A Cup of Justice Coffee, Fair Trade, & Justice for Farmers in the Global South Coffee The third most valuable item traded internationally. Americans Like Their Coffee Worldwide, people drink over 1½ billion cups of coffee a day. The U.S., with just onetwentieth of the world’s population, consumes one-fifth of all the coffee. Coffee is grown in some 80 countries Coffee-growing countries are located fairly near the equator and generally are quite poor. The largest producers are shown in yellow on the map. Coffee is Grown on Small Farms About 70% of the world’s coffee is grown on farms of less than 25 acres. Most are between 2½ and 12½ acres. In Mexico, 90% of coffee is grown on small plots. Many Small Farm Families Depend on Coffee Worldwide, 20 to 25 million small farm households, some 125 million people, depend on coffee for their livelihoods. Nicaragua Costa Rica Ethiopia Farmers Get Only a Small Share of the Price Consumers Pay From tree to supermarket, coffee changes hands up to 150 times with costs and profits added at each step. Small coffee farmers receive 1% or less of the price of a cup of coffee sold in a coffee bar. 1% 5% They receive roughly 5% of the retail price of a package of coffee sold in a U.S. supermarket. Small coffee farmers, their families and communities are suffering What Is Happening in the Global Coffee Industry ? Ethiopian coffee farmer Prices Paid Coffee Farmers are Very Low $6.00 per pound (2005$) $5.24 $4.00 $1.86 $2.00 $0.89 $0.51 $0.00 03 20 00 20 97 19 94 19 91 19 88 19 85 19 82 19 79 19 76 19 The price farmers receive for their coffee is at a record low, just 25% of the price in 1960. World Price of Coffee,* 1976-2005 (adjusted for inflation) * A djusted fo r inflatio n est. at 3% / year So urce: Internatio nal Co ffee Organiz. Prices Paid Coffee Farmers are Very Low • An excess supply of coffee has driven down the world price. • A power imbalance has driven down the prices paid small farmers even more. An excess supply of coffee has driven down the price There are new coffeeproducing countries. Viet Nam is now the world’s second largest producer. Traditional producers are also growing more coffee to boost incomes. Young coffee plants An excess supply of coffee has driven down the price Farmers try to offset the falling price by producing and selling even more. But this leads to even lower prices and earnings continue to fall. An excess supply of coffee has driven down the price The fall in price has especially hurt people whose small farms cannot be mechanized and who lack money for investments that could increase their output. Small hillside farm of shade-grown coffee Coffee plantation in Kenya An excess supply of coffee has driven down the price While the world price has fallen, the price charged consumers in grocery stores and coffee shops is little changed. The “middle-men,” especially the coffee roasting firms, reap much of the benefit. Prices Paid Coffee Farmers are Very Low A power imbalance has driven down the prices paid to small farmers even more. Kraft owns Maxwell House A power imbalance has driven down prices paid small farmers Lacking modern transportation and with limited options for selling their crops, small farmers often sell to local buyers (“coyotes”) who pay especially low prices. A power imbalance has driven down prices paid small farmers Small farmers typically sell their crop immediately after harvest when the price is lowest because they lack storage facilities and need the money. A power imbalance has driven down prices paid small farmers They may have borrowed money during the growing season to buy food, meet emergencies, or pay for other coffee-growing items. Generally, loans are available only at very high rates of interest so prompt repayment is critical. Returning home from the coffee trees on the mountainside A power imbalance has driven down prices paid small farmers “In selling my coffee I cannot consider the market price. I decide when to sell according to my pressing needs. Hence I will sell regardless of the price, whether it is high or low. I do not have bargaining power.” --Indonesian farmer A power imbalance has driven down prices paid small farmers With little access to credit at reasonable rates, small farmers often cannot afford investments to improve their farming practices or diversify into other, more profitable crops. A power imbalance has driven down prices paid small farmers Consequently, small farmers have difficulty competing with mechanized coffee plantations and multinational firms. Small Farmers Earn too Little Low coffee prices and small farmers’ vulnerability and disadvantage mean they earn too little for