The World Coffee Crisis: How Bad Must It Get?; A Challenge to the National Coffee Association and Its Membership

3/7/2002

From: Liam Brody of the National Coffee Association, 617-835-8966 Adrienne Smith of Oxfam International, 617-728-2406

FT. LAUDERDALE, March 7 -- Oxfam International calls upon coffee companies meeting at the annual National Coffee Association Convention to join governments and civil society in search of global solutions to the world coffee crisis. The meeting is taking place today through March 10 at the Turnberry Isle Resort and Club.

"In the past few years, we've suffered so much.... This poverty can't get worse. We've gotten to the stage where we can't afford anything, anything...I wish there were better companies than the ones that buy the coffee from us. It's gotten so bad, there is so much suffering, that I could imagine going into coca (1)." Carmela Sanchez Rodriguez is from Peru. She is 56 years old and has six children. She is a coffee farmer who has seen her income collapse. Carmela sells her coffee for 40 percent less than she got last year, and over 60 percent less than what she received just three years ago. As a result, she can no longer feed her family properly, and has trouble purchasing items on credit from the local shop.

The slump in world coffee prices, caused by over-supply, is turning into a development disaster. Across dozens of producer countries, families are cutting back on food, children are not going to school and medicines are becoming an unthinkable luxury. However, this human dimension of the coffee crisis barely gets a mention in the corporate world. Multinational corporations that process and sell coffee benefit from the fall in the cost of their raw materials. Complacency and shortsightedness have characterized many companies' attitude toward the crisis. Yet no industry can build a sustainable future upon the misery of its suppliers.

Jose Adan Reyes, a 39-year old Peruvian farmer, has one hectare of coffee. He has four sons between the ages of one and eight. Jose explains: "The price of coffee has fallen year after year, from 500 soles per quintal (2) (equivalent to approximately $1.40/lb) to 300 to 250 to 200 to 150. And now it's even reached 100 soles per quintal (equivalent to approximately $.28/lb).... We can't build a house properly, we can't put on a good roof, we can't buy kitchen utensils, we can't buy a blanket. If the price went back to around 400 or 500 soles per quintal, our income would be back to normal.... We could look after our health and our children, feed ourselves and educate our children properly...I'm worried about my children's education when they get older. Because it costs, doesn't it? With this price of coffee, it's not even worth talking about. I won't be able to."

Consumer countries cannot ignore the coffee crisis for both moral and pragmatic reasons. Peru's Junta Nacional de Cafe, which represents many small producers, estimates that between 25,000 and 40,000 hectares of coca farming have been rehabilitated in the last year alone. Old coca plantations are being resurrected and new ones are cropping up. It is not hard to see why. An average hectare of land can produce roughly 1,230 lbs. of coffee a year, which is worth approximately $350. The same land would produce roughly 3,300 lbs. of coca a year, giving the farmer an approximate income of $3,000. Desperate coffee farmers, unable to feed their families, are understandably tempted.

Producer nations have recently committed to restrict the export of low quality coffee, thereby helping to tackle the underlying problem of over-supply. But these countries, among the poorest in the world, need support from consumer nations and companies. If some 5 million bags of the lowest quality coffee were removed from the world market, the overall price of coffee could rise by as much as 20 percent, according to some estimates (3). This would translate into a $1 billion or more of additional income for coffee-exporting countries. The cost of this measure -- likely no more than $100 million -- is hardly prohibitive. Oxfam calls upon coffee companies to join governments and civil society in search of global solutions to the crisis. We urge the NCA and its membership to propose concrete measures that would ensure remunerative and stable prices for farmers, hence promoting sustainable production.

1 -- From interviews conducted by Oxfam, February 2002 2 -- A quintal is 100 lbs. 3 -- Based on research by Christopher Gilbert at Vrije Universiteit, Amsterdam. ICO composite price used as benchmark.