Bitter days for coffee producers Glut depresses prices, could
threaten stability in Latin America
By BRENDAN M. CASE The Dallas Morning News February 7, 2002
CORDOBA, Mexico - Although U.S. consumers are paying top dollar
for decaf lattes and mocha cappuccinos, coffee farmers such as José
Inés Caballero are careening toward bankruptcy.
"Four or five years ago we got $180 for a [132-pound] sack
of coffee beans," said Mr. Caballero, 55, dropping off a coffee
shipment at a warehouse in Córdoba, a mountain town in the Gulf
Coast state of Veracruz. "Now we get about $42. ... For most
of us, that's not enough to live on."
Coffee has reigned as Latin America's largest legal cash crop for
decades, fueling fortunes and social rebellions alike, depending
on price swings and government support programs. Now, with the world's
supply of coffee beans outstripping demand, prices have plummeted
- and a social crisis is brewing.
Misery is spreading through coffee farms in Africa and Asia as
well. But in Latin America - which accounts for about 60 percent
of world coffee output - low prices are undermining such U.S. goals
as slowing the flow of illicit drugs, stemming illegal immigration
and fostering economic development to accompany the region's young
democracies. "Political stability is at stake, that's what's
at issue here," said Larry Birns, the director of the Council
on Hemispheric Affairs, a think tank in Washington, D.C. "The
coffee crisis produces a kind of political volatility that could
open the door to populist solutions." Coffee has long been
an economic mainstay in dozens of countries with tropical and subtropical
climates. But it has also been subject to volatile price swings,
leading to a perpetual cycle of boom and bust. Prices reached $1.80
a pound in 1997, and farmers from Guatemala to Kenya planted more
bushes to boost their sales. Growers increased their output with
improved production methods.
Meanwhile, international development agencies helped finance coffee
production in Vietnam. The Southeast Asian nation, long a negligible
force in the coffee market, vaulted into the No. 2 slot in global
coffee production, behind Brazil.
Now, there's a lot more coffee in the world than people are drinking.
The International Coffee Organization's benchmark composite price
has slipped below 45 cents a pound. Many small-time coffee farmers
receive somewhat less than that for their crops of unprocessed coffee.
Coffee is no longer profitable throughout large swaths of Latin
America and dozens of countries in other developing regions.
"This is the worst crisis in the history of the coffee industry
- not just in Mexico, but in the whole world," said Roberto
Giesemann, executive president of the Mexican Coffee Council, a
government agency that looks after that nation's 280,000 coffee
In Nicaragua's Matagalpa region, Eddy Kühl Aráuz has to spend $75
to fill a sack with his high-end Selva Negra coffee. But the sack
is worth less than $65 these days, despite its premium status. "That's
very, very low," he said, adding that he can make ends meet
only by dipping into his savings.
Coffee-producing countries have implemented schemes to destroy
part of their crop, in a bid to reduce the supply. Many farmers
are simply leaving coffee beans on the bush because harvesting has
become too expensive.
In Colombia, unemployed coffee worker Marcos Cortez recently moved
to the part of the country controlled by the rebels of the Revolutionary
Armed Forces of Colombia in order to work in a feed lot for cattle.
"Coffee was our life, but there's no market now, so we came
here to work on cattle ranches," said Mr. Cortez, 28, who now
works in San Vicente del Caguán.
Low prices have proved a boon to U.S. coffee importers, which have
boosted their stockpiles of coffee beans and widened their profits.
Among coffee producers, a few determined entities are trying to
weather the storm by changing the way they do business. Some are
even trying to copy Starbucks Corp. on a small scale.
In the southern Mexican state of Chiapas, for instance, a growers'
cooperative formed a company called La Selva a few years ago to
market their coffee at upscale cafes in Mexico City and elsewhere.
Other farmers are shifting to certified organic coffee in hopes
of earning premium prices.
A budding "fair trade" movement in the United States
and Europe aims to connect farmers in poor countries with socially
minded consumers in rich countries who are willing to pay a little
extra for their morning cup of joe.
U.S. imports of such fair-trade coffee has risen from about 2 million
pounds in 1999 to more than 7 million pounds last year, according
to TransFair USA, a fair-trade group in Oakland, Calif. Equal Exchange
Inc., a fair-trade coffee importer near Boston, now pays $1.26 a
pound to its suppliers, providing a much-needed lifeline to devastated
growers in poor countries. Last fall, the Northwest Texas United
Methodist Conference in Amarillo passed a resolution calling on
members to serve Equal Exchange coffee at church functions. "For
farmers, we're always the best deal in town," said Rodney North,
an Equal Exchange executive.
Governments are developing solutions of their own.
Mr. Giesemann of the Mexican Coffee Council is shelling out tens
of millions of dollars in emergency aid and low-interest loans to
coffee growers. He also spearheaded a joint effort with Central
American nations to destroy 5 percent of their total harvest.
Now he's launching a campaign to boost the image of Mexican coffee
abroad, and increase consumption at home by installing coffee machines
in government offices, prisons and military bases. He even wants
to add coffee to the breakfast menu for school children as young
as 8 years old.
"Studies in Brazil showed that children who drink coffee and
milk do better in school," he said. "Besides, coffee is
more nutritious than soft drinks."
Seeking new ways
But such steps take time and expertise, and success is far from
guaranteed. Meanwhile, millions of farmers are seeking other alternatives,
many of which fly in the face of some of the U.S. government's chief
goals in Latin America.
In Colombia - the home of marketing icons Juan Valdez and his coffee-carrying
mule - law enforcement agents suspect that displaced coffee workers
and small-time farmers might be abandoning coffee to sow another
stimulant: the coca plant.
According to a report last year by the United Nations, the acreage
devoted to coca fields in Colombia jumped 60 percent. Other farmers
might be turning to poppies for heroin production, analysts said.
"Those people are looking for other ways to make money, and
it seems other crops don't have the market troubles that are affecting
the coffee business," said John Narango, commercial director
of the country's
National Coffee Federation.
"Coffee once provided people with a good income, higher than
elsewhere in Colombian agriculture. ... So it is tough for many
now to have to give that up."
In Mexico, coffee farmers are streaming off the farm to urban shantytowns
and the United States.
Donato Cortés, 25, says most of his peers have left the coffee-growing
areas around Zoquitlán, Puebla, to crowd into the slums of Mexico
City. Pedro Castro, a 52-year-old grower in El Paraíso, Veracruz,
reported that many of his neighbors have moved to Texas, Colorado
and California. Gustavo Luna said he is one of the few men left
in the hamlet of La
"There are 180 families in my village, and 150 family fathers
are working in the United States," said Mr. Luna, 43. "We're
only surviving thanks to the money they send us from up north."
Others aren't so lucky. Throughout Latin America, low coffee prices
are deepening rural poverty and creating a large class of bankrupt
farmers and unemployed workers, even as many nations are still taking
their first steps toward democracy.
"People who once lived on the farms and worked in the fields
have gone to the city to beg or to ask for temporary government
jobs," said Juan Francisco Chavirria, 37, a Nicaraguan who
earns $1 a day picking coffee. "This whole region is dead;
there is no economic lift."
Staff writers Laurence Iliff in Nicaragua and Ricardo Sandoval
in Colombia contributed to this report.