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The global coffee industry, focusing on production, consumption, and the inequality between coffee farmers and large corporations. It discusses the main coffee exporting countries, the role of trade, and the issues faced by farmers, including low prices and exploitation. The document also touches upon the environmental impact of coffee production and the emergence of Fair Trade as a solution.
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‘Black as the devil, hot as hell, pure as an angel, sweet as love’. That’s the recipe for coffee according to French statesman Talleyrand (1754 –1838).
People drink more than 2.5 billion cups of coffee each day coffee, ranging from instant, strong Turkish, Italian espresso, specialist gourmet, organic and no caffeine varieties. Aside from the satisfying ‘buzz’ first thing in the morning, coffees greatest power is how it connects people, places and environments across the world in a complex network of international trade.
Coffee is the world’s most traded product, second in value to oil. Brazil is the world leader in coffee production and USA the largest consumer. Interconnections along the coffee ‘supply chain’, involves producers, exporters, importers, roasters, and retailers before reaching consumers.
The coffee industry worth over $100 billion a year, produces large profits for transnational organisations (TNC) such as Nestle and Starbucks. Unfortunately not all stakeholders along the coffee ‘supply chain’ benefit fairly from its profits. When we pay for luxury lattes at the local café, the price paid exceeds half the daily income of many small-scale coffee farmers. This inequality has led to Fairtrade organisations working to provide coffee growers with improved working conditions and larger slice of the profits. You are aware of the lingo ‘medium mocha macchiato decaf grande skim latte’ now become fluent with the details!
Ethiopians were the first people to recognise the energising effect of the coffee bean plant. It is believed that Kaldi, a goat herder in Ethiopia, noticed goats were friskier after eating red berries from the plant. The energising substance is called ‘caffeine’. The earliest coffee drinking appeared in the mid 15thcentury, in Sufi monasteries in Yemen. The Sufi’s or Whirling Dervishes drank coffee as a stimulant, to help them stay awake during meditation and prayers. Sufi’s spinning is referred to as physically active meditation. It occurs when Sufi’s spin in repetitive circles aimed to unify their mind, emotion and spirit. Today, it is practiced by the Sufi Dervishes of the Mevlevi order in Turkey.
Image: Cappadocia, whirling dervish, (J. Bliss)
Pilgrims, traders and travellers, spread coffee drinking throughout the Islamic world. It reached Mecca (Saudi Arabia), where it was drunk in mosques, and in 17th century Syrian businessmen established coffeehouses in Istanbul. Coffee became available throughout the Ottoman Empire. Formation of culture around coffeehouses dates back to the 14th century in Turkey. As coffee was a powerful aid to intellectual discussions, people met and conversed. The coffee was brewed in large cauldrons, flavoured with saffron, cardamom, opium, hashish and/or ambergris. The Sultan’s coffee service consisted of golden braziers to heat the coffee. Golden pots held on gold chains by slave girls, gracefully passed the coffee in the finest porcelain cup to the Sultan’s lips.
In 1672 the first Parisian coffee café opened and in 1713 King Louis XIV was presented with a coffee tree. Coffee’s growth is tied up with the explosion in trade networks brought about by the spread of international empires. For example, Belgium (9th largest global coffee consumer) established coffee plantations across the Congo and Rwanda in Africa. In London many coffee houses became the world’s most powerful businesses such as Lloyd’s Coffeehouse became Lloyds of London and the Baltic Coffeehouse became the East India Company.
In 1952 the Pan-American Coffee Bureau, promoted the ‘coffee break’ in the workplace. Its uptake was facilitated by the popularity of instant coffee and vending machines. Today coffee has become an institution in the Australian workplace
In Saudi Arabia ceremonies are performed around the consumption of coffee and in Ethiopia their love of the beverage, can necessitate an hour to merely make the drink. Today, coffee is consumed in café’s and sold by street vendors, extending across age, gender and cultural barriers. Coffee drinking is displayed on television such as Frasier, where Frasier and Niles drink lattes in the Café Nervosa, and the six characters in Friends, provide youthful camaraderie, while drinking coffee at Central Perk. As the world has evolved into a ‘gotta-have-it-now’, transnational corporations such as Starbucks have established a chain of restaurants around the world.
