About Coffee

Coffee is such an integral part of everyday life that few of us stop to think about the people that grow coffee beans to make this hugely popular beverage.

The history and importance of coffee

Legend has it that the energizing effect of the coffee bean was first recognized by a 9th-century goat herder in the Kaffa province of Ethiopia, where the coffee tree originated. Coffee was almost certainly cultivated in Yemen long before the 15th century when Sufi mystics reportedly drank it to keep awake during extended hours of prayer. The drink was spread by Muslim pilgrims and traders across North Africa and the Middle East, where Arabian coffeehouses became centers of political activity. The Dutch planted coffee in Sri Lanka, India and Java in the late 1600s and later in South America. Within a few years Dutch colonies became the main suppliers of coffee to Europe, its production associated with colonial expansion and slavery. Coffee soon became one of the most valuable primary products in world trade.

Global coffee consumption doubled over the last 40 years from 4.6m tons in 1970 to 9.6m tons in 2013. Coffee producing countries consume 30% of the world’s coffee, led by Brazil whose consumption reached 1.3m tons in 2013. The remaining 70% of coffee produced is traded internationally; the US is the biggest importer, followed by Germany and Japan.

Coffee is grown in more than 70 countries but over 60% of the world’s coffee is produced by just four of them – Brazil, Vietnam, Colombia and Indonesia. Latin America is the largest regional producer with a 60% share, followed by Asia and Oceania (27%), and Africa (13%). 
For countries that produce it, coffee exports generate a significant proportion of their national income and are a vital source of the foreign exchange earnings that governments rely on to improve health, education, infrastructure and other social services. For instance, Burundi relies on coffee for 60% of its export earnings, Honduras for 25% and Nicaragua for almost 20%. In Ethiopia, 15 million smallholders, nearly a fifth of the population, depend on coffee for their livelihood. Coffee exports made up 25% of the country’s total export earnings in 2014. In Uganda, half a million smallholders produce coffee, the primary source of income for around 2.5 million people or 8% of the population. 

Coffee farmers face challenges

In the next decade, the global coffee sector will face many challenges. These include the continuing global economic crisis, volatile coffee prices, supply shortages from key coffee producing countries, rising production costs, reduced availability of land and labor, food security and poverty in coffee communities, and the impacts of climate change.

In 2011, the value of the global coffee market, including fresh and instant, grew by 17.5% to reach $70.86bn. Coffee supply chains are often complex, with beans sometimes changing hands dozens of times on the journey from grower to consumer. The coffee supply chain has long been dominated by a small number of multinational trading and roasting companies. Four companies – ECOM, Louis Dreyfus, Neumann and VOLCAFE – control around 40% of global coffee trade.

But while coffee is clearly profitable for food companies, it’s a very different story for coffee farmers. In the 1970s, producers retained an average of 20% of the retail price of coffee sold in a shop. When oversupply caused prices to crash to historic lows during the 1994-2004 coffee crisis, coffee growers received just 1-3% of the price of a cup of coffee sold in a café in North America or Europe and 2-6% of the value of coffee sold in a supermarket.

Farmers are also the worst affected by the notorious volatility of world coffee prices. In recent years the price of Arabica coffee has swung from a 30-year low of 45 cents a pound in 2001 to a 34-year high of almost $3.09 in 2011. And then, between May 2011 and December 2013, prices fell by 65% as a result of the global financial crisis and oversupply of coffee. This price volatility has significant consequences for those who depend on coffee for their livelihood, making it difficult for growers to predict their income for the coming season and budget for their household and farming needs. When prices are low farmers have neither the incentive nor the resources to invest in farming improvements. When prices fall below the costs of production, farmers struggle to provide adequate food for themselves and their families or to pay medical bills and school fees. 

Climate change further impacts coffee growing by causing disturbances to weather patterns and temperatures increasing the risks faced by farmers depending on coffee sales. Read here to find out more about how climate change affects coffee farmers. 

How is Fairtrade making things better?

Fairtrade was started in response to the struggles of Mexican coffee farmers following the collapse of world coffee prices in the late 1980s. From the 1960s until 1989, the coffee market was kept in reasonable balance of supply and demand in part due to the 1962 International Coffee Agreement (ICA) and subsequent agreements, signed by governments of producing and consuming countries. The ICA regulated much of global coffee trade through a system of export quotas and buffer stocks which largely maintained stable and advantageous prices for growers. The economic clauses of the ICA were suspended in 1989 because of abuse of the quota system and their incompatibility with prevalent free market economic policies. Controversial IMF and World Bank structural adjustment programs (SAP) required governments of producing countries to privatize state-controlled industries such as the coffee sector and open them to competition from private traders ostensibly to improve efficiency. As a consequence, world coffee prices immediately dropped by half to less than 80 cents a pound.

The collapse of the International Coffee Agreement and subsequent price crash was a major factor in the launch of the first Fairtrade label, Max Havelaar, under the initiative of the Dutch development agency Solidaridad. The first ‘Fairtrade’ coffee from Mexico was sold into Dutch supermarkets in 1989. It was branded Max Havelaar, after a fictional Dutch character who opposed the exploitation of coffee pickers in Dutch colonies.
 
Fairtrade was set up to ensure coffee farmers receive a fair and stable price for their coffee that covers their costs of production. Fairtrade certified cooperatives can count on at least the Fairtrade Minimum Price of $1.40 per pound for Arabica coffee sold on Fairtrade terms plus 30 cents if it is organic. Additionally, a Fairtrade Premium of 20 cents per pound is also paid to cooperatives to invest as they see fit – 5 cents of which is dedicated to improving productivity and quality. These tools give farmers the stability and confidence to budget for next farming season and household expenses and drive development in their communities. For 15 of the last 24 years, when the global price for Arabica coffee has often fallen well below the Fairtrade Minimum Price, it has ensured that farmers can earn enough to cover at least the basic costs of sustainable production. 

At the end of 2014, 445 smallholder coffee producer organizations in 30 countries were Fairtrade certified. And more than 812,500 small-scale farmers were members of Fairtrade coffee producer organizations.

Fairtrade coffee farmers grow their beans on 1.1 million hectares around the world, producing over 549,000 tons of Fairtrade certifiable coffee in 2013-14. A total of 34% of this Fairtrade coffee was also certified organic.

The Fairtrade Premium is a valuable additional source of income that allows farmer organizations to reinvest in improving infrastructure, services to farmers such as training on better farming practices or credit and financial services, but also to support cash payments to farmer members who are struggling with food security or other basic needs. Fairtrade Standards are designed to deliver against all three pillars of sustainability – economic, social and environmental.

Beyond the Fairtrade Minimum Price and the Fairtrade Premium, Fairtrade provides essential training and support to farmer organizations to help them thrive. One of the main focus areas is to train farmers to how to better adapt to a changing climate and weather conditions. Watch coffee farmers in Peru share the lessons with other farmers as they adapt to climate change. 

Keeping the next generation engaged in the coffee sector is one of the challenges facing the industry. Fairtrade International is working with coffee importer Sustainable Harvest and Fairtrade cooperatives to inspire the coffee farmers of tomorrow.