets, financial markets, or other markets. However, one of the things that the NPR reporter failed to note is that the reason that coffee prices have fallen so much in the last couple of years is because of a large increase in supply, not a response to natural market conditions, not an attempt to equilibrate supply and demand in the market, but rather a response to government incentives. Coffee, like other agricultural commodities, is heavily subsidized in most governments. The largest single exporter of coffee today is Brazil, which gives very strong subsidies to domestic producers. Part of the rationale for this is a view that markets for agricultural commodities are somehow different from other markets, and that, yes, maybe free markets can produce shoes or automobiles or microcomputers, but that food production is different, and that the government needs to intervene to assure a safe supply of food, a secure supply of food, and so on. This is the rationale behind farm policy in almost every developed country and many developing countries as well, where agricultural production is heavily subsidized and regulated by the state. Now, it's true that producing coffee, or producing any agricultural commodity, is not easy. It's very difficult. There are a lot of uncertainties associated with the weather, associated with disease, associated with fluctuations in global markets that are often beyond the coffee producer's control. But if you think about it, this is no different from producing any other commodity on a free market. There are always uncertainties. There are many things outside the entrepreneur's control. What's different about farming? Indeed, the sorts of uncertainties that farmers like other entrepreneurs have to deal with can be handled by insurance programs. The free market can ensure against crop failure. The free market can ensure against price fluctuations in agriculture, just as insurance markets work for any other good or service. There's nothing unique about agriculture in this case, just as, as we've discussed on previous Mises' views, there's nothing unique about healthcare or education that makes it where the free market cannot supply the right amount, cannot ensure the right quality, cannot somehow equilibrate supply and demand. So what should government planners do to take care of the agriculture sector? What should government do to make sure we have the right amount of coffee or any other commodity? Government should do nothing at all. Government should allow the free market to determine what is produced, how much is produced, how it's consumed, how it's traded, who participates in the market, and so on. Let's have a free, vibrant, and robust market for coffee beans. That's the best way to assure that the coffee market works the way it should.