their coffee. Developing Countries Earn too Little A different power imbalance leaves small coffeeproducing countries with too little money for their coffee. Developing Countries Earn too Little Exporters in coffee-producing (usually poor) countries sell their coffee to international buyers and roasters. These large multinational firms seek to pay as little as possible. • Just three roasters (Nestle, Kraft – Maxwell House, and Sara Lee) process 45% of the world’s coffee. • Just four companies purchase 40% of the world’s coffee. Developing Countries Earn too Little If prices for the 10 most valuable agricultural commodities exported by developing countries (coffee is one of these) had risen since 1980 only enough to keep pace with inflation, then exporting countries would have received $112 billion more in 2002 than they actually did. Developing Countries Earn too Little This amount, $112 billion, is more than twice the international aid received by all developing countries, worldwide, that year. Market, San Cristobal de las Casas, Chiapas, Mex. Developing Countries Earn too Little Colombia Since they are paid so little for their products, these poor nations are unable to pay off their debts, provide essential services to their populations, and import needed items. The Impact of Low Coffee Earnings On Coffee Farmers and their Communities Sincelejo, Colombia Nogales, Mexico Impact of Low Coffee Earnings Worsening poverty In Mexico, “as a result of the decline in farmers’ income, about 20% of children were taken out of school and [farmers] were unable to afford clothes, shoes, basic medical attention, and repayment of credit.” -- Mexico: Coordinadora Nacional de Organizaciones Cafetaleras Chiapas, Mex. Impact of Low Coffee Earnings Loss of Farms Farmers can lose their land, forcing families to move to cities where living conditions may be inhumane and jobs are scarce. Indonesia Brazil Impact of Low Coffee Earnings Neglect of Coffee Trees Cuts Future Income Farmers may leave their communities to look for other work. Coffee trees are neglected, reducing the quality and quantity of future years’ beans, and future income. Neglected, diseased coffee tree Impact of Low Coffee Earnings Migration Farmers may leave their country, seeking work elsewhere. Tens of thousands of Mexican coffee farmers have left their land, leaving behind grieving families and weakened communities. Some come to the U.S. without documents. U.S.-Mexico border What Can Be Done ? Fair Trade, not “free” trade, will improve the lives of coffee farmers Fair-trade importers provide a vital link between small farmers and consumers who seek justice for small coffee farmers. A Fair Trade Coffee Importer Agrees to: * Buy coffee grown by small farmers organized into cooperatives (coops). What is a Coop? A cooperative (coop) is a business that is owned and democratically controlled by its members. Members, CIRSA Coop, Chiapas, Mex. What is a Coop? A coop operates for the benefit of its members. It does not earn profits for shareholders. It elects its own leadership and does not answer to an outside board. Coffee coop members, Nicaragua A Fair Trade Coffee Importer Agrees to: * Pay a fair price currently set at $1.21 a pound or pay the world price, whichever is higher; and Pay a 5 cent per pound “social premium;” and If organic, pay an additional 15 cents a pound. The Social Premium The social premium of 5 cents per pound is paid to the coop, not to farmers. Coop members decide how this money is to be used: for example, to purchase needed equipment such as a truck to transport coffee, or to build a school or clinic. Truck purchased by Mexican coop A Fair Trade Coffee Importer Agrees to: * Purchase coffee directly from farmer coops, eliminating many “middle men” and opportunities for exploitation, providing higher prices for farmers. Warehouse, CIRSA Coop, Chiapas, Mex. Farmers get a Larger Share of the Price Paid by Consumers A simplified market (follow the green lines) means fewer middle men and more money for farmers. A Fair Trade Coffee Importer Agrees to: * Develop long-term relations with a coop. This encourages investment since farmers know they will have a strong, ongoing market for their coffee. * Offer credit of up to 60% of the coffee’s sales price in advance of the harvest. Benefits of Fair Trade to Farmers and their Families Better education, health, and opportunities due to the social premium payment. Higher incomes. Greater access to credit for investment and other needs. Benefits of Fair Trade to Farmers and their Families Stable incomes that enable farmers to risk experimenting with other techniques and crops that might have a