Cartoon: https://runningintherealworld.files.wordpress.com/2011/05/barista. gif
A Coffee House in Tophane (Istanbul). 19th Century painting by Megerdich Jivanian (1848 –1906) Source: https://commons.wikimedia.org/wiki/File:Megerdich_Jivanian_(from_Thomas_Allom)_-A_Coffee_House_in_Tophane-_Google_Art_Project.jpg
Once picked, coffee travels long distances, changing hands a great many times. In fact a typical coffee bean changes hands 150 times on its journey from plant to cup. Most coffee is transported by ships. Currently there are 2,200 ships involved in transporting beans each year.
Map: http://www.geocurrents.info/economic-geography/hot-caffeinated- and-expanding-the-global-geography-of-coffee-tea-and-yerba-mate
Graph: https://image.slidesharecdn.com/coffeeindustry-131228133454- phpapp02/95/coffee-culture-in-india-industry-analysis-7-638. jpg?cb=
Ethiopia and Uganda dominate the region’s coffee production. However, with the exception of Ethiopia, Africans drink very little coffee. Globally per capita coffee consumption is low, with leading consumers – Ethiopia (2.27 kg), Madagascar (1kg) and Cote d’Ivoire (0.9kg). However, this is changing with the growing urbanised middle class driving up coffee consumption, reflected by the growing number of local coffee shop chains. Historically coffee has mainly been grown for exports.
Pie graphs: https://assets.weforum.org/wp-content/ uploads/2015/10/151021-Africa-coffee-production-consumption-MG.jpg
The coffee supply chain is complex, open and dynamic. It is composed of different processes and multiple stakeholders of different sizes that compete on price, brand and market share. Stakeholders Farmers, buyers, shippers/transporters, importers, traders, roasters, labelers/packagers, distributors, shop owners/grocery store owners, consumers. Processes Grow (Arabica or Robusta species), pick (hand or machine), process (dry or wet), mill (hull, clean, sort, grade), roast, package, ship/transport, grind, brew, drink.
Infographic: https://tazzadiluna.files.wordpress.com/2014/05/zettwoch_coffee_blueprintsketch.jpg?w=
Germany: Big roaster but not a single coffee bush found!
Image source: (J. Bliss) Karen Blixen who wrote Out of Africa, lived on a property 15 minutes from Nairobi in Kenya. Today the coffee garden contains hundred year old coffee trees. Karen and husband hired local workers, predominantly the Kikuyu to work on the coffee farm.
Black Ivory Coffee is produced by the Black Ivory Coffee Company in northern Thailand. The coffee has been described as very smooth without the bitterness of regular coffee and is among the world’s most expensive coffees, at US$1,100 per kilogram.
Process
The Golden Triangle Asian Elephant Foundation (GTAEF) selects the best 100% Thai Arabica beans picked from an altitude as high as 1500masl.
The elephants are fed 33 kilograms of Arabica coffee cherries to produce one kilogram of coffee. The Arabica coffee beans are digested by the elephants for around 24 hours. Once the elephants have defecated the wives of elephant mahouts (*mahouts work, ride and tend elephants), collect the dung, break it open and pick out the coffee. They are then sundried and roasted.
The elephants’ digestive enzymes breaks down the coffee’s protein, that contribute to coffee’s bitterness. The elephants do not get over active from the coffee, as caffeine is only released when beans are heated.
