Coffee Prices Have Collapsed, Threatening the Livelihood of Millions Across the Global South

Coffee Prices Have Collapsed, Threatening the Livelihood of Millions Across the Global South

Coffee Prices Have Collapsed, Threatening the Livelihood of Millions Across the Global South

Why aren’t big importers like Starbucks doing something to help the small farmers and workers who are the backbone of their multibillion-dollar businesses?


Santa Rosa de Copán, HondurasEveryone here in the coffee-growing highlands of Honduras knows two numbers with some precision: the latest world price for coffee on the Intercontinental Exchange in New York, and the going rate to hire a coyote to smuggle you northward, into the United States.

Everyone in this charming but poor colonial town knows that the world price is way down, as yet another global coffee crisis bites deeply. The smuggling price continues to rise. And Starbucks and the other big companies that import coffee from producing nations like Honduras have done almost nothing to help the suffering small farmers and poor agricultural workers who are the backbone of their billion-dollar businesses, and who are now leaving Central America by the tens of thousands for an uncertain future in concentration camps along America’s southern border.

Once again, the benchmark “C” price for arabica coffee in New York has dropped sickeningly, from nearly $3 a pound in 2011 to under $1 now. Such regular price collapses are features of the world coffee market, and they’ve gotten worse over the past three decades, as the masters of the global economy have imposed harsh neoliberal policies on the industry. There are an estimated 25 million small farmers in Latin America, Africa, and Asia who grow coffee; add their dependents, and more than 100 million people are directly affected. Most coffee farmers, as here in Honduras, are increasingly desperate, because they have no other way to earn a living.

What’s more, in many of those nations, coffee exports are a major source of foreign exchange, so the skidding world price threatens imports of medicine, food, and other necessities—for everyone, not just the small farmers who live directly from coffee.

Reports of crisis are coming in from Uganda and Rwanda, from Colombia and Brazil. Back in March, 13 organizations in the World Coffee Producers Forum issued an emergency appeal, warning that the price drop is threatening to become a full-blown “humanitarian crisis.” The forum said: “The current pauperization process of coffee producers is destroying the very social fabric in the rural areas of more than 40 countries in Africa, Asia and Latin America, leading to increased criminality in producing nations, more poverty in the cities, and massive migrations towards the United States and Europe.”

So far, the mainstream Western media are ignoring the crisis, aside from brief, dry accounts buried in the financial pages.

One ominous precedent was set during the 1989–94 coffee crisis, with consequences that were even more tragic than increased hunger and forced emigration. Back then, Rwanda earned some 80 percent of its income from coffee exports, according to David Waller’s 1993 book Rwanda: Which Way Now. The experts agree that the price collapse was a major contributor to the economic depression and political upheaval that culminated in the 1994 genocide.

Today, the world price is just a third of what it was eight years ago. Growers here in Honduras say it is actually below their cost of production. What would happen in the rich world if global economic pressures forced millions of hard-working people to take a two-thirds pay cut?

Walk into a big Starbucks store in the United States and you will be offered coffees that reek with exoticism: East Timor Peaberry, Malawi Sable Farms, Rwanda Muhondo. You can also find Honduras Premier, grown just to the southwest of here, advertised as including “sweet, creamy notes of toffee and clover honey in the cup—lovely, lovely flavours.” But you will learn nothing during your visit to Starbucks about the crisis facing the people who actually produced those romantic-sounding coffee beans.

Starbucks did announce in September 2018 that it would donate “up to $20 million” to its smallholder suppliers in Mexico and three Central American nations (not including Honduras) “until the coffee market self-corrects and rises above the cost of production.” Starbucks did not elaborate, and its publicity department rebuffed an e-mail request for more specific details, responding only that “all our information is available on our website and publicly.” There is no way to learn if the coffee giant actually fulfilled its vague promise, or how and when it expects the world coffee market to “self-correct.”

What’s more, that $20 million promise does not sound so generous alongside Starbucks’s profits last year, which were $4.52 billion. Starbucks founder Howard Schultz is worth $4.1 billion himself (some of which he considered spending on an independent campaign for president). To Schultz, the global coffee crisis was so insignificant that his recent campaign “autobiography,” From the Ground Up, did not make a single reference to the small farmers who actually grow his coffee. Nor did the mainstream press interviewers, who included Anderson Cooper on CNN, ask him about the desperate people in the Global South who are the base of his supply chain.

It is true that the other big US importers are also ignoring the coffee crisis. But Starbucks should be setting a good example. Its customers are among the most discerning, people who already pay more attention to the origins of their coffee than the supermarket shoppers who drop a can of Folgers or Maxwell House into their carts. Starbucks could pay more for its own coffee imports, start educating its huge global clientele, and shame the other importers into acting.

