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ECONOMY: Still Not Enough in That Coffee Cup

Sanjay Suri

LONDON, Jan 19 2004 (IPS) - The rise in coffee prices is “still too small” to tempt back many producers who have switched to growing poppy and other such crops, the International Coffee Organisation (ICO) says.

The London-based ICO has expressed growing concern that farmers are taking to production of poppy, marijuana and other illegal stimulants because low coffee prices are making production unprofitable.

Farmers are taking to such alternatives “in Colombia and in certain other Latin American countries to a sufficient extent to make this a worrying development,” Pablo Dubois from the ICO told IPS.

“The more entrenched coffee growers have kept clear of such alternatives, but we are seeing them in places where there are strong financial pressures on growers,” Dubois said.

The composite indicator price for coffee has recovered to 56 cents a pound from 50 cents late last year, Dubois said. He called this “a rise, not a recovery.”

Coffee production is at present less than demand, largely due to a shortfall in Brazil, the biggest coffee producing country. This is the first deficit after five years of surplus production. But questions still remain how far Brazilian production will recover in the next season from later in the year.

There is every indication that production will not be as high as expected, but that is still no guarantee that prices will recover proportionately, Dubois said. Prices will be affected by the large stocks kept in importing countries and by several other natural factors, he said.

The rise to 56 cents a pound is far short of taking farmers to old margins. In the 1980s the price of coffee was 120 cents a pound. In the late 1980s earnings by coffee producing countries were 10 to 12 billion dollars a year. Now coffee producing countries earn only about five billion dollars a year.

The marginal rise is expected to make little difference in areas where farmers have turned away from coffee.

More and more Ethiopian farmers are now growing the illegal stimulant chat, the non-governmental organisation Oxfam says in a report. Farmers in Peru and Colombia are increasingly replacing coffee with coca and poppy, the report says.

“Coffee growers are not suddenly international narco-traffickers,” the Oxfam report says. “In reality, the giant transnational companies that control the global coffee market have failed to solve its worst crisis in the last 100 years.”

In Peru coca offers three dollars a pound compared to coffee, and a litre of opium latex up to 1,000 dollars, the Oxfam report says. “Without more political will to compensate for unsustainable low prices and solutions for the crisis, Oxfam fears that many more coffee farmers will begin growing raw materials for the narcotics industry,” the report says.

Coffee has been hit by the failure of the World Trade Organisation (WTO) negotiations in Cancun in Mexico last year, Oxfam says. “Any chance that the world’s trading nations could have agreed on better ways to encourage coffee farmers to diversify into other legal crops were dashed at Cancun,” Oxfam says.

Proceedings under the WTO can have critical consequences for coffee production – and for dangerous diversification as a result of low prices, says Constantino Casasbuenas from Oxfam.

“If the WTO were to eliminate subsidies and tariffs, and there is the same level playing field for different countries, the situation would of course change,” Casasbuenas told IPS. In the present scenario coffee growers in Latin America “find it impossible to compete against farmers enjoying high subsidies.”

The tough tactics used to handle the problem are not helping, he says. “In Colombia or Peru, instead of finding a real solution for small producers, the land where the illicit crops are being grown is being sprayed with poison,” he said.

“This is destroying the soil, and the soil here will be finished for decades.” Besides hitting the farmers, this is creating an “environmental disaster”.

International institutions must accept where the responsibility lies, he said. “It is their policies that do not give farmers the choice of diversifying to other agricultural products.”

Dangerous diversification from coffee production has meanwhile been growing around the world. “We have seen farmers turn to marijuana, poppy and coca in Colombia, and we are seeing similar phenomena in south-east Asia,” Casasbuenas says.

“This kind of thing is becoming notorious because of the low coffee prices.”