Increased wellbeing
Image source: http://m5.paperblog.com/i/37/376635/the-black-ivory-coffee- L-DGIlw.jpeg
Image: http://www.look4ward.co.uk/wp-content/uploads/2016/06/simge1.jpg Civet coffee or Kopi Luwak is one of the most expensive coffees in the world. It is produced in Indonesia (Sumatra, Java, Bali and Sulawesi), Vietnam and the Philippines. An Asian cat-like animal called a palm civet or civet cat eats ripe coffee cherries. After they have been partly digested (takes about 24 hours), they are defecated. The faeces are collected, washed and roasted, then sold as kopi luwak. The digestive process is supposed to improve the flavour of the beans. The short supply of this coffee, different taste, and unusual production methods explains the reasons for its high cost.
Kopi Luwak Average coffee Per cup– ordered in shop $35–$100^ $2 –$
Price per 500g $100–$600 $3–$
Problems
Adapted http://www.most-expensive.coffee/make-kopi-luwak-coffee/
Production: from farmer to roasters A large number of small businesses/farmers producing coffee sell their product to a handful of big companies, called transnational corporations (TNC). Farmers sell to roasters TNCs undertake contracts with farmers who sell them seeds, fertilisers and pesticides and in return buy their harvests at low prices. As a result, 25 million small coffee farmers receive about 10% of the cost of a jar of coffee, often toiling in what is described as ‘sweatshops in the fields’. Roasters buy from farmers TNC control the world’s coffee roasters such as Nestle, Kraft and Sara Lee. Nestle has now launched its ‘fair trade’ label. Consumption: from retailer to consumer However, the reverse is true when it comes to consumption. In many Western countries, coffee shops are dominated by a few players. The leading coffee sellers are McDonald’s , Dunkin’ Donuts a nd Starbucks.
Cartoon: http://s3.amazonaws.com/corpwatch.org/img/original/ ethiopiastarbucks.jpg
Patent Steam Coffee Roaster, 1884. Source: Wikimedia Commons
Most of the beans produced in Brazil, Colombia and Ethiopia are Arabica. However, these beans now fetch around $ a 60kg bag- this is less than 50% of what farmers received a couple of years ago. The reason is the production of cheaper Robusta beans, is booming.
A decade ago Vietnam grew an insignificant quantity of Robusta beans. However, today it has expanded production to 25million bags of beans a year. Additionally more expensive Arabica coffee is being substituted for cheaper Robusta varieties. This has resulted is an oversupply of coffee that particularly hurts Arabica coffee producers.
Around 70% of the world’s coffee is grown on farms of less than 10 hectares. These farmers are poor, earn little money and work very hard. Some earn half a dollar a day while the rich people sip a $5-$10 coffee in luxury cafes.
Image source: https://www.oxfamamerica.org/publications/ mugged-poverty-in-your-coffee-cup/
Lower life expectancy, higher infant mortality rates, increased malnutrition and stunted growth in children.
Knock on effect on environment with monocropping and sun grown coffee now the norm – upsetting ecosystems.
Government revenues reduced – less money spent on free education and health services.
Child labour – helps pick coffee cherries Parents unable to pay for education or health services
Families forced to sell land and move to slums in cities
Poverty a major cause of conflict and civil war in some African countries
- less foreign investment and reduced economic growth
The coffee industry’s prices are decided in conference rooms and stock exchanges. As the highest returns in the global coffee industry is skewed towards the latter stages of the value chain (e.g. retailers), more equitable distribution of profits is required for coffee farmers. Most small-scale coffee farmers lack resources and/ or opportunities to diversify away from coffee, making them vulnerable to the changing global market prices.
The international coffee exchanges and dealings of trade ministers at the World Trade Organisation (WTO) hinder solutions to pay coffee farmers a ‘living wage’. However, Fair trade and activist groups work towards a fairer deal for the coffee farmers.
Coffee price fluctuations have a minimal impact on coffee drinkers compared to the impact on small farmers in developing countries, at the beginning of the supply chain. The world coffee market, referred to as the ‘coffee paradox’, has resulted in a widening gap between producers and consumers:
living standards for millions of people in developing countries dependent on coffee
As consumers in developed countries enjoy affordable coffee many noted a wide gap between consumer and producer prices. One response is Fairtrade labelling where producers are guaranteed a negotiated price before harvest begins.
