Who s for coffee?
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CTA. 2001. Who?s for coffee?. Spore 95. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/46291
Internet URL: http://spore.cta.int/images/stories/pdf/old/spore95.pdf
How far can the coffee price fall? In early September 2001, it stood at an all-time low of US$ 0.41 per pound and the trade media were abuzz with the question 'Why is nothing being done?'. The fall started in 1989 when the USA, consumer of half the...
How far can the coffee price fall? In early September 2001, it stood at an all-time low of US$ 0.41 per pound and the trade media were abuzz with the question 'Why is nothing being done?'. The fall started in 1989 when the USA, consumer of half the world s traded volumes, and Brazil, then, as now, the world s biggest producer, left the International Coffee Agreement and de facto abolished the guaranteed minimum price, then US$ 1.26 per lb. After a two-year free fall that has not yet stopped, farmers cannot afford to produce at these prices. They are cutting back on inputs, and on labour for picking, unwisely so since the best quality coffee requires multiple picking rounds for only ripe beans. The impact goes far beyond the coffee fields. According to the report Bitter Coffee by the British NGO Oxfam in May 2001 'The livelihoods of smallholder producers are being destroyed. About 20 million households produce the crop, which is often the main sometimes the only source of cash income. to buy food items, to pay for school fees and health care, and other cash expenses.' Why have prices fallen? A simple question of supply and demand. Supply has risen by 3.6% a year since 1996, but consumption by only 1.5%. The major consumers in North America and Europe re-exported existing stocks as roasted and soluble coffees. Producers such as Brazil, Honduras, Tanzania and Uganda energetically increased their production, but Uganda s export earnings, for instance, dropped by 40% in two years. The greatest upsets have come from Vietnam s assertive ascendancy in the production tables, replacing Colombia in second place. With European investment, notably from France, Vietnam now provides more than 900,000 t of the world s crop of 6.8 million tonnes; the problem, however, is that consumption is 6.2 million t. One solution is retention in stores, but a plan launched in 2000 by the Association of Coffee Producing Countries (ACPC) failed when oversupply outstripped the retained crop. In Kenya, producers united in the Kamuyu and Othaya Coffee Societies are retaining their coffee until they get a reasonable price (between US$ 3-5), but it could be a long wait. Vietnam, not an ACPC member, has belatedly floated the idea of reducing its supply by 30%. Niche markets based on high quality, fair trade, or organic products could offer solace for some. Jamaica is very adept at marketing its top quality Blue Mountain beans. Ethiopian smallholders, 95% of the country s producers, are replicating initiatives in Madagascar and Tanzania to certify their coffee as organic; this raises prices by US$ 0.40 per lb. Some facts of life, though, do not change: Kenyan Arabica coffee fetches five times more than a normal quality Robusta from Côte d Ivoire. Such steps aside, the only real solution is concerted action by producers and consumers, says the ACPC. At an almost panic-stricken first World Coffee Conference, in May 2001, it proposed new agreements (did someone say quotas?), processors accepting higher prices, deepening niche markets and environmental and social guarantees for producers. A dash of regulation, after all? [caption to illustrations] It s hardly worth being careful