Mugged

There is a crisis destroying the livelihoods of 25 million coffee producers around the world. The price of coffee has fallen by almost 50 per cent in the past three years to a 30-year low. Long-term prospects are grim.

Developing-country coffee farmers, mostly poor smallholders, now sell their coffee beans for much less than they cost to produce - only 60 per cent of production costs in Viet Nam's Dak Lak Province, for example. Farmers sell at a heavy loss while branded coffee sells at a hefty profit. The coffee crisis has become a development disaster whose impacts will be felt for a long time.

Families dependent on the money generated by coffee are pulling their children, especially girls, out of school. They can no longer afford basic medicines, and are cutting back on food. Beyond farming families, coffee traders are going out of business. National economies are suffering and some banks are collapsing. Government funds are being squeezed dry, putting pressure on health and education and forcing governments further into debt.

Oxfam is calling for a Coffee Rescue Plan to make the coffee market work for the poor as well as the rich. The plan needs to bring together the major players in coffee to overcome the current crisis and create a more stable market.

Within one year the Rescue Plan, under the auspices of the International Coffee Organisation, should result in:

• Roaster companies paying farmers a decent price (above their costs of production) so that they can send their children to school, afford medicines, and have enough food.
  
  
• Increasing the price to farmers by reducing supply and stocks of coffee on the market through:
  
  - Roaster companies trading only in coffee that meets basic quality standards as proposed by the International Coffee Organisation (ICO).
  
  - The destruction of at least five million bags of coffee stocks, funded by rich-country governments and roaster companies.
  
  
• The creation of a fund to help poor farmers shift to alternative livelihoods, making them less reliant on coffee.
• Roaster companies committing to increase the amount of coffee they buy under Fair Trade conditions to two per cent of their volumes.

The Rescue Plan should be a pilot for a longer-term Commodity Management Initiative to improve prices and provide alternative livelihoods for farmers. The outcomes should include:

• Producer and consumer country governments establishing mechanisms to correct the imbalance in supply and demand to ensure reasonable prices to producers. Farmers should be adequately represented in such schemes.
• Co-operation between producer governments to stop more commodities entering the market than can be sold.
• Support for producer countries to capture more of the value in these commodities.
• Financed incentives to reduce small farmers' overwhelming dependence on agricultural commodities.
• Companies paying a decent price for all commodities, including coffee.

Read the full report (PDF)

Publication date: September 2002