September 19, 2002
The dwindling prices of coffee are spelling disaster for many of the world's coffee farmers. A flooded market and a reduction in global consumption have driven coffee prices down to their lowest in a century. So Oxfam International, with the endorsement of other aid agencies, has kicked off a global campaign in Vancouver to raise awareness about the problem plaguing coffee growers.
Coffee bean prices are down 50 per cent since 1999 and that's having a devastating effect on coffee farmers of developing nations. "Coffee producers are going through the worst crisis in history due to the low prices they receive for the coffee they sell to importing countries," said Nestor Osorio, president of the London-based International Coffee Organization, which represents the producing countries. "The price is lower than it was in the Depression."
Coffee production is often the only source of income for families in coffee-producing areas. In Kenya and Vietnam, for example, aid agencies report farmers are unable to provide their families with nutritious food, basic medicine and education due to the plummeting coffee prices.
The brewing problem of low prices
Several factors have caused the nosedive of bean prices. Increased, low-cost production in countries such as Brazil and Vietnam have flooded the international coffee market, while the demand for coffee has not caught up with the supply. In the late 1990s, when coffee prices were high, farmers planted more coffee plants. The trees are finally beginning to produce more beans, but they will only flood further the overcrowded market.
The production of low-quality beans has also affected international demand. Poor coffee has turned some people off the drink completely so that countries such as the U.S. and Germany are reported to be consuming less. But farmers continue to grow low-quality beans, sacrificing quality for quantity in order to recoup their losses.
Proposed solutions
The ICO and Oxfam International, a non-governmental organization, are taking steps to combat declining prices and the over-saturated market. Starting October 1, the ICO's quality-improvement program will begin the self-policed process of removing the poorest quality coffee from the market. "It's a very timid step, but politically it has meaning," Osorio says.
Oxfam, in its campaign called "What's in your coffee?" calls for large multinational companies such as Kraft and Nestle to take responsibility for the issues facing many poor coffee farmers. Oxfam will target Kraft, asking the company to support a Coffee Rescue Plan and pay farmers a decent price. "As the largest roaster, Kraft has the power to make a difference, and Canadians have the power to encourage Kraft to do the right thing," said Gilles Léveillé of Oxfam Québec.
The group points out that while the companies reported profit margins as high as 26 per cent last year, growers are still struggling. "Together they buy nearly half the world's coffee crop," said Rieky Stuart of Oxfam Canada. "Yet they have done virtually nothing to keep the price paid to farmers from collapsing."
The aid organization's "Coffee Rescue Plan" calls for the destruction of surplus coffee reserves. It says destroying 5 million 60-kilogram bags and clamping down on poor-quality export could lift bean prices up to 20 per cent in the first year.
Nestle, which has a 13 per cent share in the global coffee market, contends that a higher demand for coffee is the solution. The company is working on increasing coffee consumption in developing countries, which makes up 30 per cent of its sales. "The point that people don't see is that by simply jacking up the price one way or the other, all you are going to do is produce an opportunity for large producers to start producing more and faster. . . to make more money. It does not solve the problem for small farmers," said Francois Perroud, a Nestle spokesman.
Perroud also acknowledges that the coffee problem can affect their operations. "Apart from the sympathy you have for small people who have hard times, it's a question of rationality. In these countries we have a large number of customers," Perroud added. "If their economies are not doing well, that's an impact on our growth."
Fried is optimistic about improving the conditions of the coffee trade, believing awareness in coffee-drinking Canadians can bring about the necessary changes. "In the 21st century, companies are increasingly recognizing that they cannot treat the supply chain as something they're separate from. It affects their image if there is terrible misery in coffee-growing regions." He added, "We will make sure it does affect their image."
TransFair, a Canadian agency that ensures fair trade in coffee, has also endorsed Oxfam's campaign. "Canadians are shocked to know that farmers receive only two cents for a cup of coffee that costs us $1.50," said Caroline Whitby of TransFair. "Fair Trade guarantees a decent living for producers. Consumers have the power to make trade work for coffee producers."
Canadians and their coffee
Canadians are among the biggest coffee drinkers in the world. Acccording to Statistics Canada, coffee consumption increased for the fourth consecutive year in 2001 when each Canadian drank almost 102 litres of coffee. That's slightly higher from the level in 2000, when 97 litres were consumed in 1991.
· Canadians drink 15 billion cups of coffee a year, more per capita than the U.S. or Europe.
· Per capita, Canadians drink 402 cups of coffee per year, 77 more than in the U.S. and 152 more than in Europe.
· Canadians spend $600 million a year on coffee for at-home consumption.
· Canadians spend between $2.2 and $2.5 billion a year on brewed coffee.
· Ninety percent of the coffee sold in Canada is produced by Kraft, Nestle and Procter & Gamble.
· The two largest players in Canada's coffee industry are Kraft (Maxwell House, Sanka, Nabob) and Nestlé (Nescafé and Taster's Choice).
· Canada's largest coffee houses are Second Cup, Van Houtte, Tim Horton's and Starbucks.
· Nearly all the coffee sold in Canada is grown in the following countries: Colombia, Brazil, Guatemala, Mexico, Vietnam, Costa Rica, El Salvador, Peru and Nicaragua.
· Fair Trade sales in Canada are double what they were in 1998, but still make up less than one percent of the total coffee consumed.
· Source: Oxfam Canada
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