3 Coffee, money and debt
Now that you have a sense of the importance of the income generated through the sale of coffee for some regions in the world, you have the chance to think about the consequences of the prices that coffee farmers receive for their crop. Coffee prices are determined through an international system of exchange. The ‘C’ market price (for commodity coffees) is notoriously unstable (as it is for many commodities) and there have been times when this price has fallen below the cost of production. This makes it hard for coffee farmers to make ends meet. But what can you, as a consumer, do about this? This is a difficult question because there are many factors that determine the price of coffee and these factors are not always visible to or changeable by consumers.
The first series of films in this course introduces you to the complex relationship between coffee, money and debt. As you watch each extract, take some brief notes to help you address the questions that follow below.
What are the consequences for coffee farmers when the coffee prices are low?
When coffee prices are low, coffee farmers may get into debt because they have borrowed money to pay for things upfront (such as coffee seeds, fertilisers and labour) which they are now unable to pay back due to lower than forecasted coffee prices. In some communities, such as Oaxaca in Mexico, farmers are abandoning their crops and migrating to the city to make more money.
You saw a number of people describing why they (or the coffee farmers they work with) continue to grow coffee. Match the three statements below with the speaker pictured.
Using the following two lists, match each numbered item with the correct letter.
EDMUND KANANURA, UGANDA COFFEE DEVELOPMENT AUTHORITY
FERNANDO AGUILAR, AMA COFFEE
DONALDO GONZALEZ, CAFÉ ARUCO
a.In areas where coffee is grown, there’s a better income per household, and less poverty.
b.Coffee culture is a way of life in Honduras. People depend on us for their business and we help a lot of people in our community by harvesting coffee.
c.My family has always grown coffee and now I have the opportunity to re-invent our business and directly trade our specialty coffee with buyers in London.
- 1 = a
- 2 = c
- 3 = b
What can consumers do to increase the amount of money that coffee farmers receive?
Schemes such as Fairtrade (where the farmers are guaranteed a set price for their coffee) and direct trade are ways that consumers can help ensure that more money returns to coffee farmers. However, convincing consumers about the effectiveness of these schemes can sometimes be difficult. In addition, some farmers, such as Fernando Aguilar from El Salvador, are able to sell their single-origin speciality coffees for a much higher price because consumers are willing to pay more for these distinctive flavours.
Do you agree with Rebecca Singer that ‘we have lost the ability to understand … the real value of a product’?
This question has no right or wrong answer and this will be something for you to continue to think about. There is one school of thought that believes that the value of a product ought to be determined by the amount of human labour that has gone into its production. One problem with this approach is that it does not take into account interactions between supply and demand. Just because someone has supplied coffee using labour-intensive production methods does not mean that the demand for this coffee will be any higher than a similar coffee that has been supplied using mechanised-production methods. The value of coffee on exchange markets is shaped by the global supply and demand of coffee, and those most able to supply high yields of coffee do so because they do not rely on human labour alone.
Whether people ought to support small-scale farmers producing coffee is hotly debated because, for those small-scale farmers, coffee is their main source of income and they have few opportunities to improve their productivity. Large-scale coffee farmers, such as those in Brazil and Vietnam, pull down the global price of coffee because they supply so much, which in turn creates global inequalities between coffee producers and between countries.