Coffee - the global giant

The world coffee market today is vast, coffee being the world's second most widely traded commodity after crude oil. World coffee production in 2004 is projected to be around 6.3 million metric tonnes, a reduction from 2003 figures due to stockpiling equivalent to 1.3 million tonnes. Ten years ago the global coffee economy was estimated to be worth some $30 billion, of which producers received $12 billion. Today it is worth around $50 billion with producers receiving a mere $8 billion of that (source Global Exchange, 2004). Brazil, Columbia and Vietnam are the world's biggest coffee producers, accounting for around half of global production in 2001. Because of the central importance of coffee exports to their economies, a number of Latin American countries made arrangements before World War II to allocate export quotas so that each country would be assured a certain share of the US coffee market. The first such coffee quota agreement was arranged in 1940 and subsequent agreements were renegotiated in 1968, 1976, and 1983. However due to a shift in the balance of production, participating nations failed to sign a new pact in 1989 and world coffee prices have been in free-fall ever since as production continues to outstrip demand, and a "global coffee crisis" ensued. "Fair Trade" measures designed to help the struggling farmers only account for only 8 million of the 2.6 billion pounds, or 0.3% of the coffee sold annually in the USA. With an estimated 20 million coffee workers worldwide, developing nations have been hit hard by this global coffee crisis as trade prices have fallen short of production costs. New yield technologies in combination with overproduction, especially by the developing economies of Vietnam and the Ivory Coast, have largely contributed to the crisis. The human cost is demonstrable. In Latin America tens of thousands of farmers and labourers have begun migrating to look for alternative work as plantations close down. This is not the only toll of overproduction however, as the drive for cheaper, faster growing coffee has led to widespread clearance of the forest cover normally associated with high quality blends. In Vietnam alone, which produces around 11% of the world's coffee, nearly 1.5 million acres are now under cultivation causing the clearance of vast areas of forest.