higher payoff. Increased self esteem. Higher quality coffee (that earns a higher price) due to training provided by the coop. Benefits of Fair Trade to Farm Communities Enhanced community opportunities such as economic development projects, schools, health clinics, sanitation facilities, clean water, and fuel-efficient stoves. Strengthened communities with less poverty, more stability, and healthier and more educated community members. Benefits of Fair Trade to Farm Communities Stronger political and economic organizations representing farmers’ interests locally and nationally. Better environmental practices including organic farming. Strengthened indigenous communities. Benefits of Fair Trade to Farm Communities “When you buy our coffee you are not just buying our coffee but supporting our democracy” -- Guillermo Vargas Leiton, coffee farmer, Costa Rica Benefits of Fair Trade to Developing Countries Increased export earnings to pay off debts to banks and international organizations and to purchase needed imports. A better fed, healthier, and more educated population. A more stable population without excessive migration within or out of the country. The Story of one Coop: Coocafe in Costa Rica Coocafe is a coop in Costa Rica that began selling fair trade coffee in 1989. It has grown to over 3,500 farmer members and their families. The Story of one Coop: Coocafe in Costa Rica Coocafe has used its social premium to: • Purchase a processing plant to de-pulp coffee beans that uses 80% less water. • Purchase a solar energy system to dry beans, eliminating the need to cut down over six acres of forests annually. • Promote diversification into additional crops like macadamia nuts, yucca, bananas, and cassava, and help market these crops. The Story of one Coop: Coocafe in Costa Rica Coocafe, has also provided: • almost 1,000 scholarships for farmers’ children to attend secondary school and university. • helped maintain local primary schools. • purchased land for 25 landless families. Learn more at www.Coocafe.com Fairly Traded Coffee The first Fairly Traded coffee was imported into the Netherlands in 1973 from Guatemalan small-farmer cooperatives. Thirty years later, 200 coffee cooperatives representing nearly 700,000 farmers, and more than 70 traders and 350 coffee roasters are part of the Fair Trade network. Fairly Traded Coffee Over 30% of all Fairly Traded coffee sold in the world is purchased in the U.S. It comes from 84 co-ops and hundreds of thousands of farmers in 18 countries. Fairly Traded Coffee But this was less than 2% of all coffee sold here. Fair Trade Coffee Sold in U.S. 18,000 16,434 12,000 9,332 (tons) By 2004, sales of Fairly Traded coffee in the U.S. had risen to over 16,000 tons. 4,874 6,000 3,335 2,125 1,026 38 0 1998 Source: TransFair 1999 2000 2001 2002 2003 2004 Fairly Traded Coffee Worldwide, sales of Fairly Traded coffee grew 40% between 2004 and 2005. Global sales of Fairly Traded coffee, 2004 and 2005 (tons) 37,469 26,700 2004 2005 Fairly Traded Coffee Certified fair-trade coops produce seven times more coffee than fair trade buyers purchase. They cannot sell all their coffee to fair trade purchasers. So we need to expand sales of fairly traded coffee. Fairly Traded Certified Coffee The nonprofit organization TransFair USA certifies coffee, tea, chocolate, rice, sugar and a few fresh fruits. WATCH FOR & BUY PRODUCTS WITH THIS LABEL Where to Buy Fairly Traded Coffee There are a number of Fairly Traded coffee traders and roasters. Coffee, tea, and cocoa may be purchased through the UCC-Equal Exchange Coffee Project (www.ucc.org/justice/issues/coffee-project/) Where to Buy Fairly Traded Coffee Equal Exchange is the oldest and largest fair trade organization in the U.S. and is itself a workerowned coop. It’s Interfaith Program for faithbased organizations serves over 11,000 participating congregations and other groups. Where to Buy Fairly Traded Coffee Global Exchange has links to a number of sources of Fairly Traded coffee. (www.globalexchange.org) To find a grocery store near your home that sells Fairly Traded products including coffee, go to TransFair’s online locator at www.transfair.org. Where to Buy Fairly Traded Coffee Starbucks, Dunkin' Donuts, Procter & Gamble, and other large corporations have also agreed to sell Fairly Traded coffee. However, consumers report it is often unavailable when they request it. The Bottom Line: Watch for the Fair Trade Certified logo Produced by Edith Rasell Minister for Workplace Justice Justice and Witness Ministries United Church of Christ 700 Prospect Ave Cleveland, OH 44115-1100 216-736-3709 raselle@ucc.org 2006 , God is Still Speaking