On May 15th, Radio 4′s ‘The Food Programme’ broadcast a fascinating programme about coffee – focusing on Central America.
Apparently the global price of coffee is at a 34 year high. Back in 2003 coffee was trading at $60cents per pound. Now the price is $3 per pound (for Arabica beans). Unsurprisingly the majority of the benefit of this escalation in price is going to middlemen – traders, financial speculators, etc – rather than the actual producers. The Black Gold film website has a tool through which you can calculate where the money goes from the price of your daily cup. Illuminating stuff.
Almost all coffee is traded on the global market, and coffee is the second most actively traded commodity in the world (after oil). The programme featured the story of a company that is bucking this trend. Hada del Cafe buy coffee direct from Nicaraguan producers, cutting out the reams of middlemen involved in the web of global trade. Despite the difficulties the model is working, and profits are helping mountain communities develop sustainably.
Another feature of the programme was that as a result of the astronomical coffee price, the price paid on the Fair Trade market is no longer a big draw for producers. Fair Trade certified coffee is bought at $1.50 per pound, or the market price if this is more – it effectively provides a floor, or price insurance for the farmer. With the market trading at double the Fair Trade guaranteed price producers are defaulting on their Fair Trade contracts to sell to other buyers, and fewer are willing to join the movement. The benefits of being a part of the Fair Trade scheme are a harder sell when cash in hand prices are so high.
So, will coffee remain at this price? The commentators on the programme think so. As usual China is the big maybe. If the Chinese start drinking more coffee, and other developing economies such as Brazil (now second only to the US in total consumption) continue to gulp down more than there is no reason for the price to drop. Apparently Nicaragua, Columbia, Peru and maybe Honduras are the main countries that are able to increase production to meet this potential demand. Black gold indeed.