Price Crisis Response Initiative Part 1
PART 1: A SUMMARY OF THE BACKGROUND OF COFFEE & THE CRISIS ITSELF
(these are my personal notes from reading through the SCA price crisis response initiative to be used for a summary for my clients and coffee friends)
In 2018, we first found ourselves with commodity futures price in coffee below $1 per lb. This was well below offering a sustainable livelihood for coffee farmers, and the lowest it had been in 12 years. Coffee farms were proving unprofitable and coffee producing communities were in a state of crisis with basic survival needs at risk!
The effects included:
1. Rural out-migration
2. Transition to illicit crops
3. Increased food insecurity
Farmers were struggling to break even, in which case meant they had to forgo vital and costly farm maintenance. This lead to diminished quality and yields and some farmers transitioning out of coffee all together!
If this continues: volume, quality and diversity of global coffee supply will be severely diminished.
MEANWHILE: Roaster and retail sector has been thriving?
1. In 2015, retail coffee market was rated at $200 billion.
2. Largest roasters operated with profits of upwards of 15%
3. Top 10 roasters supply over 35% of the world’s coffee.
Downward pressure on traders and producers has led to terms of payment up to 300 days! And some roasters have completely pulled out of high-cost countries of origin.
The price crisis response (PCR) was started by SCA in December 2018 to confront economic systems that threaten the livelihood of coffee farmers. Although this current price drop is immensely harmful for coffee producing communities,
IT IS A SHORT-TERM SYMPTOM OF A COFFEE MARKET THAT HASN’T BEEN SUSTAINABLE FOR MOST COFFEE FARMERS FOR A LONG TIME.
The PCR goal is to identify interventions with the most potential for long term systemic change, rather than a short-term fix.
They want to focus on distribution of value between actors along the value change that demonstrate the cyclical nature of the commodity futures market, extractive nature of the current coffee system and ensuing devastation in coffee communities. An equitable value distribution is yet to be pursued.
Post-profits investment in sustainable projects has been proved to not be successful in improving long-term sustainability of coffee farmers, or deterred concentration of wealth and power that squeezes coffee farmers and businesses.
NEW MODELS: IDENTIFY ECONOMIC MODELS THAT DISTRIBUTE VALUE MORE EQUITABLY AND PRINCIPLE OF TAKING LESS RATHER THAN GIVING MORE IS A KEY VALUE.
VISION:
Specialty coffee sector that distributes value equitably, fosters resilient coffee farming communities that are economically prosperous and value diverse producers of differentiated coffees.
PURPOSE:
confront low commodity prices and price volatility threatening the specialty coffee industry whilst supporting development and utilisation of alternative economic methods for specialty coffee.
PROBLEM STATEMENT:
Consistent pricing volatility, commodity prices at low levels, embedded systems that work to deter actors from pursuing a more equitable distribution of value along the value chain- contribute to unsustainable livelihoods for coffee farming communities and vulnerability of specialty sector.
THIS CRISIS HAS BEEN GOING ON FOR DECADES AND WILL NOT BE FIXED WITH A QUICK-FIX.
Read the full SCA Research document here