Coffee producers are calling on leading companies including Nestlé, JAB Holdings and Starbucks to cover farmers’ costs as they struggle to make ends meet, with coffee prices tumbling to a 12-year low.
“The situation is desperate,” said Roberto Velez, chief executive of the Colombian Coffee Growers Federation, who warned of social unrest in key coffee-growing countries.
The lack of returns has meant that some of Colombia’s coffee farmers are now planting coca, which is processed into cocaine. Statistics showed that acreage for coca had risen to 200,000 hectares — the highest on record — while coffee cultivation was declining, Mr Velez said.
In Guatemala, low prices were driving farmers to emigrate to seek work, said Ricardo Arenas Menes, president of Anacafe, the country’s coffee association.
The benchmark coffee price traded in New York has fallen to less than $1 a pound, due to a bumper crop in Brazil, the world’s largest producer and exporter, and the weakening Brazilian real.
That is well below the cost of production in many of the key coffee producing countries. In Colombia, a leading producer of arabica coffee, the milder tasting higher quality bean, it is about $1.20 a pound, while in El Salvador it is about $1.50.
About 100m people worldwide are involved in the production and processing of coffee, according to coffee sector executives.
The World Coffee Producers Forum, which includes producers’ associations from Africa, India, Mexico, and Central and South America, wants coffee companies to commit to buying coffee at more than the cost of production.
One of the proposals is for the growers to provide certification to coffee roasters and retailers, which would show that they were paying farmers a sufficient return. Another is for the coffee industry to inform consumers about the growers’ plight through marketing campaigns.
The world’s top ten coffee companies account for more than a third of bean consumption in volume terms, with Nestlé accounting for 9 per cent, private equity group JAB Holdings at 8 per cent and Starbucks on 3 per cent, according to the Coffee Barometer published by leading NGOs earlier this year.
“We want to see if we can come up with a scheme or some sort of formula that can work for [the companies],” said Anil Kumar Bhandari, president of the India Coffee Trust.
The producers’ forum said it was planning to write to the leading groups this week to seek meetings. It said it wanted to work with all the players in the coffee supply chain, from growers and distributors to roasters and consumers.
Even when prices were higher, returns for farmers had not kept pace with the growth of the coffee market, said Andrea Olivar, global manager of coffee at Solidaridad, a Dutch NGO. Coffee was increasingly regarded as a “poverty crop” by farmers, she said, adding: “This is the worst time to be a coffee farmer.”
Nestlé said it believed constructive dialogue was of critical importance to the coffee sector. “We welcome and look forward to continued interaction with the World Coffee Producers Forum,” the Swiss group said.
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