Small coffee farmers, traders, processors and retail outlets operate in a global competitive market where there are severe inequalities in wealth and power.
Consumers also have little negotiating power when it comes to purchasing coffee from large retailers such as supermarkets (Woolworths) and corporate coffee chains (Starbucks).
By contrast large TNCs controlling trading, roasting and retailing of coffee, earn huge profits. These organisations push prices for coffee produced down and prices consumers pay for coffee up.
They capture the financial gap and make billions of dollars.
Intergovernmental organisation The International Coffee Organisation (ICO) is the main intergovernmental organisation for coffee. It consists of 77 producing and consuming countries. It tackles the challenges facing coffee through international cooperation.
Cartoon: http://www.anglonautes.eu/images/ill_caric_poor/ill_caric_poor_ rich_coffee.jpg
Coffee Kids Coffee Kids is an international, non-profit organisation (NGO). It works with local organisations in Latin America to create education, health care, microcredit and community-based programs for coffee farmers and their families. These efforts allow coffee farmers to reduce their dependence on the volatile coffee market Oxfam (NGO) Oxfam provides over $1.6m of annual support to development programs in coffee producing regions These programs seek to strengthen the position of poorer coffee farmers in the market by increasing their business and technical skills. They help small farmers to diversify out of coffee and improve quality of their coffee. World Vision (NGO) World Vision and Jasper Coffee, Australia’s Fairtrade coffee company, sells organic certified coffee from Ethiopia. The Yirgacheffe beans come direct from a community called Kochore, where World Vision assists farmers gain Fairtrade and Organic accreditation for their coffee. Farmers’ receive higher wages through fair trade and children are healthier and are able to attend school. Roaster companies such as Kraft, Nestlé and Sara Lee It is recommended they commit to: paying a decent price to farmers; labelling coffee products on basis of quality; buying increasing volumes of coffee under Fair Trade conditions directly from producers.
Coffee impacts on education Bruno Selugo, 17, and his brother Michael, 15, who live in Mpigi District, Uganda, have both had to drop out of school because they cannot afford the fees. ‘I can’t be successful if I don’t go to school,’ says Bruno. ‘I will just be left here, growing a little food. I have been sent home again and again from secondary school … They just send you away if you don’t have the fees …This is the main coffee season. Everyone used to go back to school with the money from coffee, but now the money is not there. The price is so low people are not even picking coffee… I wish the people who use our coffee could give us a better market. All I want is to go to school.’ Patrick Kayanja, head teacher at Bruno’s school, explains, ‘The number of students is very low. Much as we try to reduce the fees, the parents cannot pay. They always took cash from selling coffee but now it is gone. There was a time, between 1995 and 1997, when we had 500 students. Three years ago we had 250. Last year we started with 140 and ended with 54. This year we cannot go beyond 120, the way I see the situation with farmers.’ Source: http://www.oxfamamerica.org/newsandpublications/publications/ research_reports/mugg ed/mugged_coffee_report.pdf
Map: https://www.fairtrade.net/products/coffee.html
In 1988 Fairtrade certification for coffee was introduced. Fairtrade guarantees farmers a fixed minimum price for their coffee, seeks greater equity in international trade and prohibits forced and child labour. Fairtrade eliminates middlemen exporters who often pay farmers below market rates and then sell at rates set by the New York Coffee Exchange, pocketing excess money for themselves. Fair trade coffee must meet several criteria. Growers must be organised into democratically run cooperatives that agree to independent inspections and use sustainable methods of agriculture. Today, coffee farmers spend at least 25% of the Fairtrade Premium to enhance productivity and quality and their Fairtrade-certified coffee products have won 28 Great Taste Awards.
