by Michael Sheridan of CRS Coffeelands Blog
This is the question David Griswold, ex-President of the SCAA and co-founder of the innovative coffee importer Sustainable Harvest, asked a panel of coffee luminaries at last month’s Let’s Talk Coffee event in El Salvador: Is the coffee business broken?
The answer was a resounding yes.
Much of the conversation in specialty coffee over the past year has focused on the coffee leaf rust epidemic in Central America. And the Let’s Talk Coffee event during which David posed this question was followed by a separate event devoted exclusively to the search for solutions to the current CLR crisis. But leaf rust was not the issue that was weighing heaviest on the minds of the experts he had assembled; they were more concerned about coffee prices.
They are low — lower than costs of production — and they are falling. They are volatile, and the prices roasters pay for their coffee bears no relation to what it costs farmers to grow it. Additionally, the primary mechanism for determining prices, the NY C exchange, is increasingly influenced by factors not directly related to the underlying fundamentals of coffee supply and demand.
The expressions of concern for the coffee business were candid.
Luis Fernando Samper, Communications Director for the powerful Colombian Coffee Growers Federation, said Colombia can’t make it in coffee in a $1.04 market. He should know: Colombia’s government has responded to not one but two national strikes led by coffee growers, with a march on Bogota scheduled for 3 December, and the Federation is currently paying growers subsidies to keep them afloat in this miserable market.
Chad Trewick, who spent many years buying coffee for one of the largest specialty coffee retailers in the United States, confirmed that farmers aren’t breaking even with today’s prices. He wondered aloud how many of us would continue to work in a business in which our earnings were so often negative, and were determined by processes as inscrutable as the movements of the futures exchange are to the average coffee farmer.
Gilbert Gitali of KZ NOIR in Rwanda was asked what single message he would convey to consumers if he could communicate with them directly. His answer: You need to pay more for your coffee.
Oscar Schaps, a fourth-generation coffee grower and risk guru from Hencorp, said there is simply too much coffee out there, and that farmers who can’t achieve high levels of production efficiency or cup quality don’t have a future in coffee.
The coffee business, in other words, is broken. And the biggest problem in the coffee market may be the market itself. Or at least, the way it goes about determining what prices farmers will earn for their coffee.
But price is only one of the ills ailing the coffee business. There is a long list of other challenges at origin that we know about — limited farmer organization for the market, low productivity, low quality, rising input costs, limited access to agronomic and financial services, limited investment in research, diseases like CLR, gradual loss of coffee suitability due to climate change, seasonal hunger in coffee communities, etc. And there are, most likely, other challenges at origin we don’t yet fully comprehend.
The coffee business can be fixed. But before we start talking treatments and cures, we would be well-advised to spend a bit more time agreeing on a diagnosis.
Michael Sheridan is the Director of Sourcing and Shared Value at Intelligentsia Coffee. He also orchestrates the Extraordinary Coffee Workshop (ECW), an annual supply chain summit that convenes Intelligentsia’s Direct Trade partners from around the world. Prior to joining Intelligentsia, Sheridan led coffee programming for the international development agency CRS for more than a decade. He is a member of the SCA’s Sustainability Center Advisory Council, and has served as a volunteer advisor to the industry on sustainability issues since 2012.