Hopeful Signs On The Horizon: Digging Out of the Price Trough
BY DONALD N. SCHOENHOLT
In this conclusion to his three-part series on the current coffee crisis, Donald Schoenholt summarizes ways people around the world are helping the farmer, and offers suggestions as to what else can be done.
In times of turmoil,it is comforting to remember the lessons of history. The current coffee crisis will run its course, just as those of the past. Producers will sustain real pain, and some farmers will stop farming. Coffee farm workers and their families, perhaps in large numbers, will be displaced. Consumption will continue to grow in new markets in Eastern Europe and Asia. The out-of-home market will continue to grow in North America, and Western Europe, even in some producer nations as Brazil. The market dynamic will reverse as supply of stocks and demand equalizes. The rebound will be hurtful to the consumer, and may be severe enough to curtail consumption due to high prices. In time again there will be oversupply because high prices will bring a new wave of planting in an effort to cash in on the high price levels which will in turn begin the round again. The economic cycles of coffee are as old as the coffee trade. The question remains whether this generation of coffee leaders, who have accomplished so much for the consumer in the way of product and price point choices, can do as much for their farmer partners. Whether we can find the answers to prevent the repetition of this unhealthy business environment once and for all is a healthy challenge. There are some hopeful signs on the horizon.
The Eastern African Fine Coffee Association (EAFCA) funded by the World Bank and the U.S. Government is promoting open auctions which they hope will support the better grade East African coffee values. Internet auctions such as those held during the last year in Brazil, Panama, and Guatemala have illustrated that such venues can bring substantial prices to those farmers who produce, enter and win regional and national cupping and grading competitions. Also, EAFCA is attempting to create formal appellations for growing regions. The first of these would be Yirgacheffe in Ethiopia.
The SCAA has begun working on a certification system which would both guarantee origin (a response to the 1990s Kona Kai scandal) and cup quality through a rating system akin to that used by Wine Spectator Magazine. Certified and cup rated coffees would then be offered for sale through an Internet auction system in part or whole administered by the SCAA.
Partnering between individual farms, farmer cooperatives and specialty roasters is also a desirable effort to support small independent farmers and co-operatives. Green Mountain Coffee, Waterbury, Vermont, is a leader in efforts to partner with and support their farmer sources at origin. In addition to these independent activities this socially responsible roaster has entered an agreement with TransFair USA whereby all of the company’s regular organic coffees will be certified Fair Trade by the organization. In hard times for public companies, Green Mountain sales are up, and its stock price has soared during the last year. Those who aspire to a better future for all in the coffee world might use their efforts as a model.
LONG TERM SOLUTIONS
In the U.S., coffee people and consumers with their hearts in the right place can pro-actively reach out to government and the public by taking on issues of importance to the media.
If an organized group wants to reach out to Americans and have them bring their ideals home there are many large coffee users to approach who are sensitive to grass roots voter pressure. The U.S. armed forces remains a tremendous buyer of roast coffee. Other branches of the government also buy coffee. There are high profile buyers too, including the coffee served at the Executive Mansion, and in the dining facilities of Congress.
Each state operates hospitals, penitentiaries, and other places where coffee is served throughout their jurisdiction. Amtrak, subsidized by the federal government for a generation, buys and serves coffee by the bushel. In addition there are large businesses preparing coffee for the supermarkets, and at fast food outlets that would be sensitive to public interest in being more environmentally and socially sensitive in their choice of raw material sources.
As painful as these coffee boom and bust cycles are, efforts throughout the last 100 years to artificially control supply to stabilize prices have resulted on each and every occasion with long term disappointment. Retention and valorization programs have failed. Well-meaning international agreements including trade quota provisions, and guaranteed minimum price floors likewise have failed to prevent wild price fluctuations. In the 1980s the U.S. acted on its long-held belief that the International Coffee Agreement was being manipulated by producers to be at all times grossly unfair to consumer nations who were parties to the Agreement, while favoring non-member nations with lower prices. Contributing to the end of the last ICO Agreement with quotas was producer nation intransigence, and insensitivity to their customer’s needs. Impasse resulted in the end of U.S. participation. The collapse of these international price control efforts and the subsequent wild coffee price fluctuations have seen the “C” above three dollars and below 60 cents. The current steep decline in world coffee values can be said to have been caused by a failure of international political and economic understanding. Still, prices would not have failed if the market fundamentals were there to keep them strong.
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