Welcome to our Media Campaign!
Before you start reading, please check out the following Video:
You are drinking coffee on a regular basis…
…but have you ever wondered about the price?
…how much of that price went to the growers, the people who planted the coffee, took care of the plants, picked the coffee beans, cleaned them, and dried them?
…how much went to the exporters?
…how much went to the companies who shipped the coffee beans and roasted them?
and finally how much went to the store that sold you the coffee?
Take a small look at this chart and you know the answer!
Only a small amount of the money you have paid for the coffee is going to reach the people who actually work so hard to grow the coffee beans, and carry all the risks of failing crops or falling prices. Let’s take a look at those people.
The poor farmers in the south…
… who make their living by selling the crop on a cheap price… hardly enough to have a confident life! These farmers are poor, and they do not have any reserves of money to support them when their crops fail or when coffee prices are low. The small farmers have to sell their coffee beans when they are ready to be harvested, and take whatever price the coffee buyers offer.
The export of the coffee is important to the country aswell. Large external debts force the governments to export in order to get the hard currency with which they repay the debts.
The coffee-growing countries are forced into competition with each other, each trying to get a bigger share of the market. This means that they all produce more and more coffee. As a result, there is too much coffee on the world market and the price falls, so each country has to try to sell more coffee to make the same amount of money.
But there are aswell the people who make a lot of money during this competition… they are:
The powerful corporations in the north
Most of the world’s coffee is bought by just a few countries, and most of the world’s coffer market is controlled by a very few companies.
Over 70% of the coffee on the world market is imported by just nine countries in the North. Within those countries, the giant corporations have most of the market share.
Take Britain, for example:
“There are 2 big manufacturers, Nestle and Kraft, and 2 big retailers, Sainsbury and Tesco. Between them, they sell well over half the coffee in this country.”
- Peter Cushman, public relations manager for a Co-op superstore in England.
Due to those influences between countries and the buyers, the coffee price is very unstable…
…now guess who has to carry the weight of unstable prices? The poor workers in the south!
If the weather destroys the crop, there is no way for the workers to make up the loss. This brings the coffee price to a new height and in the hope of making more money. However, if a lot of farmers plant more coffee, there is a problem when the plants start to produce coffee beans about three year later.
As soon as the coffee beans are on the market, the price is falling sharply because of the mass of farmers offering their coffee beans. That can force the farmers to leave their farme in hope for a better work because they just lost all they have been working for in the past three years until there is a shortage on coffee beans once again.
The small farmers are powerless in the face of disasters and low prices, but the retailers and manufacturers are protected because they are big enough and rich enough to get through the ‘bad’ times.
While the price is going up and down, it becomes rare that the actual retail price is going down in any way.
When world coffee prices rise, the price we pay in the shops usually goes up too.
Yet, when world coffee prices fall, the price in the shops doesn’t come down. This is one way that manufacturers and retailers can even out the effects of world price changes.
But there are ways to bypass the shortage/overflow of coffee beans
and therefore a way to make the coffee price more stable.
This is how it works.
Because the price of coffee can change so much from year to year, a lot of coffee is bought at a fixed price long before it is ready to be harvested: instead of buying actual coffee beans after they have been picked, the corporations buy ‘coffee futures’ that is they agree that they will buy the coffee beans for a certain price when the harvest time comes.
However, in reality, the system provides an opportunity for speculators in the ‘futures’ markets to make a lot of money, because the coffee futures are bought and sold many times before the coffee beans themselves reach the manufacturers.
The London Commodities Exchange* (which deals with commodities like sugar, cocoa, oil, and African-grown coffee) has more than $30 billion of investments – and makes more profit than the London Stock Exchange.