Whether internationalist bohemian or 9 to 5 yuppie, chances are you drink the stuff. So why is your morning pick-me-up friend an especially hot topic these days? Forget clouds in your coffee. Today, there’s politics and global economics in that dark void of swirling liquid.
Here’s a contrast that’s somewhat confusing, if not alarming. Yes, America (and Europe) is still in the throes of a designer, high-quality coffee boom, one which finds the discerning spending up to $15.99/lb for bag of Jamaican Blue Mountain beans. Specialty coffee sales hit $6 billion this year, up from $1 billion in 1990. At the same time, the global coffee market and its producers are deep in a slump. Low quality, what used to pass for “normal” coffee is as cheap as dirt. There’s simply way too much of the raw “green bean” out there.
A ‘90s coffee price jump pushed producers to raise production and cash in. Increased mechanized harvesting techniques in Brazil and Vietnam’s spectacular invasion of the marketplace with cheap robusta beans added up to giant increases in production that outmatch consumption. In 2003, global production is exceeding consumption by 15 million bags (132 lbs per bag). The result is that millions are left without a source of income as production costs exceed the paltry return on the open-market. Roughly 600,000 (permanent and temporary) workers in Central America have lost their jobs. Whereas Vietnam has produced an estimated 4 million jobs from its coffee boom. The sudden shift is considered a humanitarian crisis even by conservative leaders in Central America.
After petroleum, coffee is the world’s major, most expensive commodity. It is produced in 50 countries, and nearly 6 million tons are exported a year. 25 million farmers (mostly small landholders with less than 25 acres) depend on coffee for their income. Countries such as Honduras, Uganda and Ethiopia depend on coffee exports as a major portion of their revenues. For nearly 15 years, coffee has been traded “freely” (without tariffs). And right now, with the crisis hitting hard, there is pressure for a regulatory solution. Activists long for the time when the global coffee trade was regulated. Under the International Coffee Agreement, price was controlled internationally from 1963 until 1989. The International Coffee Organization (created by the UN) still exists, but the US has been MIA since 1989, rendering it less effective. With the current crisis, even pockets of the coffee industry are calling for the US to come back into the fold.
What’s the solution? Some activists are calling for a better deal for small-time coffee producers, others want programs encouraging growers to get out all together with crop diversification. It’s worth remembering that for decades, developing countries were encouraged to stop growing their own food and grow export crops like coffee. The ICO wants the production of higher quality and less quantity of robusta coffee and they want roasters like Starbucks to encourage this in their purchasing. Oxfam, the humanitarian organization has taken the lead on the activist side of the issue, and is promoting Fair Trade coffee as the solution.
Conservatives are uneasy about all of this. And think-tanks such as the CATO Institute defend “free” markets to death, even as it is obvious that in this case the market is failing miserably. The conservatives answer that inefficient over-producers need to exit the market and things will sort themselves out. In fact, many of the growers are exiting. And reports indicate they are getting into a more lucrative business, narco-trafficking.
Many coffee farmers in the developing world truly are in a tough place right now. They can’t grow corn or other commodities for export because the US and EU heavily subsidize their farmers who over produce so much that they can only dump incredibly cheap stuff on the south. G. W. Bush has even increased subsidies. There’s not much “free” in free trade. So what of Fair Trade?
Fair Trade coffee presently holds only 1 percent of the American market. Certification means that farmers were paid a premium rate, such as US $1.26 per pound and $1.41 for organic for their coffee. Fair Trade coffee is more expensive and the average coffee drinker is unlikely to come in contact with it. Most coffee consists of blends of wildly varying quality rather than high-end one-source beans.
It’s en vogue to call Starbucks the evil empire of coffee. The Organic Consumers Association has Starbucks in its crosshairs because while the coffee retailer talks a good game, they say it still uses genetically modified dairy ingredients and doesn’t buy and brew much Fair Trade coffee. Actually, Starbucks agreed to begin brewing some Fair Trade coffee and offering it in stores way back in October2000. It also declined to sell milk from growth-hormone supplemented cows in early 2001, incurring the wrath of the technology-crazed dairy industry who claims that such milk is tested and safe.
So is Starbuck’s the bad guy or the good guy in the current coffee war? Does Fair Trade group’s Global Exchange bumper sticker “Starbucks profit as others starve” real or jive? After all, Starbucks is not the source of the coffee crisis. Aforementioned massive increases in production by Brazilian and Vietnamese coffee growers have caused the glut, not savvy marketing and aggressive retailing. And price fluctuations have had little effect at the coffee bar. In actuality, only 5 to 7 percent of the cost of a cup of coffee is for the beans. The cost of a latte is in the dairy, the labor, the advertising, etc. Furthermore, Starbucks has probably increased the demand for coffee all over the country at a time when the American consumption is actually decreasing. We don’t guzzle the mud like we used to. Per capita, Americans sucked down 36 gallons of coffee per year in 1970. As of 2000, it’s a sissy 17. Starbucks has created a new, artificial consumer need which naturally has done what? Led people to become more interested in the higher-end product, thereby increasing the supermarket and café demand for shade-grown, premium, boutique level (more likely Fair Trade) coffee even if Starbucks isn’t selling as much of it as idealists would like.
Starbucks has turned Fair Trade into a useful marketing technique. It offers four kinds of Commitment to Origins coffees that are either Fair Trade (bought through co-ops for a premium price) or Farm Direct (purchased directly from growers). They’ve got big fat logos for shade-grown, sustainable, ecologically sound on these products. But most Starbucks coffee is not like this stuff at all because the demand simply is not there. One could argue that a truly responsible Starbucks would offer only Fair Trade coffee. Rather, retailers have learned ways to take the cheaper bean (a Vietnamese Robusta or Brazilian Arabica) and get a smoother flavor out of it. This is why Starbucks doesn’t need Fair Trade beans to please most of its customers.
But Fair Trade may have it’s day in the sun yet. Not surprisingly Newman’s Organics is getting on board the movement, with a Fair Trade coffee on the launch pad. But perhaps more of a shocker, is that Dunkin Donuts will launch espresso products that will be fair-trade certified (soon). Sometimes enlightenment comes in unlikely packages.