DEVELOPMENT: Oxfam Launches Rescue Plan for Coffee Growers

By Jim Lobe Reprint | | Print |

Jim Lobe

WASHINGTON, Sep 17 2002 (IPS) - Oxfam America is launching a worldwide campaign to save the livelihoods of some 25 million coffee farmers in poor countries threatened by a five year freefall in global coffee prices.

The campaign, called “What’s That In Your Coffee”, aims to bring the global supply of coffee beans, which has grown faster than the proliferation of Starbucks coffee shops, closer into line with demand.

Among other measures, Oxfam is calling for the world’s major coffee roaster companies – Proctor & Gamble, Kraft, Sara Lee, Nestle, Starbucks, and Germany’s Tchibo – to commit to paying higher prices for beans and to make at least two percent of their total purchases over the next year “Fair Trade” coffee, and to increase that amount in future years.

Together, those roasters buy more than half the world’s coffee.

Fair Trade coffee, which is certified by an international monitoring group called the Fairtrade Labeling Organization (FLO), is produced by farmers who are paid a living wage by buyers that may also provide other forms of support, such as loans to farmers who lack access to credit.

Global coffee prices have virtually collapsed over the past five years, creating a major crisis for small producers, especially in Central America, parts of Latin America and the Caribbean, east and west Africa, and Southeast Asia.

Worldwide, coffee is currently priced at an average of about 1.10 U.S. dollars per kilogram, while production costs around 1.76 dollars.

As a result, thousands of families have been forced off their land, while working men are abandoning their homes to seek work elsewhere. In Central America alone, nearly 600,000 temporary and permanent jobs have disappeared over the last several years.

Unable to afford books, these families are taking children, especially girls, out of school.

In some coffee-growing areas in Central America and East Africa, conditions have gotten so bad that children are suffering severe malnutrition, according to a report also released by Oxfam Tuesday, “Mugged: Poverty in Your Coffee Cup”.

“There’s a bitter aftertaste in America’s cup of coffee,” according to Liam Brody, coffee programme coordinator at Oxfam America. “It’s the daily poverty and misery faced by millions of desperate coffee farmers and their families.”

Local coffee traders are also going out of business, while, unable to recover loans, some banks, especially in Central America, are collapsing. That is putting heavy pressure on governments to rescue them with funds previously earmarked for such important development priorities as health and education and for debt repayments of their own.

“The coffee crisis has become a development disaster whose impacts will be felt for a long time,” says the Oxfam report.

While the plight of small farmers has become increasingly desperate, the major roasters have been doing very well. Starbucks, which has bought limited amounts of Fair Trade coffee, tripled its profits between 1997 and 2000, while Nestle made an estimated 26 percent profit margin on instant coffee. Sara Lee’s profits on coffee are running at an annual rate of nearly 17 percent, according to the new report.

“With farmers getting a price that is below the costs of production, the companies’ booming business is being paid for by some of the poorest people in the world,” says Oxfam.

The companies have benefited by several important developments over the last decade.

Global production has increased sharply as a result of Vietnam’s entry into the market and increases in Brazil’s crop. While the global supply of coffee has grown by more than two percent a year, demand, growing at 1.0-1.5 percent a year, has not kept pace.

The trend towards free-market systems, encouraged by international financial institutions (IFIs) such as the World Bank and the International Monetary Fund (IMF), has exacerbated the situation. Previously, governments had managed coffee markets both internally and internationally, but economic reforms have greatly reduced their role.

As a result, the market now sets the price, and the companies, which use as many as 20 different coffee types in their blends, can buy from the lowest-cost producer “at the click of a computer mouse”, says the report.

The IFIs also urged countries to liberalise trade and pursue export-led growth strategies that would be to their “comparative advantage”. The result was a major global coffee glut, “a stunning policy failure” that the IFIs should have foreseen, according to the report.

To redress the situation, coffee-producing governments, under the auspices of the International Coffee Organisation (ICO), have agreed to a plan that aims to reduce the supply. But it will only work with the backing of the companies and consuming countries, the report states.

Over the next year, says Oxfam, roaster companies should commit to: paying farmers a price over their costs of production so that they can at least send their children to school and afford medicines and food; reducing supply by raising minimum quality standards as recommended by the ICO and destroying at least five million bags of coffee; and increasing the amount of coffee they buy under Fair Trade conditions to two percent of their volumes.

Donor countries and the IFIs should also create a fund to help poor farmers shift to other crops or livelihoods to reduce their reliance on coffee, consider additional debt relief for affected countries, and support a major international coffee conference next spring.

The plan should be considered as a pilot for a longer-term commodity management initiative to improve prices and provide alternative livelihoods for farmers who produce other commodities that have suffered similar production gluts in recent years, Oxfam said.