Long championed by governments, private companies and nonprofits as a means of driving development, coffee has become one of the world’s most traded commodities. But while both consumer demand and prices have continued to increase, and coffee companies have registered record profits, the engines of this $200 billion industry — many of the world’s millions of coffee farmers — go to bed hungry, every night. This has been going on for decades.
Our two organizations, Heifer International and Lutheran World Relief, have worked with coffee farmers for more than 10 years. We have partnered with some of the biggest names in the industry. While we have had impact at a small scale, hunger and poverty has worsened in the coffeelands, forcing some farmers and workers to migrate. With conditions deteriorating for many coffee growing families, we are questioning whether we have the right approach.
Our search for a solution that will end poverty for these key players in this lucrative industry has led us to ask: does continuing to work with coffee companies that are profiting from the current market structures at the direct expense of farmers make us unintentionally complicit in pushing coffee farmers further into poverty?
Prices paid to coffee farmers keep falling and are currently below their cost of production. Yet retail consumer prices continue to rise. These retail price increases are not being passed on to producers in the form of fair prices. Today, less than 10% of the final price of coffee actually makes its way into growers’ pockets. We estimate that if we are to end poverty for coffee farmers, this figure needs to at least double.
Many years of work and millions of dollars spent by governments, companies and nonprofits have failed to ensure a fair and dignified pricing arrangement between farmers and roasters. Farmers remain price-takers and, in most cases, are unable to make a living income from their farms.
Consumers often see farmers as the faces of the coffee they buy, but are the projects we design and execute with financial support from roasters and others doing enough to address the root causes of this imbalance in the coffee value chain, or are we just feeding PR campaigns? In seeking a solution to the crisis facing farmers, this is a question we are asking ourselves, and we wonder whether other actors in the coffee sector share our concerns.
Farmers and workers do the hard work. They labor throughout the year to produce the coffee that we all love that is the foundation of this lucrative industry. Simply put, they need a better price for their hard work and their coffee.
We need to make this happen. We will be taking action, reaching out to consumers, private sector partners and other stakeholders to make them aware of the problem, and show how they can be part of the solution.
By working together with all actors in the coffee value chain, we can end poverty for millions of coffee farmers and workers. Urgent action is needed. Without it, we are all only pushing farmers deeper into poverty, an end that serves no one.
Pierre Ferrari, President and CEO Heifer International
Daniel Speckhard, President and CEO Lutheran World Relief
Pierre Ferrari and Daniel Speckhard
Pierre Ferrari is the president and CEO of Heifer International. Daniel Speckhard is the president and CEO of Lutheran World Relief
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Or we could just stop diverting life changing roasting income from farming communities and pretending it’s not all about profits. We do and we don’t have any of these problems you guys have http://www.not1bean.com
I have been in the coffee field for more than 30 years mainly in exports . The questions you have raised are very relevant and more so now since the input /production costs have gone higher and climate change impact is beginning to affect . As you have figured out correctly what ever you are doing is feeding PR campaigns…
Not for decades, it’s been going for at least one and a half century. Campaigns may be important to improve quality or yields, but as in all economic activities in the world, fair prices is the key to sustainability, but programs are a lot cheaper PR campaigns…
Mr Ferrari and Mr Speckhard if you are interested, I have a project to improve the mexicain coffee chain based on fair prices and transparency.
The root cause of this problem is that coffee farmers do not have access to consumer markets. As a result, they typically receive $1 for every $10 the global coffee market creates!
However, what if we turned this equation around and purchased freshly roasted coffee directly from growers? Profits in the coffee supply chain are very good for roasters and retailers. That’s why some farmers have organized themselves to roast and brew their own coffee in the United States.
I am the CEO of Pachamama Coffee, a California-based roaster that is 100% owned and governed by small-scale farmers in Ethiopia, Guatemala, Nicaragua, Mexico and Peru. We roast and distribute coffee throughout the USA. By going direct to market, Pachamama’s farmer-owners capture revenue of more than $12 per pound of coffee sold, on average. We are not the only growers doing this.
Many farmers are solving their own problems by moving downstream to directly serve customers and organizations like Lutheran World Relief. Why not applaud and promote the efforts of farmer leaders like Merling Preza of PRODECOOP Cooperative? As a co-founder of Pachamama, Merling today serves as the President of the Board of Directors. At PRODECOOP, owned by 2300 families in Nicaragua, they’ve empowered themselves by investing in a roastery, cafes and staff in Sacramento.
The problem is NOT lack of access to market – that daft – how is a small farmer going to sell to Nestle? You need aggregation. The problem is small farm size. It doesn’t matter where in the world the farmer is, if a farmer had 1ha of agricultural land, he is always going to struggle.
You can mess around at the fringes with initiatives like this, and pat yourselves on the back. But the real problems remain. Land tenure (to allow collateralisation), infrastructure and farming efficiency are the only things that will change anything.
Any more questions?
Mr. Tremain, how can we spread this model that you have at Pachamama throughout the US? I am in the Sacramento region and would like to sit down and understand how this model can gain greater adoption.