End Evil

The Coffee Market

The History

The world coffee market is in crisis with the price at a 30 year low. Most of the coffee producing countries are also the world's poorest countries, with large rural populations a proportion of whom are dependent on coffee crops. Oxfam estimates that 25 million coffee growers and their families face starvation due to the international coffee crisis, but all of the Multinational Corporations (such as the big four - Kraft, Nestle, Proctor & Gamble and Sara Lee) who trade coffee have been recording huge profits.

Coffee Beans

In 1962, the International Coffee Agreement fixed prices at between $4.40 and $5.30 per kilo, and each coffee-producing country had an agreed "fair" allotment of the market. It had been set up to counter the "red threat" in Asia and South America. But in 1989 the US withdrew from the agreement. The market soon became unregulated. The World Bank encouraged Vietnam to move into coffee production despite the already large supply of coffee on the world market. By 2000 Vietnam was the world's second biggest exporter of coffee. The glut on the market caused prices to plummet below the cost of production. Many farmers can't afford to switch crops, and are tied to the land by remaining subsidies from Europe and the US. Many have already lost their farms, contributing to unemployment and instability in desperately poor areas.

This may be a surprise to you, as there has been little or no reduction in the cost of coffee in shops and restaurants. The "Big Four" have recorded huge profits by maintaining their sale prices, but buying the raw coffee for much less.

The average price paid for coffee in 1997 was £1.02 per pound.

Prices on 10/5/2004
ArabicaRobusta
World market41p per pound19p per pound
Cafe direct71p per pound61p per pound

This doesn´t just affect the farmers, but the whole country. In Nicaragua, coffee cultivation represented some 30 percent of the agricultural sector's GDP, half of agricultural export earnings and a quarter of the country's total exports. Since January 2003 the percentage of national export has more than halved due to falling coffee prices on the international market. Oxfam also reports that in 2001, Ethiopia, received £33 million in debt relief, but their coffee income dropped from £145 million to £84 million.

The baddies - The Big Four

In December 2003, Oxfam analyzed the contribution of the "Big Four" coffee roasters in the previous 12 months to help solve the global coffee crisis.

Sara Lee performed abysmally. The company did little to pay coffee farmers better prices, or establish guidelines for buying coffee, or help farmers diversify into other crops. Kraft failed to buy either Fair Trade coffee or coffee that meets internationally agreed quality standards. The company did however contribute to social development programs around the world.

Nestle fared marginally better. They led the industry in various international meetings and supported the efforts of the International Coffee Organisation (ICO) to solve the crisis, including buying directly from farmers. But Nestle still refuses to buy Fair Trade coffee.

Proctor and Gamble launched a fair trade brand, and helped lobby the US to rejoin the ICO. However, it had too few guidelines on buying coffee that would ensure at least basic standards for farmers.

Oxfam´s Canadian site notes that -
"Kraft net profit was $810m in the nine months to September; Nestle $2b in the six months to June and Sara Lee $1.4b in the 12 months to June. Proctor & Gamble's snacks and beverage division - which includes its flagship coffee brand Folgers - sold $896m worth of product (up 9% on last year) in the three months to September."

Kraft produce Kenco, Maxwell House, Jacobs, Carte Noir and Cafe Hag. P & G make Folgers (US), Sara Lee are largely US based.

Special dishonourable mention - Starbucks

Early in 1995, following a U.S. Labour Education in the Americas (US/LEAP) campaign, Starbucks promised to adopt a code of conduct. They released a "Framework for a Code of Conduct", the first by any commercial US brand. The document stated that the company would seek to buy coffee from growers who paid their workers a decent wage and respected the basic rights of its workers, with a pilot project to be established in Guatemala.

Two years later, nothing had happened. US/LEAP began campaigning again so, Starbucks promised to start a program to pay growers an extra $500,000 for improvements for workers, and began advocating corporate responsibility within the coffee industry.

By 2001 there was little progress, so Starbucks initiated another strategy to implement its code of conduct and announced new "sourcing guidelines". They established an incentive-based system that commits Starbucks to reward its "preferred suppliers" financially if they meet key "sustainability" criteria. The guidelines put forth four criteria: quality, social conditions, environmental and economic. The code was again revised in 2004. It is an improvement, but still falls short of the guarantees offered by fair trade coffees.

The goodies - Fair Trade Coffee

In 2003 the Co-op went 100 per cent Fairtrade. This will boost the value of the UK Fairtrade coffee market by an estimated 15 per cent or £4 million, returning a total of £750,000 to growers. There are loads of other great fair trade coffees - look for the fairtrade logo. I especially like Cafe Direct, and the instant coffee tastes better that Nescafe anyway!

Instead of going to Starbucks, use Costa Coffee (in the UK). You have to pay 10p extra for fair trade coffee, but it is well worth it.

Look for the Fairtrade Logo on your coffee


For further information check these resources -

Oxfam (especially the Canadian and American offices)

US Leap

Global Exchange

Cafe Direct

Reuters

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