Wednesday, June 18, 2008
The Impact of the coffee crisis on coffee producers
Please find below a copy of the reports submitted by coffee producing countries to the ICO
on the effects of the crash in coffee prices.
TEXT OF ICO LETTER SENT TO REPRESENTATIVES OF COFFEE PRODUCING COUNTRIES
14 July 2003
In my submission to the G-8 Summit in June 2003 I explained that the current
situation of extremely low levels of coffee prices which has lasted now some three years has
led to great social and economic hardship in coffee producing countries.
In order to provide the greatest possible evidence of the effects of the coffee crisis
I am writing to ask you to send me a brief description of the impact of the crisis in your
country particularly with respect to poverty as well as on the development process.
I am sure you are aware that all United Nations’ Members agreed in September 2000
on a series of millennium development goals setting targets for the reduction of poverty and
the improvement of global living standards.
Sadly the evidence I have indicates that the situation of the world coffee market poses
a real impediment to attaining these goals. In consequence I believe that additional support
for action to deal with the coffee crisis could be mobilized if a clear picture could be
presented on its impact on individual producing countries. If you could provide me with an
approximately two page summary of the effects of the coffee crisis related to poverty in your
country it might be very helpful to secure appropriate support for relevant action.
It would be most helpful if you could reply to this request by 15 August 2003.
(signed) Néstor Osorio
SUMMARY OF RESPONSES FROM COFFEE PRODUCING COUNTRIES
Two million people are dependent on coffee in a population of 15 million.
Income. Low prices have contributed to reducing production from high levels in the 1980s and 1970s of 124,000 tonnes of Robusta and 31,000 tonnes of Arabica to the present totals of
32,000 tonnes and 5,600 tonnes respectively.
Many agricultural workers have lost their jobs.
In view of the above many young workers have migrated to the cities which are seeing
increased crime rates. In rural areas less money is available for health care and education,
leading to reduced life expectancy and reduction of educational levels.
CENTRAL AFRICAN REPUBLIC
Faced with low income from coffee many small producers have abandoned their farms;
others have turned to food crops, reducing the country’s foreign exchange earning capacity.
Especially as the country is landlocked, coffee is uncompetitive at present prices.
Many traders have left the sector and many rural workers have lost their jobs.
There has been a widespread migration of young people from the country to the towns.
Farmers are leaving coffee growing and are bereft of cash earnings to pay for education,
health care, clothing and construction. Poverty has increased substantially.
Those producers who continue are reducing the care given to their coffee trees, with a
consequent drop in quality.
The coffee industry has been the principal motor of Colombian economic and social
development. For many years coffee was the principal contributor to export earnings and,
though its share in total exports revenue has declined, it contributed almost US$890 million
in 2003, about 7% of export income.
As the world’s second largest producer with 11.6 million bags in 2002, the coffee culture has
assisted in the creation of an economic and social infrastructure within its area of about
800,000 hectares and its area of influence extends to some 3.6 million hectares.
There are 566,000 coffee growers and there are currently some 480,000 families who are
directly dependent on coffee production.
In this sense, coffee, including activities related to its cultivation and processing, is still one
of the major industries and the first agricultural export item in the country. The average share
in the gross domestic product (GDP) and in total agricultural and industrial production during
the last six years accounted for an average of 1% of GDP and 10% percent of the total
production of both the agricultural and industrial sectors.
However, at a national level, low international prices have reduced coffee contribution to the
total economic activity, from 5.3% to 1.3% of GDP during the period 1990 to 2002. Exports
earnings have decrease by US$1.5 billion between 1999 to 2002 due to fall in international
Additionally, as measured by the real value of the coffee crop, the coffee sector’s income has
fallen by 50% during the last decade, from US$ 1.5 billion to US$737 million last year.
The coffee industry provides direct employment for some 530,000 people, accounting for
30% of total rural employment. An additional 2 million people are directly and indirectly
dependent on the coffee industry.
Notwithstanding, if the crisis continues the National Federation of Coffee Growers
estimates that approximately 100,000 more people may lose their jobs in the sector.
Given its role as a major source of employment in the rural sector, coffee continues to be
indispensable. Coffee has been a major influence in regional development. It has assisted in
the creation of an economic infrastructure and a social safety net.
As a result of the international crisis in the coffee sector, coffee producers’ welfare has been
severely affected, and there has been a high human cost. According to the research centre
Crece (2003), due to the reduced profitability of the coffee sector it is estimated that the
number of households in coffee growing areas living under the poverty line rose from 54.2%
to 61% between 1997 and 2000.
Coffee growers have become poorer with an increase in sub-standard living conditions and
some have been unable to pay for their children’s education. There has been an increase in
levels of malnutrition.
There has been increased migration to urban centres, especially young people. Some farmers
in marginal regions are also replacing coffee by illicit crops, grassland or abandoning
In a population of 3.9 million in 1999/2000 there were some 73,700 registered coffee
producers, a figure which dropped to 70,500 by 2001/2002, as a result of the crisis.
Since costs of production are not currently covered by prices received farmers have reduced
plantation care or abandoned coffee.
Job losses in the coffee sector are estimated at 10,000.
In the Brunca region, one of the main coffee areas, homes classified as in extreme poverty
(per capita income below the cost of the basic food basket) represented 11.8% of the total
in 1998. In 2002 this had risen to 13.1%. The national figures were 7.1% and 8.8%
The crisis has had a negative impact on trade, transport, warehousing and the financial
Coffee with cocoa forms the basis of the economy for around 7.5 million people out of a
population of 17 million. At least 2.5 million people are directly employed in coffee and
Reduced fiscal revenues from coffee have severely affected the national investment budget
constituting a break on development. Producer prices have fallen from US 41 cents per lb in
1997 to 15 cents in 2002.
