The Times (London)| By Marina Cantacuzino | June 14, 2003
British adult drinks an average three cups of coffee a day; every second, 3,900 cups of one brand of instant coffee are drunk across the world -yet while business has never been better for the retailers,coffee farmers in the poorest countries are being paid less than ever for their beans, and are facing new levels of poverty, the loss of their livelihood, the breakdown of their communities, and even starvation.
Forget the cliche of tea -without even noticing it we've become a nation of coffee drinkers. The world's second most popular drink after water kickstarts us in the morning, sees us through the day, and revs us at night. Statistically, every adult in the country drinks on average more than three cups of coffee a day. Go to any town in the UK and you'll be in no doubt that the industry is thriving, with slick multi-national coffee chains springing up in every high street, bringing with them a whole new language of skinny lattes and caramel macchiatos. At home we prefer instant coffee, with the 2002 Mintel report on the retail coffee market showing that 90 per cent of British housewives buy it. Nestle comes out top here, and little wonder since 3,900 cups of their soluble coffee is drunk in 120 countries round the globe every second of the day. With the UK's retail coffee market valued at Pounds 776 million, the second most traded commodity on the planet after petroleum is clearly making some people very rich indeed.
But whether an espresso, latte or instant, your morning cup of coffee may be driving someone, somewhere, deeper into poverty. Look a little closer at the facts that pollute the brown liquid in your mug and it's a shameful story of complacent governments, bullying multinationals, and 25 million coffee farmers round the world facing economic ruin. Few of life's little luxuries can leave such a bitter taste in your mouth.
The "Big Four" roasters -Kraft, Sara Lee, Procter & Gamble and Nestle - who retail brands such as Maxwell House, Kenco ( and Nescafe, dominate the $ 60-billion industry and control almost half the world's coffee crop. While they each have coffee brands worth $ 1 billion, only about 5 per cent of the retail price of instant coffee reaches the farmer. While the current coffee economy generates bumper profits for the corporations, the collapsing price of coffee is intensifying poverty and causing social dislocation in the world's poorest countries.
In the past three years the price of coffee has dropped by 50 per cent to a 30-year low, largely because, since 1992, production has increased at twice the rate of consumption (8 per cent more coffee is produced than consumed), leading to rising stocks (15 million bags of low-grade coffee languishing in warehouses round the world) and sinking prices. Stocks in consumer countries -the most important determinant of price levels -currently stand at more than one million tonnes.
Whereas once the International Coffee Organisation (ICO) regulated quotas to ensure some stability in the market, much of their power collapsed under the free-market spirit of the Eighties, and particularly after America - previously the key and most crucial player in the ICO -pulled out in favour of deregulation. A free market has given the coffee giants powerful global reach, allowing them to buy from the lowest-cost producers -often with disastrous consequences.
The devaluation of the Vietnamese dong in 1997, for instance, was quickly exploited by coffee traders and retailers. When Nestle started to source from Vietnam to drive down prices, it forced its traditional suppliers in Mexico and Central America to lower their prices, too. As Nestle's annual report on its coffee-trading performance in 2000 states: "Trading profits increasedI and margins improved thanks to favourable commodity prices."
This is not altogether surprising for a company which last year made front-page news with its demand for Pounds 6 million from famine-stricken Ethiopia as compensation for the nationalisation by the previous military government of a German business Nestle now owns. It wasn't until earlier this year, when public pressure sufficiently embarrassed the company, that Nestle lowered its claim to $ 1.5 million and returned the money for famine relief. To prove that this decision was more than a face-saving response to international pressure, Oxfam has demanded that Nestle demonstrates a long-term commitment to ethical purchasing.
The worldwide coffee crisis is widely acknowledged, but, although the issue was raised at this month's G8 summit, governments and companies alike have been reluctant to take action. The economies of entire nations are now being affected, particularly coffee-producing countries such as Ethiopia, Uganda and Rwanda, where half the export revenue comes from coffee and where coffee exports are a crucial source of foreign currency needed to service external debt.
With millions of coffee growers round the world at pre-starvation level, and some malnutrition deaths now related directly to the coffee crisis, the future of whole communities is under threat. Parents can't afford to send children to school, nor can they afford medicines or basic necessities.
Many farmers, particularly in South and Central America, are abandoning their coffee crops in order to survive. Some are changing to coca (the raw material for cocaine), others migrating to cities in the hope of finding work.
