A Series About the Coffee Paradox | How Do We Turn It Around?
For the first time in more than a decade, the market price for coffee has been below 1 US Dollar. Being the consumer, you might not notice this, but truth be told, the low coffee prices has major consequences for the farmers and producers. In a series of short and informative articles we will dig into different aspects of this development and discuss what we can do – as a company as well as a consumer, to turn this around.
In the past weeks there’s been an increased focus on coffee prices in the Specialty Coffee Community. This comes from a concerning development that’s been taking place since August where the Coffee C Market Price dipped below 1 US Dollar. The Coffee C Market price can in short be described as the reference point for most coffee sales from producing countries. This was the lowest in more than a decade, and this week it dropped even further. At the time of writing it is again below 1 US Dollar which illustrates where this is heading. But what does this mean? For a lot of people reading this, the price might just be a number that is hard to relate to. Truth be told, the low coffee prices has major consequences for the farmers and the producers. As the farmers’ economy are collapsing, the future of good coffee might follow suit, if the development continues.
To get an idea of the broader picture, and the different external factors playing a role in this development, you can read an extract from an article by Kim Elena Ionescu:
»Coffee farmers and organizations representing farmers have been warning buyers for years that from a purely economic perspective – to say nothing of environmental and social pressures – coffee production is increasingly unattractive in all but a handful of places. I often hear (and I repeat) the prediction that climate change will cut the amount of land suitable for coffee production in half by 2050, but with market conditions like the ones we’re living in, I wonder if the sector might lose half of its farmers by 2030.«
Ionescu sums up the concerning development and what consequences it might have in the future. If you want to get a deeper look into this, we would definitely recommend you to read the article.
Taking a closer look on the Coffee C Market Price, the downward trend has been going on since 2011, and most of 2018 it has been below what might be seen as the minimum level to cover the farmers’ cost of production. This downward trend in prices paid to producers is making production of coffee less and less attractive. Especially production of good coffee, since that already includes more work, higher risks and lower yields. The picture is starting to get very clear of where the situation is going.
At the same time, coffee shops and new micro roasters are popping up everywhere. Market studies in the US has shown how Specialty Coffee since 2016 has more than half of the total numbers of cups of coffee sold. Big international conglomerates are buying medium-sized coffee businesses and small chains to enter this market. When even the biggest actors enter the Specialty Market, then it can be without doubt that it’s a booming business.
In the early 2000’s we found ourselves in a similar situation; Specialty Coffee was growing (from a smaller level than today though) and farmers were paid the lowest prices since the 1960’s. Researchers studied this contradictory development and phrased it The Coffee Paradox.
So, how do we avoid a Coffee Paradox part 2? And if it is already here – how do we turn it around? During a series of articles we will explore consequences of the paradox as well as search for possibilities we can take towards improvement.