The drop in income from coffee has been somewhat compensated by earnings from cocoa.
Nevertheless rural living standards have dropped, and many families are finding problems to
pay for education.
Levels of care for coffee trees have been reduced, with a consequent drop in quality.
There are 105,000 coffee families in Ecuador, with an estimated 800,000 people involved in
coffee out of a population of 12 million.
Prices received in the 2003 harvest do not even cover harvesting costs, so many farmers are
neglecting or abandoning plantations, or replacing coffee by annual crops or grassland.
The coffee processing industry is working at one third capacity and has dismissed staff.
Many producers are migrating to cities or abroad, leaving their families behind.
Replacement of coffee by annual crops or grass is causing an adverse environmental impact
since coffee is normally grown under shade.
Research and extension institutions have needed to lay off staff.
There are around 20,000 coffee growing families in a population of 6.4 million.
Producers have incurred losses since 2000. Current debts of coffee growers are
US$334 million, equivalent to US$257 per quintal produced in 2002/03, four times the
current export price of US$60 per quintal. Reductions in coffee earnings have had a
depressing effect on many other economic areas.
With respect to salaried employment the crisis has led to permanent job losses of some
The World Food Programme has needed to distribute emergency rations to 10,000 coffee-growing families. In many coffee-growing areas malnutrition is affecting 45% of children.
In 2003, 52 children in coffee areas have died from malnutrition. 25% of farmers are seeking
to sell their land or change their activities and 8% intend to emigrate to the USA.
Shaded coffee is practically the only still-forested area in the country. The threat to coffee is
thus likely to cause further deforestation.
Incidence of coffee berry borer infestation has increased with potential losses of 40,000 bags.
About 25% of the population of 65 million depends on the production, distribution or export
of coffee. There are some 1.2 million coffee farming families.
Many people in the coffee sector are now living on less than US$1 per day. Farmers are now
selling coffee at prices well below the cost of production. Since coffee on average constitutes
over 50% of export earnings the government is suffering severe fiscal constraints.
It is stated that there has been a considerable reduction in employment.
Coffee farmers are now unable to pay for their children’s education and for basic medicines.
They have also had to cut back on food consumption, living on one meagre meal a day, with
frequent cases of malnutrition. There has been increased migration to urban centres, swelling
The environmental impact has been negative with abandonment of coffee farms.
Ghana is a small producer; several hundreds of farmers have coffee as a main source of
Prices received by farmers are more volatile as well as lower since marketing system
liberalization. The producer price share of the fob price has moved from 56.93% in 2000 to
55.70% in 2002. Current prices do not cover production costs.
Coffee represents a cash crop element in subsistence farms; cash shortfalls mean less money
for health and education. Some farms have been abandoned.
Several local traders (licensed buying companies) have closed or been rendered ineffective.
There are now 5 active companies out of 50 which are eligible to trade.
There are some 500,000 coffee workers.
Growers find it difficult to cover production costs at present price levels and are reducing
inputs and their work force. The sector is facing a credit burden of loan service said to be
unmanageable, with a consequent unavailability of further loans from the banking sector.
Production is decreasing.
There have been widespread lay-offs.
Poverty levels have increased significantly in the Western and Eastern Ghats areas.
Coffee is mainly grown under shade but growers are now tempted to remove trees and sell
them as timber, leading to deforestation and loss of ecological balance. The Western Ghats
are rated as one of the 14 most sensitive ecological areas in the world.
Agriculture, in which coffee is the main activity, is the principal source of employment.
270,800 jobs exist in the coffee sector. Total population is 5.2 million.
At a national level shortfalls in foreign exchange earnings caused by the coffee crisis are
estimated for 2000/01 – 2002/03 at US$142 million through falls in volume and
US$165 million through falls in price. Losses in income tax collected are estimated at
Job losses caused by the crisis are estimated at 122,000.
There has been a substantial increase in rural to urban migration, although there is no demand
in the cities for this type of labour. There have been several demonstrations demanding work
in coffee areas.
Low prices have discouraged care of coffee trees and limited access to credit.
PAPUA NEW GUINEA
Papua New Guinea has a population of 4.9 million. It is estimated that just over 50% of
households depend on coffee for all or part of their income.
During the period of the crisis, from 1998 to 2002 PNG’s GDP fell 3.5% in real terms. In the
main smallholder coffee sector the average return per man-day is estimated at US$1.
There has been a 40% decline in formal employment in the estates sector, which accounts for
some 15% of production, between 1998 and 2002. There have also been substantial layoffs
in the research and extension services dealing with coffee.
Many smallholders are experiencing difficulties in paying for medicine, bride price, school
fees, meat and fish, etc. In the Eastern Highlands 50% of parents have not paid their
children’s school fees this year.
The Government of PNG has conveyed that the coffee crisis has increased poverty, slowed
down economic growth, curtailed employment prospects and has had a negative impact on
the balance of payments.
With production costs at roughly US$300 per ha. and revenue from coffee per ha. at
US$256 at current prices coffee production is not economic.
There is stated to be a widespread unemployment problem in coffee areas.
Coffee farmers have become poorer with substandard living conditions. Land owners are
unable to pay taxes and many farms have been abandoned.
Quality has suffered from lack of fertilization, improper harvesting and other factors linked to
Coffee is one of the main economic activities in the Central Highlands, particularly in the
province of Dak Lak, whose population is around 2 million.
When coffee prices were high, as in the mid-1990s, 1kg of coffee could be exchanged for
5kg of rice. This had dropped to 1 for 1 in 2002.
A March 2002 survey showed that 45% of coffee-growing families lack adequate nourishing
food, and 66% have bank debts. Many children from medium to poor households have left
school in view of the costs involved.