Unfair Coffee Trade: Ones downfall a fortune to another
By Wondwossen
June 11, 2006
Two extreme outcomes of the global coffee crisis, Ethiopian coffee farmers impoverished livelihood and Starbucks’ grace, dominated local media in a rare coincidence last week. Starbucks’ public relations event coincided with Seattle’s film festival screening Black Gold, a film on Fair Trade, a mixture of which drew a crystal clear distinction between the states of the coffee giant, the poor coffee farmers and consumers.
Starbucks hosted an “African Coffee Celebration” event on May 31 and June 1, 2006 at its headquarters here in Seattle. The event with a leading theme of “celebrating economic, social development in East Africa” raised many eyebrows, prompted the question “which Africa?” The press release marking the event later stated that the guest farmers – representatives of coffee farmers and exporters from Ethiopia, Kenya, Rwanda and Tanzania - were “educated about Starbucks socially responsible coffee buying practices.” Seattleites, mainly community activists, African-Americans and the invited guests were all skeptical to Starbucks’ PR on its interest in East African coffee growers at this time and with business plans that are even sketchier. Many attempted, to no success, to draw parallels of fair trade and “socially responsible coffee buying practices.”
A few miles away from Starbucks’ headquarters, the film, Black Gold was scheduled for screening at the film festival featuring Tadesse Meskela of Oromia Coffee Farmers Cooperative Union in Ethiopia. The film displayed images contrary to the ones depicted in the local media. The documentary film is centered on the lives of Ethiopia’s poor coffee farmers at the backdrop of the striving business of the coffee companies from London to Seattle. The images of starving coffee farmers queuing for donated grain in a sack gloriously labeled “USA” flashes along side a warehouse full of whole beans.
Following the breakdown of the International Coffee Agreement (ICA) in 1989, the coffee market plummeted from a managed structure to flooded market structure leading to a severe oversupply of coffee. Under ICA, governments in both producing and consuming nations managed to balance supply and demand by agreeing to set pre-determined export quotas for producing countries. This had, to a certain extent, helped to maintain the price of coffee at a reasonably high and somehow stable price level. In 1989, with the U.S. opposing and subsequently leaving ICA as a member, the agreement broken and ICA later replaced by International Coffee Organization (ICO), which has no power to regulate the supply of coffee and the price thereby. As a result, prices for coffee are now determined on the futures markets based in New York and London. This has effectively excluded the small-scale farmers of the developing countries from the international market with their fate left for the merits the big corporations. In contrast, for the world’s largest coffee roasters – Nestlé, Kraft Foods, Procter & Gamble and Sara Lee – the result was a lucrative business.
The emergence of large-scale irrigation farming in countries like Vietnam which is now the world’s second largest coffee producer, has further undermined voices of the poor farmers while giving the big companies additional bargaining power.
With unregulated market structure, the ‘specialty’ coffee sector, consisting of coffee bars, stood out as a promising market for the small-scale farmers, paying them a better price than the sagging coffee price. This specialty coffee sector has become a popular outlet market for the poor farmers because of the relatively high price it pays for the premium quality coffee the farmers are blessed with. This sector is characterized by its demand for unique qualities of the coffee. And with abundant supply already at hand, the definition of ‘quality’ has quickly broadened to include coffees that are organic, shade-grown, bird friendly, etc. Even at such a level of specialty, however, there is still no shortage of supply of coffee meeting all or most of the quality criteria demanded.
Evidently, the breaking of ICA has brought fortunes for Starbucks, and other companies, along with the privileges of determining where, when and how to buy their coffee beans. Starbucks, one of the biggest chains of this “specialty” coffee sector, has enjoyed a dramatic growth with sky-rocketing profits since early 1990s. The power imbalance between poor farmers and the profiting companies has deepened such that Starbucks, for example, is bestowed the highest possible bargaining status along with all the privileges at its discretion.
World trade could be a powerful force for reducing poverty if poor people could sell their products at a decent price and are guaranteed for a fair market share. Unfortunately, the gross injustices of the world trade system, unfair trade agreements and agricultural subsidies hamper efforts to reduce poverty. With international coffee trade taking hostage of the world’s poorest economies under the control of a few companies, it is difficult to even begin to imagine the fate of the coffee farmers in Ethiopia.
Coffee price has increased over the past few years but the income generated by the farmers has been in decline. Today, for every $3 we pay for a cup of latte here in the West, farmers are paid less than 3 cents for the coffee beans they produce. According to Tadesse, price is not the only problem the coffee cooperative he represents encountered. A problem of grave concern to him and the farmers whose livelihood has long deteriorated to a standard below the subsistence level is lack of buyers for the coffee beans already produced.
