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How the coffee crisis of 2019 can affect you

How the coffee crisis of 2019 can affect you

How the coffee crisis of 2019 can affect you

 

In 2019, an art of milk froth and everything costs an average consumer of coffee in the United States, around $ 5 (£ 4). So, why are the farmers who cultivated the beans behind their morning preparation leaving their plantations for different crops, different jobs or even to seek asylum in a different country?

The world coffee industry is in crisis. This month of May, coffee prices fell to their lowest point in more than a decade at $ 0.88 (£ 0.70) per pound.

The fall is due in large part to the two-year surplus of Brazil, the world’s largest coffee producer, which has had a major impact on producers around the world by introducing millions of kilograms of beans into the market. Economic problems in coffee producing regions such as Central America and Africa are also at stake.

By mid-July, market prices have approached about $ 1, but it is still not far from the lowest price the industry has seen in 10 years.

But in recent years, consumers in the US UU And the United Kingdom has seen the price of a coffee with milk increase, although farmers see less than 2% of those profits.

This is how the crisis is developing in each link of the coffee chain.

For farmers
Worldwide, more than 21 million families live off coffee. Plantations generally have a significant crop per year, so high and low cycles are expected, but the price of the 2018-2019 production year has fallen to historic lows, which makes the climate difficult for farmers.

To simply achieve a balance, most farmers must sell a pound of coffee for more than $ 1.

 

In October, several Central American farmers traveling with the caravan of migrants to the United States told BBC journalists that the coffee crisis had forced them to leave their farms and try to seek asylum in the United States.

In the last 10 years, more than 60% of coffee producers in Guatemala, Nicaragua, El Salvador and Mexico have reported food insecurity during the harvest cycle, according to the Specialty Coffee Association of America.

José Sette, executive director of the International Coffee Organization (ICO), which was founded in 1963 with the support of the United Nations to address sustainability in the coffee commodity market, told the BBC that this current low cycle was so important for the entire industry precisely. Because of its “dramatic” effect on growers.

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“If farmers are discouraged today and are not planting, not taking care of their trees … that is a bad omen for the future, since demand increases by approximately 2% every year,” says Sette. “That’s 3m more bags that we need every year to meet the demand.”

Mr. Sette adds that while the global coffee industry sees revenues of more than $ 200 billion each year, only $ 20 billion reach the producing countries and, ultimately, less than 10% of that reaches the producers. .

“When we reach the level of prices we are seeing today, the industry needs to look at itself and try to find ways in a spirit of shared responsibility, to improve in some way the fate of coffee producers, especially the smaller farms” .

Across Africa, where the market is largely composed of these smaller subsistence farms, this cycle is proving exceptionally challenging.

“In Africa, we are likely to see much more suffering than anywhere else because our returns are quite low,” Fred Kawuma, Secretary General of the Inter-African Coffee Organization (IACO) told the BBC.

“The amount of coffee a farmer gets from his farm is very limited compared to, say, an Indian or Vietnamese coffee producer.”

This means that when coffee prices fall, so does the already small profit margin of a farmer, which makes it impossible to pay for household needs, such as school and health.

This year, Mr. Kawuma says that his organization is seeing how many farmers in difficulties leave coffee for other more lucrative food crops.

“Côte d’Ivoire is one of the countries that at the moment is having serious consequences: farmers are not happy,” he says. “Togo, small producers such as Liberia, Sierra Leone, all the smaller countries are doing very badly and are not sure that they can really continue in production.”

For toasters and coffees.
Chuck Jones knows this industry on both sides: he owns a toaster and coffee shops in Pasadena, California, but almost half of his beans come from his family’s farms in Guatemala, one that is his and two of his cousins.

But at the end of July, one of his cousins ​​in Guatemala is expected to lose his farm.

“The exporter, with whom he has a debt to cover two crops, is taking over the farm because he has not paid,” says Jones.

He says that the “boom and bust cycles” of coffee prices unfairly hurt growers like his cousin, who only make money a few times each decade, especially given access to cheaper options in the commodity market.

“As a buyer, I can easily replace that [coffee],” he adds. “But it hurts because he’s my cousin, and he’s losing his source of income, he’s middle-aged and he’s been living off the farm.”

“Even though my cousin is a producer of high quality specialty coffee, he is still going to lose the farm because of the systems in place to prevent him from succeeding.”

Jones says that industry leaders have been pointing out that roasters should pay more. But for Mr. Jones, who operates a business in a city with a high cost of living and a high price for labor with a minimum wage of $ 15 per hour, “there is no clear winner in the chain.”

Included in its $ 10 wholesale price, roasted coffee includes numerous shipping and ongoing storage costs, labor, machine maintenance and other financing costs.

For consumers
So, how exactly do you break down the price of a coffee with milk for consumers?

Mr. Sette, of the OIC, explains that the retail price of coffee “is not very linked to the price of physical producers”.

“The amount that reaches the producer is 1 to 2%, but things like labor and rent, marketing, all of them occupy a large part of the final price.” Mr. Jones broke down the price of retail coffee in his Pasadena coffee shops, and for a $ 4 coffee with milk, only the cost of coffee (10%) is under Mr. Jones’ control. Organic milk, labor, cups, eyelids, sleeves and coffee condiments are important factors.

“I do not think anyone is making fun of their way to the bank,” he says. Across the country from New York City, coffee director of coffee chain Think Coffee, Enrique Hernandez, told the BBC that making a small coffee with milk costs the company $ 0.28, and sells for $ 4.25. to pay for costs not related to coffee.

That price will rise to $ 4.50 this year, says Hernandez, due to the increase in income and minimum wage expenses.

Checking for solutions
The ICO and other industry organizations are working on changes such as the diversification of income from small farms with other sources of income, the teaching of risk management, the rationalization of production chains and the fight against climate change by adopting environmentally smart agriculture.

“We must also promote coffee consumption in coffee producing countries, where it is often low,” adds Mr. Sette of the ICO. “A promising approach for at least the specialized coffee sector is to foster direct relationships between producers and roasters.”

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