Coffee Buzz: Smaller Harvests, Higher Prices
Brandon Sun “Small World” Column, Sunday, July 11 / 11
Prices are going up! With the rise in the cost of petroleum products, global prices for food products, including coffee and cotton, and many minerals as well are rising. Blame steeper bills for transportation and the operation of machinery, for agricultural chemical inputs, and other related items.
This situation is hurting consumers in Canada and overseas, and is an indication of significant change along the chain from field or factory to store or home.
Many observers are commenting on the rash of demonstrations and rebellions taking place around the world. While our political leaders and the media may attribute this discontent in Europe, the Middle East and North Africa, to a yearning for democracy, it is as much about the shrinking ability of ordinary people to afford three meals a day as food prices have risen at least 10% in recent times.
Loss of livelihood and growing hunger are the fuel of opposition and change.
The Food & Agriculture Organization (FAO) of the United Nations reports that food prices have risen 25% in Vietnam and 11% in China this year.
Corn prices for edible varieties around the world have doubled as farmers have taken advantage of government subsidies to grow corn for bio-fuel rather than for food. Wheat prices are also up – 70%!
Coffee prices on the world market have doubled in the past year. Many companies, such as Starbucks, Folgers and Dunkin’ Donuts, have followed this trend with repeated smaller increases, 15 to 25% at a time. This increase is particularly true of bags of coffee to purchase and take home, while the prices of liquid coffee in cafes have stayed relatively stable as companies make such a huge profit on these anyway.
The cheaper brands, meanwhile, are more composed of “filler” (Robusta as opposed to Arabica beans).
Along with oil prices, climate change is driving coffee prices.
Shortage of supply, which affects demand and price, has been created by too much rain in Latin America and not enough in East Africa, leading to small, slow and/or poor quality crops. Sales of coffee, like those of gas, have not decreased as people need their caffeine fix. Some retail outlets worry that the fancier coffee drinks and the organic and fair trade brands will suffer as they start off more expensive.
However, higher quality, environmentally and ethically produced varieties are being ratcheted up in production as the popularity of these brands is growing faster than that of conventional brands.
Interestingly, coffee researchers are now saying that our world may have reached “peak coffee” supply, just as we talk about “peak oil.” That is, faced with challenges such as climate change, the time it takes to get new coffee crops “on line,” and the growing demand for coffee, we may be facing a situation of shortage and the limits of potential supply!
To try to eke more coffee out of the system, producers are replacing old varieties with new more vigorous ones that resist disease and pests.
Loans are being offered to coffee producers by their national governments to encourage them to invest in the production of greater quantities and quality of beans.
Manitoba’s Derryl Reid is owner and operator of this province’s only fair trade certified coffee roaster, Green Bean Coffee Imports. After five years in “the field,” his small business finds rising prices yet another difficult challenge to deal with. This spring and summer, Reid has been visiting “direct trade” (non-certified fairly traded) coffee producers in Bolivia and Puerto Rico in search of new business relationships and products.
Many of these groups are cooperatives established by community economic development organizations but don’t go “fair trade certified” due to the cost and paperwork involved.
In an email from Puerto Rico, Reid remarked that the cost of a container of green coffee beans, which would have cost $60,000 a year ago, is now $120,000 – “a huge challenge for us”! Reid says that producers he is meeting tell him that in the past they “often were harvesting at a loss” and “even with the high price now, there are so many production costs, they are only seeing a fraction of the price they are getting.” Consumers, contends Reid, “needs to really try to understand where their coffee is coming from.”
Level Ground Trading, Canada’s largest fair trade coffee distributor, based in British Columbia, has also expressed concern that prices are rising, sales are slowing, and add that speculators in the global marketplace and pretenders to fair trade are hurting the prospects of Third World producers and Canadian socially responsible businesses.
A recent survey of Canadians determined that they love their coffee more than their friends and relatives. With the coffee market in flux, there may be growing angst among caffeine lovers, as well as in producer communities and the organizations and businesses that try to support them.
Zack Gross works for the Manitoba Council for International Co-operation (MCIC), a coalition of more than 40 international development organizations.
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