Coffee is the second most traded commodity in the world, after oil. More than 2.25 billion cups of coffee is consumed everyday all over the world. More than ninety percent of the cultivation happens in developing countries while developed countries are the major consumers. It employs millions of people in its cultivation, processing and trading. Earlier, the ICO (International Coffee Organization) was the institution in the coffee industry which controlled and regulated coffee trade from 1960s to 1989. They ensured that the price of the coffee was regulated by introducing the quota system which reduced excess supply and stopped the price from dropping too low. They also implemented various price control mechanisms and promoted coffee consumption to increase demand. The agreements signed under ICO had both importing and exporting countries. These agreements helped poor Latin American and African countries tremendously. But all the efforts went down the drain as US pulled out of ICO in 1989, after which coffee prices plummeted. Coffee Farmers were marginalized and earned just sustenance wages.
After the advent of WTO (World Trade Organization) and IMF (International Monetary Fund) to the scene, the situation of the coffee farmers worsened. WTO was not a fair platform for the third world countries because the developed countries, such as USA, have a lot more delegates that handle negotiations for them behind closed doors. This strength in numbers, coupled with the economic prowess of the developed countries, leads to the suppression of the voices of less developed nations. For example, USA does not allow the Ethiopian government to subsidize the coffee farmers, while simultaneously subsidizing their own dairy farmers. It is often seen that US and EU shift the focus of WTO conferences towards their problems instead of more important ones, such as poverty and development in poorer countries, which is exactly what happened when Ethiopia raised their concerns about the coffee farmers. Export subsidies allowed the developed world to gain market share in developing countries and put a downward pressure on prices and competed unfairly with the farmers of the third world. But after the developed world lost their footing in the export agricultural market they started campaigning against the export agricultural subsidies and stopped it. Earlier, the largest chunk of subsidies were given by the developed world to their farmers and after the year 2000 developing countries such as India, China, Vietnam and Thailand began subsidising their farmers. We should remember that the developing world is the one who exports agricultural products such as rice, wheat, maize, cotton, milk, mutton etc. to the developed world while developed world takes all these raw materials and processes them to create processed foods such as cheese, chocolate etc. which could be sold in other markets without restrictions even though all the ‘raw material’ obtained from their own farmers have been subsidized by their government.
One way by which farmers try to stay in the market is by becoming part of fair trade. Fair trade is a trade practice which promotes better trading conditions, price and sustainable agriculture practices. Big brands which are able to spend millions on advertising are able to influence the consumers, making them believe that they are getting the best quality for the higher cost incurred by them, while similar quality item would be available just across the aisle which is ignored by consumers because it is produced by a lesser known brand. This is the example of classic asymmetric information which causes the consumer to select a product for a higher price. The middlemen between the farmers and buyers were making a lot of money by exploiting the farmers. The coffee companies sell one cup of coffee for more than 10 times the price which was paid to the farmers for 1kg of coffee (1kg of coffee beans could produce 80 cups of coffee in 2006). Now, the farmers are comparatively worse off as they get the price of one cup for every kilogram they sell. The farmers are forced to quit farming coffee and turn towards cultivating khat (chat), which is a narcotic drug that could destroy their future generation. Africa was the only continent which got poorer by trade in the last 20 years. Africans are forced to depend on aid sent by richer Western countries while they could sustain themselves better if they received an increase of even one percent in their trade with other nations as that would amount up to $70 billion towards their GDP, which is five times the amount that they receive in aid. The four corporations, namely Kraft General Foods, Nestle, Proctor & Gamble and Sara Lee, which controls the world market is another horror that these farmers have to suffer.
Climate change is another villain that the coffee farmers face. Coffee plants need a temperature between 15 to 26 degree Celsius to thrive. Global warming, which causes less rainfall and a rise in temperature, could cause a huge blow to the coffee industry. In Ethiopia, summer and spring rains have declined by 15 to 20 percent since 1970s, and frequency of droughts have also increased in recent years. A recent study published in Nature Plants shows that Ethiopia could lose up to 60 percent of its coffee growing areas because of climate change. Farmers adopting to this change have started growing false banana crops to shield their precious coffee. Some farmers are also growing alternative crops to battle with this issue. Researchers believe that as lowlands get struck first and become inhospitable for coffee farming, farmers could grow coffee in higher altitudes as a short-term solution. But in long run, the only solution to protect the farms from climate change is by reforestation, renewable energy and other methods.
List of citations and references
Strubenhoff, Heinz. “The WTO’s Decision to End Agricultural Export Subsidies Is Good News for Farmers and Consumers.” Brookings, Brookings, 28 July 2016, https://www.brookings.edu/blog/future-development/2016/02/08/the-wtos-decision-to-end-agricultural-export-subsidies-is-good-news-for-farmers-and-consumers/
Stratford, Charles. “Ethiopia’s Coffee Industry Threatened by Climate Change.” Ethiopia News | Al Jazeera, Al Jazeera, 27 Aug. 2017, http://www.aljazeera.com/video/news/2017/08/climate-change-threatens-ethiopia-coffee-production-170827102529018.html
“Coffee under Threat.” BBC News, BBC, http://www.bbc.co.uk/news/resources/idt-fa38cb91-bdc0-4229-8cae-1d5c3b447337.
2001., William Minter November 1. “Foreign Policy In Focus.” Africa and the World Trade Organization: The Issues in Brief, fpif.org/africa_and_the_world_trade_organization_the_issues_in_brief/.
Francis, Nick and Mark Francis, directors. Black Gold. Speakit Films, 2006.
Columbus, Courtney. “Ethiopia’s Coffee Farmers Are ‘On The Front Lines Of Climate Change’.” NPR, NPR, 19 June 2017, http://www.npr.org/sections/thesalt/2017/06/19/533538555/ethiopias-coffee-farmers-are-on-the-front-lines-of-climate-change.
The author, Danish, is a student of Jindal School of Public Policy.
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