Diagram: http://wfto.com/sites/default/files/10%20FT%20Principles.png
‘The Grumpy Mule’ promotes sustainable roasting and sourcing and has earnt Fair Trade, Rainforest Alliance and Organic certifications. ‘Rise Up Coffee Roasters’ roasts organic and Fair Trade beans and other brands include ‘Conscious Coffees’ and ‘Kickapoo Coffee’.
Image source: http://images.selfridges.com/is/image//selfridges/554- 78042186-80824_M?$PDP_M_ALL$
Cartoons: http://www.ethicalconsumer.org/portals/0/gee2/cartoon%20coffee-peanuts.jpg; and http://developmenteducation.ie/app/uploads/2016/02/ deved_1270113692.gif
What can you do?
Store/Café
Distributor
Large coffee company
Broker
Exporter
Processor
Middleman – buyer
Producer – small farmer
Store/Café
Fair Trade Distributor
Farm Co-operative
Producer – small farmer
Notes and diagram S. Bliss Background: https://media.licdn.com/mpr/mpr/shrinknp_8 00 _800/p/6/00 5 /0 81 / 1 fb/3f51e5f.jpg
Consumption of coffee is increasing and farmers are struggling to keep up with demand. Unsustainable practices have created loss of biodiversity, deforestation, pesticide pollution, habitat destruction, and soil and water degradation. Hopefully more people mindful of their coffee consumption habits will purchase Fair Trade Coffee (fair salary/treatment of farmers) and shade- grown coffee (natural and environmentally friendly methods of growing coffee).’ (Adapted https//saman3230.wordpress.com/2012/09/)
You buy the bags of ‘green’ coffee beans from the coffee exporter, load them on your ships and transport them to Japan, South Africa and the EU, where you sell them to the coffee roaster. You pay for fuel, skilled people to operate your ships, and insurance for ships and their cargoes. You also pay port fees and taxes for importing coffee.
You purchase the ‘green’ coffee beans from a shipping company and mix the different varieties of bean to get a ‘blend’. You roast the beans and process them to make instant coffee then package it into jars and sell it to retailers. It is a competitive business, so a large amount of money is spent to advertise your brand and provide attractive packaging. You constantly need ti invest money to improve coffee taste and keep ahead of the competition.
You buy the instant coffee, store it until you need it, label it with the price, put it on display and sell it to the customer. You have to pay high rents to sell your coffee at a popular location. You make your shop attractive, which means expensive decorations as well as train and pay sales people to provide first class customer service.
You live in rural Indonesia on a small farm two hectare in size. Robusta coffee is the key crop grown and the main source of income. You plant coffee trees in the shade, weed the ground and industriously monitor that there are no pests or diseases. When the coffee beans are ripe you harvest the coffee ‘cherries’ by hand. You then dry the cherries in the sun and sell them to a local trader. The money earnt from coffee sales pays for the family’s medical bills and children’s school. You have to spend money on pesticides and fertilisers, and every 15 years you buy seedlings to replace the old coffee trees. However, you are experiencing competition from large plantations, Arabica and organic varieties, expensive specialty brands such as Kopi Luwak and climate change.
Divide class into five groups and assign them a role. Hand out the cards.
Hold up a jar of coffee and inform the students it costs $10 to purchase in Australia.
Ask each group to decide how much of the selling price they should get for their work, and provide reasons.
Indonesia is among the world’s top coffee producing and exporting countries. You visit the growers to but their coffee. As the growers are scattered over a wide area, you pay for transport and fuel to collect the coffee. Your factory processes the coffee ‘cherries’ to extract the ‘green beans’. You sort the beans, pack them in bags and transport them to the port where you sell them to a shipping company. The market for coffee is unpredictable, so you sometimes have to pay to have it stored.
Answer the following questions.
Refer to the article on Coffee Biomes (page 29)
What are the differences between free and fair trade?
coffee supplies and price volatility.