Jul 14, 2019

Growing coffee for peanuts

Photo: Eric Lafforgue/Art in All of Us/Corbis/Getty

By one measure, coffee has rarely had a better day — it is the beverage fashion of choice, conferring class, cachet and cool on its drinkers almost regardless of their age or station, leading to chronic lines out the door of cafes in country after country.

But that's only if you are a retailer or restaurateur: If you are growing the beans, it is a time of want, with prices at 14-year lows and farmers leaving the business in droves. Now, with what experts fear could be the collapse of a crop that has lifted numerous regions out of poverty, growers are making a new attempt to save themselves.

What's happening: For decades, coffee growers, serving among the most internationally dispersed clientele in food, have weathered topsy-turvy prices, the result of chronic over-growing, mostly by Brazil. In 1962, the growers, inspired by the creation of OPEC by oil producers two years earlier, decided to do something about their misery. They started what they called the International Coffee Agreement, a cartel through which they would attempt to control production, and thus prices.

  • The agreement injected some stability into the market, but was undercut in the late 1980s when the U.S. withdrew. Since then, growers have made various new attempts to enforce supply discipline on themselves. But so far nothing has worked.
  • The latest attempt occurred this week in Capinas, Brazil, where growers met to try to dig out of the price trough.
  • Meeting Wednesday and yesterday, they agreed to differentiate coffee with stamps denoting a bean's origin and other factors, Reuters' Marcelo Teixeira reports. Production will not be tightened.

"The tragedy is that even though we are paying $5 for Starbucks, this is not trickling down to the producer. If a more equitable mode of production doesn't emerge, I don't know what the future of coffee is," Carmen Kordick, a professor at Southern Connecticut State University and the author of "The Saints of Progress," tells Axios.

What's next: In May the price of beans plunged to 87 cents a pound, far below the approximately $1.20 price of production, though it has since risen to $1.06. Weighing on the price continues to be oversupply, particularly from Brazil and Vietnam, the biggest producers.

The only relief has been for farmers growing particularly valued beans, such as those from parts of Tarrazu, Costa Rica, whose crop commands a significantly higher price, Kordick said.

If you are not from such a region, the only thing that has provided balance over the years has been the occasional natural disaster, said Jonathan Morris, a professor at the University of Hertfordshire and the author of "Coffee: A global history." In 2007, for instance, a disease called coffee rust wiped out coffee in Latin America, pushing prices back up to relatively high 1990s levels.

Morris advocates a simple solution: People in places that are not currently quaffing down coffee, like Americans for instance, need to start — especially in countries that are primary bean growers. He singles out China, India, Vietnam, and much of Africa.

  • In Campinas this week, the growers made a stab at promoting producer consumption. Over the coming months and years, it will be seen if they come through.
  • Meanwhile, experts say a lot of growers may not survive.

The bottom line: There have been five big eras of coffee, says Morris. "If there is to be a sixth, you would need to see producer countries as consumer countries. That is what we need to correct the price."

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