Price Crisis Response Initiative Part 3

PART 3: RISE OF SPECIALTY COFFEE

(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)

Many are suggesting, surely the rise in specialty coffee and paying more for coffee is the solution?

Rise of specialty coffee means a demand for differentiation in flavour profile and variety & increase sustainable growing practices. This is often considered as a pathways to profitability for farmers. BUT accessing these markets requires additional inputs and labour relative to production of commodity grades. It is essentially a much higher cost of production.

These coffees may be SOLD as a premium, specialty coffee, for example:
c market price + $1.50 per lb

WHILE FARMERS MIGHT GET PAID MORE FOR THAT COFFEE, THE PRICE WON’T NECESSARILY COVER COST OF PRODUCTION AND IT IS STILL SUBJECT TO SAME VOLATILITY AS COMMODITY COFFEE.

Producing countries primarily export over 70% of their coffee internationally in green form. This means much of the value addition is captured by roasters and retailers in importing countries.

The average green coffee export is valued at less than 10% of the $200billion that the global coffee industry is worth!

The amount of value farmers receive relative to the total value created by the market is decreasing year on year.

In the French ‘at home’ coffee market,roasters saw an increase of revenue of 212% between 1994 and 2017.  The revenue of coffee farmers in the same time increased less than 30% whilst their total value share of the market decreased from 22% to less than 15%.

Between 1980-2005 in USA, the % value farmers received of retail price in USA for arabica coffee onaverage reduced from 34% to less than 21%.

TO SUMMARISE:

1.     Colonial structure of coffee trade

2.     Use of c-market as a reference price

3.     Price volatility

4.     Increasing cost of production

5.     Majority of market value being outside of exporting countries

= Why we have a coffee crisis on our hands.

Read the full SCA Research document here