As coffee prices surge worldwide due to unfavorable weather and supply shortages in major producing countries like Brazil, India, and Vietnam, one might expect coffee farmers to reap the benefits of the market upswing. However, despite consumers paying more for their daily cup, farmers in the Global South continue to receive a shrinking share of the profits.
Since the 1950s, coffee has been one of the world’s most traded commodities. Yet, the global coffee trade is marked by a stark imbalance between the Global North and South. Countries like Brazil, Colombia, Vietnam, Indonesia, and Ethiopia dominate the export of unprocessed coffee beans, controlling about 70% of the market. In contrast, nations such as Switzerland, Germany, Italy, France, and the Netherlands export processed coffee products like roasted beans and instant coffee, also commanding around 70% of their market segment.
This disparity extends to profits. While processed coffee sells for an average of $14.30 per kilogram, unprocessed coffee beans fetch only about $2.40 per kilogram. Consequently, coffee producers in the Global South see a minimal portion of the industry’s value. In 1992, these producers captured one-third of the coffee market’s value; by 2002, their share had dwindled to less than 10%. Today, coffee farmers receive approximately 6% of the price of packaged coffee sold in supermarkets and as little as 1% of the final retail price of a cup sold in cafes.
The consolidation of the coffee industry exacerbates this issue. Three major companies—Nestlé, Starbucks, and JDE Peet’s—account for nearly 78% of the total revenues among the sector’s top ten firms. This concentration of market power further limits the bargaining power of coffee-producing nations and farmers.
One proposed solution is for these countries to develop their own processing capabilities, adding value to their exports. However, significant barriers hinder this strategy. Developed countries impose high tariffs on imports of processed coffee—ranging from 7.5% to 9% in the European Union, 10% to 15% in the United States, and up to 20% in Japan. Unprocessed coffee, conversely, enters these markets tariff-free. This tariff disparity discourages coffee-producing countries from exporting higher-value processed coffee.
Ironically, while developed nations and international organizations often encourage developing countries to enhance the value-added component of their exports, their own trade policies undermine these efforts. For example, Brazil imposes a symmetrical 10% tariff on both unprocessed and processed coffee imports, promoting fair competition. Yet, without reciprocal policies from developed countries, coffee producers in the Global South face uphill battles in climbing the value chain.
The situation raises the question: Is it time for coffee-producing countries to unite and demand fairer terms in the global coffee trade? By collaborating, these nations could potentially increase their bargaining power, advocate for more equitable trade policies, and ensure that farmers receive a just share of the profits.
For consumers, understanding the complexities behind their daily cup of coffee may inspire a push for change. As the global community becomes more aware of these disparities, there is hope that collective action can lead to a more balanced and fair coffee industry.
Reference(s):
cgtn.com