Starbucks buys only 5 percent of its coffee from Africa. To the credit of the Starbucks’ PR, Tadesse and other guests representing African coffee growers are convinced that this is justified given the geographic location of Africa. As much as it sounds ridiculous for representatives of the poor farmers to speak on behalf of a buyer, I understand the desperation and sense of dependence these cooperatives found themselves in. In a market structure with a power balance likened to that between Goliath and David, they are left with no other choice but to give in.
The two days’ “celebration” concluded with, among others, Starbucks’ promise to increase the volume of coffee it buys from Africa by 300 percent! Yes, three hundred percent. The number sounds impressive but really, the promise is to increase the import to 15 percent. Yet, the farmers believed they should be thankful of this as the company is being generous owing to its “socially responsible coffee buying practices,” also called C.A.F.E. (Coffee and Farmer Equity) practices. Supposedly, C.A.F.E. is to ensure a supply of exceptionally superior quality coffee for Starbucks. Critiques argue that the cost of achieving such quality standards leaves the farmer with no better profit margin than other alternatives. To my understanding, C.A.F.E. is a business scheme that doesn’t involve a third party certification or monitoring. C.A.F.E. deserves a thorough scrutiny but for now, suffice to appreciate the fact that in a buyers’ market, as long as the demand for coffee is less than the supply, Starbucks is not to blame for focusing on the best interests of its investors. That is a determination for investors to make. Fair to say, however, the company’s before-tax contribution to Seattle parks does not make up a bit of the natural habitat destruction in Africa, which is happening now as the poor farmers shift to cultivating narcotic plants by uprooting coffee trees and forest shades.
Until that time when the market structure finds itself back to fair terms of trade, it is indispensable that farmers knock the companies’ doors and remind them to come to their senses. In this regard, the efforts of some of the farmers’ representatives, such as Tadesse Meskela to cry the cries of their subject poor are commendable.
But for the audience of Black Gold, the real, immediate solution to the complex problem is at the consumers’ disposal: vote with the dollar bill! The audience, through a standing ovation, expressed its determination not to spend another dollar on unfairly traded coffees. Local fair trade activists, such as Fair Trade Puget Sound, also vowed to fill the gap and connect fair trade coffee shops with consumers.
I for one shall demand equity in every cup of latte or Grande Carmel Macchiato or cappuccino or espresso, every morning!
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The writer can be reached for comments at wmezlekia@msn.com
ETHIOMEDIA.COM - ETHIOPIA'S PREMIER NEWS AND VIEWS WEBSITE
© COPYRIGHT 20001-2006ETHIOMEDIA.COM. EMAIL: webmaster@ethiomedia.com
June 11, 2006
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A few miles away from Starbucks’ headquarters, the film, Black Gold was scheduled for screening at the film festival featuring Tadesse Meskela of Oromia Coffee Farmers Cooperative Union in Ethiopia. The film displayed images contrary to the ones depicted in the local media. The documentary film is centered on the lives of Ethiopia’s poor coffee farmers at the backdrop of the striving business of the coffee companies from London to Seattle. The images of starving coffee farmers queuing for donated grain in a sack gloriously labeled “USA” flashes along side a warehouse full of whole beans.
Following the breakdown of the International Coffee Agreement (ICA) in 1989, the coffee market plummeted from a managed structure to flooded market structure leading to a severe oversupply of coffee. Under ICA, governments in both producing and consuming nations managed to balance supply and demand by agreeing to set pre-determined export quotas for producing countries. This had, to a certain extent, helped to maintain the price of coffee at a reasonably high and somehow stable price level. In 1989, with the U.S. opposing and subsequently leaving ICA as a member, the agreement broken and ICA later replaced by International Coffee Organization (ICO), which has no power to regulate the supply of coffee and the price thereby. As a result, prices for coffee are now determined on the futures markets based in New York and London. This has effectively excluded the small-scale farmers of the developing countries from the international market with their fate left for the merits the big corporations. In contrast, for the world’s largest coffee roasters – Nestlé, Kraft Foods, Procter & Gamble and Sara Lee – the result was a lucrative business.
The emergence of large-scale irrigation farming in countries like Vietnam which is now the world’s second largest coffee producer, has further undermined voices of the poor farmers while giving the big companies additional bargaining power.
