US coffee groups dispute Oxfam on poor farmers
September 26, 2002
NEW YORK, Sept 26 (Reuters) - One week after British charity Oxfam
criticized the coffee industry for making hefty profits while failing
to help coffee farmers devasted by depressed bean prices, the leading
U.S. coffee groups said they don't see eye-to-eye with Oxfam how
to tackle the problem.
Oxfam claims that 25 million coffee farmers are in dire straights,
struggling to survive as global coffee prices remain mired below
their cost of growing and harvesting the crop. "It is critical to
the NCA to have a sustainable industry and we believe in the efforts
that everyone is making, but it's not helpful to spend efforts on
solutions that will not make a difference," said Robert Nelson,
president and chief executive officer of the National Coffee Association
of U.S.A. (NCA) Part of Oxfam's approach to the crisis calls on
the major coffee roasters, who are part of the NCA membership, to
pay farmers a price above the cost of production, purchase at least
2 percent of Fair Trade certified coffee, and to respect the rights
of migrant workers.
One response to the poverty crisis, brought on as coffee futures
in New York and London headed to 30-year lows late last year, has
been to promote Fair Trade coffee, so called because it pays farmers
a fair price for beans and allows them to adequately feed and educate
their families. "Fair Trade coffee is one component as we address
the crisis, but as we look at cause-related coffees, it is important
to recognize that the market is very small in the U.S.
Even major increases in those niches won't really impact prices,"
said Nelson. Nelson explained that Fair Trade coffee has been promoted
in Europe for about a dozen years but it remains a very small portion
of the their overall market. "Our (annual consumption trend) study
shows about 2 percent of American consumers are purchasing Fair
Trade and 7 percent were aware of Fair Trade in 2002," Nelson said.
The Specialty Coffee Association of America (SCAA) represents some
2,500 company roasters and retailers of specialty or gourmet coffee
who typically pay above the depressed benchmark futures price for
their beans. "The problem we have today is a problem of structural
oversupply," said SCAA Executive Director Ted Lingle. "The Oxfam
report clearly points out the niche market isn't enough to solve
However, he added, "The report is fair in criticizing the industry's
response to the problem. We could be doing more." DO THE NUMBERS
While some casual observers of the coffee market buy into the romantic
notion that the majority of coffee produced is from small landholders
or farmers, experts say the larger plantations account for more
than 50 percent of global output. This means that most of the workers
who harvest beans do not qualify for Fair Trade status because they
are not small cooperatives.
Paul Rice, CEO of TransFair USA, the Oakland, California-based
nonprofit certification organization of Fair Trade products, says
he has been listening to the coffee industry. "We want to make it
work for the industry. You can't ignore their needs. We can develop
certifications for estates and large farms," said Rice in a phone
interview Thursday. U.S. coffee roastings run around 18 million
60-kg bags per year and the big roasters - Kraft Foods Inc. (KFT),
Procter & Gamble (PG), Sara Lee Corp. (SLE), Nestle (NESZn), and
Starbucks Corp. (SBUX) - represent approximately 60 to 70 percent,
or 11 to 13 million bags.
If the major roasters make 2.0 percent of their purchases Fair
Trade certified, it would be 250,000 bags, or 33 million lbs of
coffee. With a preliminary figure of 200 million lbs of Fair Trade
certified coffee produced in 2001/02, up from 170 million lbs in
2000/01, there doesn't appear to be a problem of sourcing. Worldwide
sales of Fair Trade coffee were 40 million lbs last year, according
to Rice. This means that the remaining 130 million lbs were sold
at slumping market prices, with no premium going to the poor farmers.
"We have an imbalance on the other side.
We need to pump up demand," Rice admitted. Rice also said he disagreed
with Lingle's assertion that the Fair Trade model cannot ramp up
enough to alter prices. "We're ready to extend the model. The question
is whether the industry is ready to step up to the plate and buy,"
Rice said. The NCA takes the position that a rise in overall coffee
consumption will improve prices. One dour coffee trader suggested
that, "Twenty-five million coffee farmers around the world facing
financial ruin might not be enough to turn the market around."