Current approaches to coffee pricing and value distribution in the global coffee market are unsustainable and present a lack of long-term resiliency in the coffee industry, according to the latest coffee market report from the International Institute for Sustainable Development (IISD).
Through 34 text-heavy pages and citations of dozens reputable published sources, the report provides an overview of issues related to green coffee prices, while underscoring some of the industry’s most deeply entrenched impediments to economic sustainability in coffee farming.
An independent think tank based in Canada with funding from dozens of private and public agencies throughout the world, the IISD includes coffee as one of its core commodity focuses. The latest report was authored by IISD representatives Steffany Bermudez, Vivek Voora and Cristina Larrea.
Called “Coffee Prices and Sustainability,” the report was published last fall, coming three years after the group’s most recent coffee sector update.
While global commodity coffee prices in 2019 were at woefully low and decidedly unsustainable levels, the 2022 report came last September, as global coffee prices were relatively high.
[Editor’s note: The 2022 publication slipped through DCN’s sizable cracks in sustainability coverage, yet it is nonetheless relevant to today’s coffee market.]
The most recent report’s authors contend that increased demand, increased costs of coffee production, continued price volatility, increased threats related to climate change, and the built-in inequity of power dynamics in the coffee value chain — among other factors — continue to threaten global coffee sustainability, even in a period of relatively high prices.
Much of the report’s focus is on voluntary sustainability standards (VSSs) — i.e. third-party certifications such as Fairtrade or Rainforest Alliance — in the coffee sector.
By and large, the report takes a pro-VSS stance, citing a wealth of research that shows how VSS engagement can boost farmer household incomes over time, whether through price minimums or premiums. The authors also state that VSSs tend to play an especially crucial role when global coffee prices are down.
However, the authors also repeatedly warn that the market growth for certified coffees has been slowing in recent years, and that only 12%-65% of the coffee produced under VSS compliance was sold as such between 2008-2019.
“We found that increased farm gate prices derived from adopting VSSs are not enough to meaningfully raise farmers’ crop income, largely due to recurring dynamics in the international coffee market, as well as lack of demand for VSS-compliant coffee and rising production costs”, IISD Policy Analyst Steffany Bermudez said during the report’s launch.
The report does end with a list of large-scale tasks actors both upstream and downstream in the coffee value chain can take to address coffee’s ongoing economic sustainability dilemma. Notably, the report calls for increased transparency in green coffee prices, down to the “farm gate” level as opposed to merely FOB.
“Increasing price transparency, so farmers and other value chain actors can see comparable transaction prices in the market, is key to help producers. Too often farmers have no choice but to negotiate in the dark and this hits their bottom line,” Bermudez said. “Price transparency also helps buyers to verify whether the premiums they pay are reaching the farmers.”
[Note: This story has been updated. A previous version contained two typos that incorrectly identified the IISD as the IISC.]
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Nick Brown is the editor of Daily Coffee News by Roast Magazine.