With unregulated market structure, the ‘specialty’ coffee sector, consisting of coffee bars, stood out as a promising market for the small-scale farmers, paying them a better price than the sagging coffee price. This specialty coffee sector has become a popular outlet market for the poor farmers because of the relatively high price it pays for the premium quality coffee the farmers are blessed with. This sector is characterized by its demand for unique qualities of the coffee. And with abundant supply already at hand, the definition of ‘quality’ has quickly broadened to include coffees that are organic, shade-grown, bird friendly, etc. Even at such a level of specialty, however, there is still no shortage of supply of coffee meeting all or most of the quality criteria demanded.
Evidently, the breaking of ICA has brought fortunes for Starbucks, and other companies, along with the privileges of determining where, when and how to buy their coffee beans. Starbucks, one of the biggest chains of this “specialty” coffee sector, has enjoyed a dramatic growth with sky-rocketing profits since early 1990s. The power imbalance between poor farmers and the profiting companies has deepened such that Starbucks, for example, is bestowed the highest possible bargaining status along with all the privileges at its discretion.
World trade could be a powerful force for reducing poverty if poor people could sell their products at a decent price and are guaranteed for a fair market share. Unfortunately, the gross injustices of the world trade system, unfair trade agreements and agricultural subsidies hamper efforts to reduce poverty. With international coffee trade taking hostage of the world’s poorest economies under the control of a few companies, it is difficult to even begin to imagine the fate of the coffee farmers in Ethiopia.
Coffee price has increased over the past few years but the income generated by the farmers has been in decline. Today, for every $3 we pay for a cup of latte here in the West, farmers are paid less than 3 cents for the coffee beans they produce. According to Tadesse, price is not the only problem the coffee cooperative he represents encountered. A problem of grave concern to him and the farmers whose livelihood has long deteriorated to a standard below the subsistence level is lack of buyers for the coffee beans already produced.
Starbucks buys only 5 percent of its coffee from Africa. To the credit of the Starbucks’ PR, Tadesse and other guests representing African coffee growers are convinced that this is justified given the geographic location of Africa. As much as it sounds ridiculous for representatives of the poor farmers to speak on behalf of a buyer, I understand the desperation and sense of dependence these cooperatives found themselves in. In a market structure with a power balance likened to that between Goliath and David, they are left with no other choice but to give in.
The two days’ “celebration” concluded with, among others, Starbucks’ promise to increase the volume of coffee it buys from Africa by 300 percent! Yes, three hundred percent. The number sounds impressive but really, the promise is to increase the import to 15 percent. Yet, the farmers believed they should be thankful of this as the company is being generous owing to its “socially responsible coffee buying practices,” also called C.A.F.E. (Coffee and Farmer Equity) practices. Supposedly, C.A.F.E. is to ensure a supply of exceptionally superior quality coffee for Starbucks. Critiques argue that the cost of achieving such quality standards leaves the farmer with no better profit margin than other alternatives. To my understanding, C.A.F.E. is a business scheme that doesn’t involve a third party certification or monitoring. C.A.F.E. deserves a thorough scrutiny but for now, suffice to appreciate the fact that in a buyers’ market, as long as the demand for coffee is less than the supply, Starbucks is not to blame for focusing on the best interests of its investors. That is a determination for investors to make. Fair to say, however, the company’s before-tax contribution to Seattle parks does not make up a bit of the natural habitat destruction in Africa, which is happening now as the poor farmers shift to cultivating narcotic plants by uprooting coffee trees and forest shades.
Until that time when the market structure finds itself back to fair terms of trade, it is indispensable that farmers knock the companies’ doors and remind them to come to their senses. In this regard, the efforts of some of the farmers’ representatives, such as Tadesse Meskela to cry the cries of their subject poor are commendable.
But for the audience of Black Gold, the real, immediate solution to the complex problem is at the consumers’ disposal: vote with the dollar bill! The audience, through a standing ovation, expressed its determination not to spend another dollar on unfairly traded coffees. Local fair trade activists, such as Fair Trade Puget Sound, also vowed to fill the gap and connect fair trade coffee shops with consumers.
I for one shall demand equity in every cup of latte or Grande Carmel Macchiato or cappuccino or espresso, every morning!
----------
The writer can be reached for comments at wmezlekia@msn.com
ETHIOMEDIA.COM - ETHIOPIA'S PREMIER NEWS AND VIEWS WEBSITE
© COPYRIGHT 20001-2006ETHIOMEDIA.COM. EMAIL: webmaster@ethiomedia.com