Nestle -the largest of the roasters whose Nescafe brand alone in August 2002 was generating 40 per cent profit margins -maintains that the fundamental problem is the supply/demand imbalance. Unfortunately it, like the other big coffee companies, is unwilling to commit to Oxfam's rescue measures (published in the 2002 report Mugged: Poverty in Your Coffee Cup), which include purchasing 2 per cent of the company's coffee under fair-trade conditions. Just as Kraft's solution to the problem is "to continue to promote consumer demand", Nestle also insists this is a more direct way of helping farmers than paying more for the coffee bean.
According to Martin Wattam of the ICO, despite a stagnating demand for coffee, "the coffee companies are doing very well by selling at old prices but buying much cheaper". There appears to be a staggeringly low level of corporate goodwill, since purchasing 2 per cent of coffee under fair-trade conditions would have minimum impact on the companies' own profits while having maximum impact on the lives of a range of farmers. Long-term solutions (such as the destruction of the coffee mountain) are also essential, but some nod in the direction of fair trade on the part of these roasters could dramatically ease the current humanitarian crisis.
Meanwhile, in the absence of any significant commercial policy change, coffee-growing countries are headed for a collective disaster. Oxfam's campaigns director, Adrian Lovett, is enraged that farmers from Vietnam to Central America are being consigned to pre-starvation levels. "The companies know there is terrible suffering at the heart of their business, yet they do virtually nothing to help," he points out. It is, he says, time "to shame them and change them".
Ethiopia.
the birthplace of coffee has no future without the production of its high-quality arabica coffee. The livelihoods of 15 million Ethiopians (nearly a quarter of the population) depend in part on the coffee economy.
Coffee generates 50 per cent of Ethiopia's export revenue, which, according to the ICO, fell in the year 2000-2001 by 42 per cent from $ 27 million to $ 14 million. In a country where 6 million people need emergency food aid (a number which may soon rise to 15 million) the future of the entire nation is tied up with coffee.
Standing in his brother's now derelict house, Workineh Wodajo -a tall, dignified man of about 50 -talks despairingly of how the collapse in coffee prices is ruining his life and his community. His brother is now dead, but before he fell ill (probably from Aids) he sold the tin roof from his house because the coffee beans he harvested had become worthless.
Wodajo and his wife now care for some of his brother's children, as well as their ten daughters and one son. The coffee crisis is having other alarming social repercussions. "I can't get my daughters married now because no one can afford to pay for a wedding any more," he explains.
He lives in what was once a thriving village in the heart of the Kafa region, the birthplace of coffee. About 15 miles west of here is Jimma - the once-prosperous coffee capital of Ethiopia, but fast becoming a poverty-stricken backwater. Five years ago women would walk to market wearing coats and carrying umbrellas to shade them from the sun, but now even these last small signs of prosperity have gone. Birkisa, a 28-year-old single mother who lives in the same village, presents an equally gloomy picture: "Parents can't afford uniforms and books, and children aren't going to school, so people are concentrating round the village. If things don't improve there will be no work, more crime and our community will perish."
In one of Addis Ababa's largest concrete blocks, Ethiopia's beleaguered Minister of Trade and Industry, Fantaye Biftu, cuts a despondent figure.
His country is now in the grip of famine and this is another insurmountable problem. As a result of the collapse of coffee prices, Ethiopia is losing around twice as much as it gained in debt relief, and the Government has now taken the drastic measure of advising farmers to diversify. "Even our coffee farmers, who do not live in the drought region, are now facing a life and death situation," says Biftu grimly.
He urges Tony Blair to use his influence with the Americans -the largest consumer government -because if America were to commit to a market-friendly scheme which would guarantee reasonable prices to growers, it would go a long way to correct the supply/demand imbalance.
Vietnam
Ten years ago this country was an insignificant exporter of coffee, its output a mere statistical blip. Now Vietnam is the second-largest producer in the world and, since 1994, its lower-cost, lower-quality robusta bean has been the country's second-most important foreign exchange earner after rice. Most of Vietnam's growth has occurred in the past five years, with exports rising from 4 million to 14 million bags, and now accounting for 12.3 per cent of the world's 114-million bag output. But with the collapse of the coffee market, and with only 4 per cent of Vietnam's coffee consumed domestically, the country's coffee farmers are also facing economic ruin.
