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A Fight For The Truly Ideal Price Of Coffee

The International Coffee Council of the International Coffee Organization (ICO) will meet in Nairobi, Kenya, from March 25 to 29, at a moment of serious crisis in all coffee-producing regions due to the exploitative prices paid by coffee-importing nations.

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By: Fernando Morales-de la Cruz, Founder of Café For Change

Opinions expressed by Forbes Africa contributors are their own.

The International Coffee Council of the International Coffee Organization (ICO) will meet in Nairobi, Kenya, from March 25 to 29, at a moment of serious crisis in all coffee-producing regions due to the exploitative prices paid by coffee-importing nations.

Unfortunately, at the ICO, the coffee importing members do not include the United States and Canada and, usually, the European Union, importer of 41% of all coffee in the world, is represented at ICO meetings by European Commission officials with no influence on trade issues.

Switzerland, a country that is home to 70% of all coffee trading and even chairs the ICO, is also represented at the ICO by public officials with little or no authority on major trade issues. The ICO and its meeting in Nairobi are therefore of little or no use for solving the coffee crisis.

The increasingly profitable global coffee industry is controlled by a smaller number of more powerful multinationals. A concentration of these companies, in Switzerland, that are trading green coffee,  have put 25 million coffee producers and more than 125 million people living in coffee communities in a deep economic and humanitarian crisis, and in a situation of defenselessness.

The drastic fall in the price of coffee, which is not a new issue, has also had a devastating impact on the economies of the coffee-growing countries. Not only coffee growers and workers depend on coffee production. Coffee growing, like many other rural activities, has a huge economic impact on national economies and, even, in the capitals of those nations.

Coffee multinationals now pay less than one dollar per pound of coffee, a price that is 74% less than that agreed in the International Coffee Agreement of 1983. Recently, the price of coffee fell to $0.93 per lb. This amounts to only $0.36 at 1983 prices, according to the Consumer Price Index (CPI) of the United States DOL. The coffee price in 1983, agreed by the importing countries (Europe, Switzerland, United States, Canada, Japan, etc.), was $1.20 to $1.40 per lb because it was estimated that this amount could, reasonably, cover production costs in the coffee countries.

The “Ideal Price” of Coffee
The solution to the crisis in the price of coffee has been further complicated by the position taken by the National Federation of Coffee Growers of Columbia, FNC, representing the third largest coffee producer in the world, to try to set and promote internationally an “ideal price” of only $1.40 to $1.50 per lb, even below the false and unjust “fair price” of $1.40 + $0.20 premium, defended by “fairtrade”.

The “ideal price” proposed by the FNC, $1.50 per lb, is less than 42% of the price of the 1983 International Coffee Agreement. That price is “ideal” for multinationals but it is not ideal for coffee-growers or rural workers in any country in the coffee belt.

It is absolutely unfair that farmers should receive 58% less in 2019 than what they were paid by multinationals in 1983, more than 35 years ago. The production costs of farmers have increased substantially since 1983 but, on the other hand, they have also increased by tens of billions of dollars per year, in coffee-importing countries, the profits, the added value and the taxes generated for the coffee crop to be sold to the final consumer.

The multinationals estimate internally the FOB value of coffee at between $4 and $5.50 per lb., an estimate that makes a lot of sense when calculating that the price of $1.40 of the ICA of 1983, adjusted for inflation and using the CPI of the US Department of Labor, would today be $3.61 lb. After adding taxes in origin, the true cost of land, social security, pensions and education to the price of coffee of 1983, the current price should be between $4 and $5.50 per pound, as the multinationals estimate internally.

Obviously, the multinationals work with development agencies on false sustainability initiatives, and NGOs that claim to fight against poverty, even though they perpetuate it, “studying” and promoting production costs that only suit multinationals and condemn farmers and workers, and their children, to extreme poverty.

“Production costs” that also guarantee underdevelopment in rural communities so that coffee continues to be available, together with many other agricultural products, at a very low price for the developed nations.

One of the greatest challenges for coffee-growers is that most of them are poor and have no way of defending themselves against greed and the influence of multinationals in their own cooperatives and organizations, nor in their national governments and institutions.

Farmers operate locally, regionally and, in very few cases, at the national level, while on the other hand, multinationals, by their nature, operate and have economic, political and communication influence at a global  level.

It is much easier for a multinational to influence the national agricultural policy of any country, or all of them simultaneously, than for the majority of coffee farmers together. It is obvious that neither national coffee organizations nor governments have known how to, or have wanted to defend producers for decades and this is why we have reached the unacceptable reality that multinationals now buy coffee 74% cheaper than 36 years ago and farmers receive less than two cents for every cup of coffee served in developed nations.

This cannot go on like this. It is essential to create and implement a transparent shared value system that compensates producers and workers, and also rural communities, with at least $0.10 per cup.

The true ideal price of coffee, cocoa, tea or any other product is one that allows all farmers and workers, and all their children, to aspire to be middle class, because they are the basis of an industry that generates tens of billions of US dollars in profits annually.

To all the friends of the National Federation of Coffee Growers, to the 25 million producers from all over the world, to all the organizations of coffee-growers and to the presidents and officials of the governments of coffee-producing countries, I invite you all to fight together for a truly ideal price that allows everyone from the coffee belt, and all their children and dependents, to live with dignity by growing coffee.

Neocolonialism and the exploitation of farmers, workers and millions of defenseless children and the fraudulent “fairtrade” and false certifications cannot be part of the “coffee landscape” of each chocolate bar or any other industry that presumes to operate within of the law, respecting human rights and the rights of children.

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