Mercy Global Concern - 2002

Poverty in your coffee cup

" The coffee farmers of Latin America are suffering the worst crisis in a hundred years. Hard working coffee farmers are falling deeper and deeper in debt because of the price which transnationals pay."

There is a crisis destroying the livelihoods of 25 million coffee producers around the world. The price of coffee has fallen by 50 per cent in the past 3 years to an all time low. Developing country coffee farmers are facing grim prospects. Farmers sell at a heavy loss while branded coffee sells at a huge profit.

Families dependent on the money generated by coffee are pulling their children especially their daughters, out of school. They can no longer afford basic health care and are cutting back on food. Beyond the coffee farmers, the local economy is suffering. The coffee market is failing. Ten years ago producer-country exports captured one-third of the value of the coffee market. Today, they capture less than 10%. The four big coffee giants - Kraft, Nestle, Procter & Gamble, and Sara Lee, each have coffee brands worth US$1 bn or more in annual sales. Together with German giants Tchibo they buy almost half of the world's coffee beans each year. Profit margins are high -- Nestle has made an estimated 26% profit margin on instant coffee. If everyone in the supply chain were benefiting this would not matter. As it is, with farmers getting a price below the cost of production, the companies booming business is being paid for by some of the poorest people in the world.

" The urgency of the coffee crisis cannot be overstated. 25 million coffee farmers are dependent on governments, coffee cooperatives, trade unions and NGO's coming together to solve the problem of the price collapse."

Paying prices as low as they can go to coffee farmers is a dangerous business strategy. It is particularly risky given that companies depend on the goodwill of consumers. The price of a cup of coffee in the 'up-market' coffee houses is not matched with what poor farmers are paid for their product. The rise of Fair-Trade sales in recent years would indicate the some consumer's care about the misery of those who produce products.

Coffee production is at an all-time high. Eight percent more coffee is being produced than is being consumed and this has contributed to the crisis. Because the coffee market operates in a free market economy, the giant producers are laughing all the way to the bank! At the other end of the market are poor farmers, so desperate that they have to 'take or leave' whatever price traders offer. They are caught in a bind because to move out of the coffee into something else, costs money which they do not have.

In the face of such misery, rich coffee consuming countries have responded with complacency. In order to change this situation, a systemic approach is needed. The challenge is to make the coffee market work for all. The open low coffee market is leaving some of the poorest and most vulnerable people in the world negotiating with the rich and powerful. The rich get richer and poor go under. Active participation by all who drink coffee is needed to change this situation. Oxfam is calling for a Coffee Rescue Plan. Such a plan could if implemented result in:

• Multinational Companies paying framers a decent price (above the cost of production) so that they can send their children to school, buy medicine and have enough food to eat.
• Coffee companies committing to buy coffee from Fair Trade sources.
• The creation of a fund to help farmers move to an alternative livelihood.
• Companies being urged by their governments to pay a fair price for all commodities, including coffee.

  "If a few companies were less greedy, the people at the bottom would have a lot more. We can do our bit by pressuring politicians and by buying Fair Trade coffee."

Next time you drink a cup of coffee, spare a thought for the farmers who produced it!

Deirdre Mullan RSM
Director
Mercy Global Concern
NY