The 2002 Mintel report on coffee in the UK states that: "In 200l, Vietnam came top of the imports list with roughly the same volume exports as in 1999, but received 39 per cent less income."
The world's chronic oversupply is blamed by many on Vietnam's dramatic entry into the coffee market, which -boosted by the heavy sale of government-subsidised fertilisers -has produced bumper crops and led to accusations from other coffee-producing countries that cheap Vietnamese coffee is one of the main reasons for the downturn in world prices.
But even the winners are now losers. Forced to sell their coffee at the world's lowest prices, smallholders in Vietnam and other developing countries now sell their coffee beans for 60 per cent of what they cost to produce. Many farmers could not have continued this long without private lenders who charge high interest rates and seek repayment in the form of land or coffee. The pressure of debt also locks small farmers into meeting quotas and prevents them from diversifying. The risk of defaulting means the loss of land. Ironically, even as coffee prices collapse, coffee growers are forced to intensify the use of fertilisers and raise production to try to meet debt repayments. The result is usually bankruptcy.
At the bustling Bac Map restaurant in Vietnam's coffee provincial capital, Buon Me Thuot, the talk among traders is no longer about profits, but about whether falling prices will soon leave them as desperate as the farmers whose coffee beans they buy. Whereas five years ago coffee lined these men's pockets, now nothing is guaranteed.
A few miles up the road in the lush green hills, Ho Hoang, aged 56, whose family is one of the few to have grown coffee for generations, fondly remembers one of his favourite boyhood duties. He would rise at dawn, trek through the highland wilderness, and forage beneath dewy bushes for the finest ripe coffee beans. His French-colonial plantation master expected nothing but the best on his breakfast table. Now, 50 years later, Ho Hoang, like most coffee farmers in Vietnam, is facing financial ruin. "Farmers are selling everything they can to repay bank debts," he explains. "Anything of value in their house -all goes for sale to please the debt collectors."
Another woman coffee farmer sums it up bleakly: "We live with coffee, we die with coffee."
The crisis has also sparked social unrest. Since 1996, an estimated 400,000 people have migrated to the Dak Lak Province in the rush to plant the "dollar tree". Thousands of acres of forest have been razed for the coffee boom. In protest, the indigenous people are waging a campaign to protect their ancestral land, destroying houses and burning acres of coffee trees.
And it doesn't end there. In response to plummeting coffee prices even farmers are starting to burn their own crops, and for the first time seeking to find another agri-export crop to earn enough to repay their mounting debts. No surprise, therefore, that the world's second-largest coffee exporter has just announced plans to destroy one-fifth of its coffee plantations in an attempt to lift prices.
Central America
On May 24, 2001, 14 young Mexican immigrants died in the Arizona desert while attempting to enter the US to find work. Of the 14 who died, six were bankrupted coffee farmers from the state of Veracruz. They were among an estimated 300,000 coffee farmers in Mexico who have been forced to leave their land in search of work. These deaths -directly linked to the collapse of world coffee prices -symbolise the desperation and sense of crisis faced by small coffee farmers and coffee plantation workers throughout the region, and the world.
An estimated 500 families per week -both farmers and labourers -are leaving coffee farms in Chiapas to migrate north to work in the oil production sector in Tabasco, or as sweat-shop workers around Tijuana.
Others try to migrate to the US, even if they have to pay more than $ 1,700 to intermediaries.
For the farmers this is a disaster, and even though coffee makes up less than 1 per cent of Mexico's export revenue, the effects are far-reaching: coffee, after all, is the primary agricultural export, employing 22 per cent of the workforce. In neighbouring Nicaragua and Guatemala -countries which rely much more heavily on coffee for foreign exchange -the situation is even more grave.
In Guatemala, which during the 2000-2001 harvest lost $ 400 million in coffee exports, small coffee-growing communities are facing bankruptcy as sales revenues continue to fall below production costs. Experts calculate that during the next harvest the country will lose 167,000 employees.
In Yupiltepeque in the remote highlands of southern Guatemala, Maria Yanes used to be able to pick 46kg bags of raw "cherries" (beans), for which she would be paid up to Pounds 12 a bag, enough to just get by. Since prices have collapsed she gets little more than Pounds 3.40 a bag, not enough to cover her costs. "I just don't know what to do," says the tearful widow, who has six young children to provide for. "The coffee I have is not worth much and even if I harvest what little cherries the trees produce it will not pay me enough."
