Stephen Mahia, 10, is one of the new generation of Kenyan children who
cannot go to primary school. Ten years ago, this was almost unheard of in
Stephen's district, where for generations there has been a passionate
hunger for education. Cash from growing and selling coffee beans helped
build the primary and secondary schools, and pay for the children to
But over the last five years world prices for coffee have dropped
dramatically. At the moment they are fetching only half the price they
were in 1997. This year, Stephen was sent home from primary school because
he was unable to pay his fees. His brother Samuel Boro, 8, has been unable
to even start at school.
Stephen is one of 25 million people around the world whose livelihood
has been drastically affected by the collapse in the price of coffee -
which has halved in the past three years to a 30-year low. Long-term
prospects are grim. Many developing-country coffee farmers, mostly poor
small-holders, now sell their coffee beans for less than they cost to
produce. In Vietnam’s Dak Lak Province, for example, they fetch only 60
per cent of production costs. 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
At the other end of the supply chain, the big four coffee roasters,
Kraft, Nestlé, Procter & Gamble, and Sara Lee, are doing quite
nicely. Profit margins are high. Nestlé has made an estimated 26 per cent
profit margin on instant coffee. Sara Lee’s coffee profits are estimated
to be nearly 17 per cent – a very high figure compared with other food
and drink brands.
A basic cause of the price collapse has been an over-supply of coffee
beans on the market. Eight per cent more coffee is currently being
produced than consumed - and production is increasing faster than demand.
Under pressure to maximise export earnings, Brazil, the world's largest
exporter, has increased its already substantial production. And Vietnam
has made a dramatic entry into the market in the last few years increasing
production from almost nothing to becoming the world's second largest
Until now, rich consumer countries and the coffee companies based in
them have responded to the crisis with inexcusable complacency.
There have in the past been inter-government agreements to manage the
supply of coffee beans, but these have failed dismally. The lessons of
these failures have to be learnt - but so too must the lessons of the
moment. A Coffee Rescue Plan, which brings together all the major players
in the coffee trade, is needed to make the coffee market benefit the poor
as well as the rich.
This means roaster companies paying farmers a decent price, above their
costs of production. It also means reducing supply and stocks of coffee on
the market - for example, through roaster companies trading only in coffee
that meets basic quality standards, and by destroying stocks of lower
grade beans. Coffee-producing governments have already agreed a plan that
aims to reduce supply by improving the quality of coffee traded.
Few of us enjoying our freshly brewed cuppa each morning are aware of
this coffee crisis and the plight of coffee farmers in Asia, Africa,
Central and South America. Their situation will only change with the help
of the companies and rich countries, alongside measures that address
long-term rural underdevelopment.
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