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Corporations Paying Cash for Coffee, Threatening Local Cooperatives

With coffee prices soaring, multinational brokers are increasingly offering farmers cash for beans, luring them away from local cooperatives that have prices fixed in contracts months in advance.

rising coffee prices threatening cooperativesAs back-to-back poor harvests in much of Central and South America continue to create shortages in the worldwide supply of beans, big trading houses including Nestle SA and ED & F Man Holdings are offering coffee producers cash at prices that are slightly higher than what was previously negotiated with local cooperatives, according to a recent Wall Street Journal report.

Local cooperatives have been in place for decades to consolidate coffee production operations and give coffee farmers some more power at the bargaining table.

“For cooperatives, it’s very difficult as we can only compete with a small amount of capital; we don’t have the same economic power as these big companies,” Alvaro Gomez, general manager of the 6,200-member Coocafe cooperative in Costa Rica, told the paper.

With the interference of multinationals leading many Central and South American coffee cooperatives to default on agreements with roasters, some are beginning to fight back.

“We had to go to the producers and say look, you guys fixed at $1.80, and today it’s at $2 a pound. So let’s make an agreement: We’re going to increase the price 20 cents but please don’t sell your coffee to the intermediaries…or transnationals any more,” Gerardo Alberto de Leon, manager of trade at the Guatemalan coffee cooperative Fedecocagua, told the paper.

For the full story: Wall Street Journal



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