The Coffee Crisis

Coffee is one of the most popular Fair Trade goods. Coffee is a cash crop, meaning that it is grown only for income. It cannot be eaten for sustenance. For many years until the 1990s, coffee had provided a good source of income for many countries around the world. Coffee provides a livelihood for 25 million farmers, and countless of their employees in 50 countries around the world. The coffee market also provides jobs for millions more who are employed in industries related to coffee. For many countries, coffee is their main source of income.

Before twenty years ago, coffee had enjoyed a relatively stable market price. Starting in the 1980s, coffee farmers around the world saw a drop in the prices that they received for their crop. The problem has become acute, not just in certain parts of the world, but nearly uniformly around the world. The prices that farmers received began to fall below $1.00 per pound. Today, the world price for coffee on the global market hovers between 70 and 90 cents per pound for premium coffee and 30 cents per pound for regular coffee. Farmers in Ethiopia report receiving much less, on the order of 23 cents per pound.(2)

Coffee cannot be used for food or any kind of sustenance. Farmers in Ethiopia have begun uprooting their coffee trees in order to clear the land for food crops which they can actually use for sustenance. The coffee crisis is claiming lives worldwide, with some farmers and their employees and families dying in quiet desperation from hunger.

It is estimated that of each cup of coffee that is sold at $4.00 per cup, the coffee farmer receives one cent.(1)

Urban Poverty

Because growing coffee has been the livelihood of families for generations, many farmers don't know how to do anything else to make money to survive. This has forced people to move from rural farms to cities to look for employment. Villages and small towns have emptied out and become ghost towns as people are forced to leave. Upon moving to cities, new unemployed migrants are only able to finding low-paying, menial jobs. Those that are unable to find jobs are forced into working in the informal sector, doing whatever they can to survive. The vast majority are unable to afford real housing. Many are forced to live in slums between clapboard walls and tin roofs that do nothing to keep out the weather. This has swelled the size of urban slums in cities such as Mexico City and Oaxaca. Urban slums are frequently breeding grounds for disease, crime, and violence.

Illegal Immigration

Some of the displaced peoples seek to come to developed countries where they think they can make a livelihood. Increasing numbers of the people found dead in the Arizona desert in recent years have been identified as being from regions of Mexico and Central America that are dependent on the coffee market.

Some farmers, faced with plunging prices for their crops are forced to grow illegal narcotics in order to make enough money to send their children to school, and provide for their families. In many countries around the world, farmers are faced with a harrowing choice. Either grow plants that can be used in the production of narcotics that are illegal in many countries, or allow their families to starve. As more and more farmers find that they cannot make a living growing coffee legally, some, not all, will resort to growing drugs.

Why Can't Farmers Just Switch to Grow Food Crops?

Coffee farmers have already begun the process of switching to other crops. These crops can be used for food, however, they draw meager prices when sold. This process of transformation is slow, especially in places where farmers have been growing coffee in their families for generations, and just simply don't know how to grow anything else. In countries such as Burundi, where 80% of GDP is dependent on the coffee industry, the coffee crisis has a catastrophic effect on the economy.

Why Does It Still Cost Me $4 for a Cup of Coffee When the Farmer Is Receiving So Little?

Companies charge so much for coffee because they are able to do so. The farmer receives so little because there are 25 million of them who are selling mainly to four large companies. There are four large roasting companies that control 50% of the world's coffee market. There are 25 million sellers competing against each other. There are only 4 main buyers. The buyers can shop around for lower prices among the 25 million sellers. This drives the price of coffee to unnaturally low levels.

Then on the consumer side, there are again billions of coffee drinker who compete against each other to buy coffee. This drives up the price that companies can charge to consumers.

(1) Kofman, Jeffery. “From Cocaine to Coffee: Coca Growers Plight.” ABC World News Tonight with Peter Jennings. 22 Nov 2004. WJLA-TV (Washington)

(2) Mochria, Ellene. “Coffee Prices Bitter for Ethiopia.” BBC News Online. Available from http://news.bbc.co.uk/2/hi/africa/2293427.stm