As a result of the crisis, government officials have encouraged farmers to sell low-grade coffee to burn as industrial fuel in the hope that it might fetch a higher price and to keep stocks out of the market. Since January 2002, there has also been widespread land invasion in the coffee-growing regions of Guatemala by unemployed casual labourers, after small growers laid off up to 75 per cent of their pickers.
The situation is less critical in Brazil -the world's largest producer - where all but 6 per cent of the coffee is consumed domestically, and where coffee accounts for only 5.2 per cent of export revenue. Here, production has been boosted by increased mechanisation. In some areas of Guatemala it could take more than 1,000 people working one day each to fill the equivalent of a container of 275 bags. In Brazil, just five people and the use of a mechanical harvester for two or three days will do the same job. A predicted bumper harvest this year will increase oversupply and have a serious impact on traditional coffee-growing countries.
The coffee-shop chains
The other winners to come out of the coffee crisis are the designer coffee retailers, which have shown record profits as the price of their main raw material slumps. The four largest chains in this country -Costa, Starbucks, Caffe Nero and Coffee Republic -are in fierce competition, accounting for 60 per cent of the branded out-of-home market. With both Starbucks and Costa each having some 300 outlets, a cappuccino frenzy has reached our high streets. No wonder. Starbucks -the world's leading retailer, roaster and brand of speciality coffee -is performing magnificently, celebrating a record year of sales and profits. The Seattle-based giant plans by 2003 to have 10,000 stores globally.
The coffee-shop chains operate more ethically than the multinationals when it comes to paying a fair price to farmers. Starbucks' guiding principle is to "contribute positively to our communities and our environment", and in America it and the Ford Foundation, a philanthropic organisation, each contributed $ 125,000 for the first year of an Oxfam project to work with small-scale farmers in Mexico. In 2001, the company invested $ 1 million in purchasing fair-trade certified coffee (still not much more than 1 per cent of its total coffee stock). Starbucks is also working with CARE to support development programmes in coffee-growing regions and claims to be "fully supportive of fair-trade coffee organisations".
When, in 2002, Starbucks UK announced it was phasing in fair-trade certified coffee as a "Coffee of the Day", Penny Newman, Cafedirect's managing director, hoped this would be good news for the company's coffee growers who, until then, "had not had a firm guarantee of a fair deal". She warned also that this was "a gesture, not a significant offering relative to the resources and earnings enjoyed by Starbucks".
While Starbucks claims that customers can buy fair-trade coffee in any of their 330 UK outlets, evidence suggests it is often only available as "Coffee of the Day" on the last Friday of every month. Some staff are not even aware of what fair trade is. In other outlets, a fair-trade coffee is granted only as long as the customer buys a whole cafetiere -in other words, four cups.
The company sources its beans from 20 different countries and boasts a long-standing practice of paying premium prices for coffee, on average, at least $ 1.20 per pound. This doesn't seem bad with coffee currently selling for as little as 50 cents a pound, but it isn't enough to help lift farmers out of poverty, when they receive on average a miserable 1 per cent or less of the price of a cup of coffee sold in a coffee bar.
The Costa chain has a better record when it comes to fair trade. Working directly with Cafedirect, since 2000 it has provided fair-trade coffee across all its coffee ranges every day of the week. According to Chris Sedgwick, its marketing director, "We do this on ethical grounds, and in addition to farmers getting a fair price, 10 per cent of the profit goes back into the farming communities to buy trucks to transport coffee, computers, and pencils for schoolchildren."
WHAT YOU CAN DO
"I just don't know what to do. Even if I harvest what little the trees produce it will not pay me enough" Maria Yanes, Guatemalan coffee farmer
* Buy fair-trade coffee verified by theFair Trade Foundation (most of the leading supermarket chains sell fair-trade coffee).
* In Starbucks and other coffee retail outlets, demand fair-trade coffee.
* Write to the big coffee companies-Nestle, Kraft, Procter & Gamble andSara Lee -to demand they pay farmers a fair price (above their costs of production), so that they can send their children to school, afford medicines and have enough food.
* Join "The Big Noise" -a global petitionof people who have united in the call to make trade work for the poor.
* Support Oxfam's Make Trade Fair campaign which offers you a chance totake action on-line in support of coffee farmers (for more information, call 01865 312610, or visit www.maketradefair.com).The Times (London)| By Marina Cantacuzino:
