Coffee Prices Under Water

I welcome this story from NPR's Planet Money journalists Sally Herships and Stacey Vanek Smith, in which they draw attention to the perilously low prices of coffee.

Image (as seen in my family's dining room)
By Oliver Ray

They rightly ask why prices paid to farmers can be so low when retail prices for coffee drinks is increasing. The answers they provide are correct, as far as they go, and include one that I had not thought of: coffee itself constitutes a shrinking proportion of what is in a typical retail cup of coffee, as concoctions involving milks, creams, sugars and syrups become more popular.


Regular readers of this space will not be surprised that as a Coffee Maven, I have several caveats:

• The story focuses on Colombia, which is an important producer, and Brazil, which is the biggest. Production trends in these countries certainly are important. They neglect to mention Vietnam, where the World Bank has promoted high-volume, low-quality production. Its rapid move to second place about two decades ago continues to disrupt the market, while causing environmental problems and not providing much benefit to farmers in Vietnam itself.
• At $1.08/pound, the current price in Colombia, though low, is a bit higher than the most commonly used benchmark price, which is $0.94. Readers of this blog can always find the benchmark price at the top-left of this page, courtesy of a widget from Investing.com.
• These prices refer to the export price -- coffee as it gets placed on a ship in Colombia, Nicaragua, Ethiopia, or any producing country. Most farmers are several steps removed from this, and must work through a series of middlemen (they are always men), including unscrupulous ones known as coyotes. Unless they are involved in a fair-trade or direct-trade contract, farmers will see only a fraction of the export price.
• Farm workers will earn even less if they do not own the farm. Harvesting coffee pays the equivalent of a nickel or so per pound.
• Just as the piece focuses on Colombia as a producer, it also focuses on a single retailer: Starbucks. It is indeed important, but in many ways not representative of the retail side of the industry.
• And finally, a small mistake that is often made. The story references the New York Stock Exchange, which facilitates public trade in equities (stocks) that constitute corporations. Coffee is traded on the New York Coffee Exchange, also known as the C Market. The operation of this market is explained in the very important film Black Gold, which I mention in various contexts throughout many posts on this blog.

Still, this story is an important one, and I am very glad to hear it told to an audience beyond my small orbit. Please scroll up and give a listen!

And always remember: #thankthefarmers