The latest coffee crisis is the worst since 1999–2003. These drops in the world price have been a central feature in the world coffee trade for more than a century, but two terrible neoliberal policy changes starting in 1989 have made them even more extreme. The fundamental problem, as in other commodities, is oversupply, which periodically floods the world market and pushes prices down. Back in the 1930s, Brazil, the largest producer, held back coffee to maintain a reasonable world price, even destroying millions of bags of beans in certain years.

Then, in the early 1960s, the United States became worried that the Cuban Revolution might spread across Latin America, where many countries relied on coffee exports. Washington, working through the International Coffee Organization (ICO), encouraged both big American importers and producers in Latin America and elsewhere to manage the supply. Prices remained relatively high and stable from 1963 onward—until 1989.

That year, with the Cold War nearly over and the threat from Cuba gone, the United States sabotaged the ICO agreement, partly responding to the rise of the “free market” neoliberal ideology that denounced any government interference in the economy. The world price immediately collapsed, and it has mostly stayed low ever since. What’s important to recognize is that the price figures are not adjusted for inflation, so even $1.50 a pound today is actually much less than it was 20 or 30 years ago.

The neoliberal ideologues then hit the coffee growers a second hard blow. In the 1980s, most nations in the Global South were stagnating, and deep in debt. The International Monetary Fund and the World Bank dictated the solution: Expand exports of primary products to grow your way out of the crisis. Advisers fanned out and instructed governments in Africa, Latin America, and Asia to concentrate on primary products like coffee, sugar, bananas, minerals, and the like, in which they supposedly had a “comparative advantage.”

In the 1990s, the experts showed up in Vietnam, which had historically grown very little coffee. There, they promoted a massive planting of coffee trees, and Vietnam shot up—to become almost overnight the second-biggest producer in the world. As any first-year economics student would have predicted, the world price dropped, and the 1999–2003 crisis was the result. (Some years later, a French agronomist I met in Haiti who had worked for the World Bank squirmed at first, but then admitted that promoting the explosion of exports from Vietnam had been a bétise—a stupidity.)

What is particularly painful is that coffee is a product that benefits small and medium farmers. Elites in nations that produce oil and minerals can capture much of the output for themselves, but coffee requires intensive care, actually does better in medium or small plots, and requires a large work force. So the coffee industry spreads some of the export earnings around, and in the past, coffee has helped build broad-based agricultural sectors in countries like Brazil and Colombia.

But the latest crisis is pushing the smaller farmers out. Here in western Honduras, a medium grower, Carlos Nahon Sarmiento, explained: “We are losing the people who have one or two hectares [a hectare is roughly 2.5 acres]. They are forced sell their single hectare for, let’s say, $9,000—which is just about what the coyote will charge to smuggle them north into the United States.” Climate change also contributes to driving out smaller coffee growers. Warmer temperatures and changing rainfall patterns have encouraged the disease called “coffee rust” (la roya in Spanish). Sarmiento said that only the larger farmers can afford the fungicides needed to fight it.

What about “fair trade” coffee? The concept has been muddied by “fairwashing”; the big importers have introduced several plausible-sounding certification labels that are actually toothless. Starbucks, for instance, boasts that 99 percent of its coffee is “ethically sourced” and that it is produced following something called “Coffee and Farmer Equity (C.A.F.E.) Practices.” Closer inspection reveals that Starbucks itself wrote those “practices”; there is no independent monitoring, and—unlike genuine fair trade, for instance—Starbucks does not require itself to pay a premium above the world price. Only two of Starbucks’s multitude of coffees are actually “Fairtrade certified,” and the company no longer even mentions the term on its website.

There are genuine fair trade importers, like Just Coffee, which promptly ships high-quality coffee from its headquarters in Madison, Wisconsin. You can visit one of Just Coffee’s co-op suppliers, as I did in Guatemala some years ago, to confirm the group’s positive impact among the small farmers who grow the beans. Similar legitimate groups include Equal Exchange, which is available in some supermarkets, Dean’s Beans, and Discovery Organics. (An organization called Fair World Project monitors “fairwashing” and discloses which importers pass the fair trade test.) But here’s the problem: The market for genuine fair trade coffee is still far too small. One estimate is that certified fair trade growers can only sell about a third of what they harvest; they have to export the rest into the regular market, usually at a lower price. So even buying genuine fair trade will not make much of a dent in the coffee crisis as long as Starbucks and other big importers continue to shun it.

The 1994 Rwanda genocide is a reminder of how a previous coffee crisis ended in tragedy. Ethnic tensions there were certainly nothing new, but they got worse after the neoliberal ideologues ended the agreement to maintain the world price, which went into free fall overnight. Timothy Longman is a distinguished professor at Boston University who specializes in Rwanda, and he lived there before the mass killing, doing research. “The 1989 coffee price collapse affected everyone, but particularly the middle class,” he explained. “Many of the middle-class people had functioned as intermediaries—earning money preparing and transporting the coffee beans. After the crisis hit, they grew much more susceptible to the appeal of violent extremist movements. A few years later, they were willing to join in the genocide.”

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