Labor is the single largest component of most coffee farmers’ costs of production. In Latin America, for example, labor accounts for the majority of production costs.
When external pressures negatively affect farmers’ profit margins, farmers naturally tend to reduce costs in any way possible. As the cost of labor is the primary expense over which farmers have control, it is typically the first one cut as external shocks arise.
Coffee farmers are currently facing a number of simultaneous shocks, including climate change, fluctuations in coffee prices and the rising costs of inputs. Without proper controls, this can translate into negative impacts, including cuts to workers’ wages, benefits, food and accommodations. This can have drastic impacts on vulnerable farmworkers, most of whom are already living in poverty.
Existing Pressures on Farmers
Coffee farmers were already struggling to cope with fluctuating coffee prices, crop diseases, climate change and pandemic-related disruptions before being hit with inflation and skyrocketing fertilizer costs.
The well-documented impacts of climate change on coffee farmers include vast fluctuations in temperature and rainfall, and increased spread of crop illnesses and pests. It has even been proven to affect coffee quality.
According to the International Center for Tropical Agriculture (CIAT), if new technologies are not put in place to mitigate climate change impacts in coffee-producing regions, Central America will lose around 38-89 percent of the land currently suitable for coffee production. Developing and implementing new technologies to help coffee farmers cope with the effects of climate change will likely represent additional investments and an increase in the costs of production for farmers.
New Pressures on Farmers
The COVID-19 pandemic created a number of additional burdens, with curfews, lockdowns and travel restrictions contributing to severe labor shortages in some regions. This resulted in key actors in some countries, such as Colombia, to call for lowering the minimum age for child labor in the coffee sector.
Furthermore, the war in Ukraine has contributed to exponentially higher fertilizer prices, especially for coffee producing countries like Colombia, Nicaragua and Honduras that source fertilizer from Ukraine, Russia and other western European countries. As fertilizer costs have increased by more than 40 percent in relevant Latin America markets, farmers have seen their already meager profits evaporate.
How these Pressures Relate to Labor Risks
These new pressures on the cost of production of coffee intensify existing labor and human rights risks, as many farmers are desperately seeking to reduce costs. Some of the practices that increase labor risks, or even represent labor rights violations in and of themselves, include:
- Decreases in wages, including by decreasing piece rates or increasing hours of work without increasing pay
- Cuts to worker benefits, food and/or housing
- Forced and/or unpaid overtime to offset decreased production and profit margins
- Reliance on labor brokers to recruit, hire and supervise workers in the face of labor shortages
In Latin America, several countries have reported an increase in labor shortages in coffee-producing regions. These shortages can be attributed to different factors, including low pay and unattractive working and living conditions.
Labor shortages often result in more migrant workers, which in turn increases reliance on labor brokers to recruit workers from faraway communities. As Verité has documented in a number of publications, the use of labor brokers increases the risk of labor rights violations if proper controls are not put in place.
Labor recruiters, who are often paid according to the number of workers recruited, are incentivized to hire as many workers as possible. This can result in deception of workers regarding their work conditions. It can also lead to the recruitment of inexperienced farmworkers, which can have a detrimental effect on productivity and coffee quality, in addition to the legal and reputational risks that coffee farmers can face if their recruiters are implicated in labor violations.
Coffee Companies and Labor Risks
All of these risks can have significant impacts on coffee traders, roasters and retailers, as new regulations increasingly require companies to implement robust due diligence systems regarding human rights throughout their supply chains.
Companies need to first identify and improve their understanding of labor issues and their root causes, then must subsequently work with and support farmers and other stakeholders to prevent and mitigate labor issues
How can coffee companies effectively support farmers in identifying, addressing and preventing labor risks?
- Engage stakeholders and partners. Through identifying and engaging relevant stakeholders, coffee companies and farmers will be in a better position to gather information, build capacity, understand risks and identify opportunities for meaningful interventions.
- Assess risks and impacts. This can be done through a human rights impact assessment or other similar assessment of potential and actual impacts that the coffee company directly or indirectly contributes to. Information from this exercise can help companies and farmers prioritize interventions.
- Embed human rights due diligence in management systems. This can include creating and disseminating supplier engagement policies (also called a code of conduct), updating sourcing practices or training procurement teams on what information to look for from potential suppliers to best assess human rights risk, among other strategies. Developing and communicating clear expectations throughout one’s supply chain is foundational to a human rights due diligence system.
- Focus support to address major labor risks. Depending on the context of each region, this may include working with suppliers and other stakeholders to address labor issues and root causes such as piece-rate pay and production quotas, forced and unpaid overtime, the use of unregulated labor brokers or other relevant issues.
There are a number of publicly available resources that can help companies identify, address and prevent labor risks in the coffee sector. For example, the ILO’s European Union-funded Vision Zero Fund has developed tools on addressing health and safety risks in the coffee sector, while Verité’s U.S. Department of Labor-funded Cooperation On Fair Free Equitable Employment (COFFEE) Project has developed a toolkit on labor issues more broadly, with a focus on child labor, forced labor and recruitment-related risks.
[Editor’s note: This is part of an ongoing editorial series led by Verité exploring labor issues affecting the global coffee sector through its U.S. Department of Labor-funded Cooperation On Fair, Free, Equitable Employment (COFFEE Project). See more of Verité’s work on coffee here. Daily Coffee News does not engage in sponsored content of any kind and all views or opinions expressed in this piece are those of the author/s.]
Quinn Kepes and Miguel Zamora
Quinn Kepes is a Senior Program Director at Verité, where he has worked for over 15 years providing businesses, investors, governments, intergovernmental organizations, workers, and civil society the knowledge and tools that they need to eliminate the most serious labor and human rights abuses from global supply chains. He leads Verité’s practice groups on Worker Agency, Voice and Empowerment (WAVE) and Applied Research for Evidence and Action (AREA). Mr. Kepes has been working on labor issues in the coffee sector for over ten years and has conducted and directed field research on labor issues on coffee farms in Mexico, Guatemala, Honduras, Colombia, Brazil, and Uganda. Miguel Zamora has been involved in agriculture for over 25 years. He has worked in farming, research, extension, business development, and economic development initiatives. From Rural Voices CIC, he supports farmers, workers and companies building more sustainable and resilient supply chains. Miguel supports Verité’s initiatives to create and promote adoption of robust resources to identify, mitigate and prevent labor abuses in agriculture.