The Value Chain Is Broken: How Do We Fix It?

Source: World Economic Forum
  • Growing and Harvesting $0.07;
  • Exporting — Beans are processed, milled and packaged for export — $0.16;
  • Roasting — Beans are mixed, blinded and roasted giving their particular taste — $0.35;
  • Distribution — To consumers or coffee shops $0.04;
  • Retail — coffee shops $2.17.

Risks to farmers

While every stage in the coffee supply chain bears its own risks, it is the farmer, at the start of the chain that is most precarious. Small holder coffee farming employs mainly manual processes. Hand held tools, a lack of safety equipment and the use of pesticides translates to dangerous working conditions to both the farmer and their children, who are often kept out of school to provide labor into the family farm out of necessity. Women experience gender discrimination through lower wages than their male counterparts. Small holder farmers lack income diversity and are overly dependent on their coffee crop. This single income stream is vulnerable to drought, floods, pests, disease and changing climate which all negatively affect crop yields and therefore the farmer incomes. Fluctuating international, agricultural commodity prices also have a dramatic impact. Coffee price falls of 65% in May 2011 and December 2013(1) had devastating effects on farmer incomes while the retail price of coffee in supermarkets and coffee shops remained consistent. Isolation from markets due to distance and poor infrastructure, poor societal protections in producer countries and a lack of advocacy leave small holder farmers in precarious positions and economically vulnerable. As the developed world experiences marked economic growth through digital technologies, the gap to the undeserved farmer becomes ever wider.

How do we fix this situation?

Considering the significant environmental, social and economic risk factors that small holder coffee farmers face and the fact that 80% of global coffee supply is from small holder farms, the entire coffee supply chain, from farmer to consumer, faces the possibility of catastrophic threats derailing global coffee supply permanently. A restructuring of the coffee value chain is urgently needed to protect the farmer and the production of the raw ingredients of coffee, the bean. The farmers need social and economic security for themselves and their communities if they are to continue producing coffee at the scale and quality demanded by consumers. They need the capital and financial services necessary to cultivate their farm’s potential and build in resilience to withstand environmental and market shocks.

References

  1. Fairtrade UK (May 2012) “Fair trade and Coffee: Commodity briefing. Available from: https://www.fairtrade.net/library/fairtrade-and-coffee-2012
  2. Speciality Coffee Association, Benchmarking Report, Coffee Price Report
  3. The Economics of Coffee in One Chart (2020), Visual Capitalist. Available from: https://www.visualcapitalist.com/the-economics-of-coffee-in-one-chart/
  4. FAO (2015) Challanges and opportunities to improve the livelihood of small holder farmers in the Pacific Islands countries. [Online]. Available at http://www.fao.org/fileadmin/user_upload/sap/docs/Challenges%20and%20opportunities%20to%20improve%20the%20livelihoods%20of%20Smallholder%20farmers%20in%20Pacific%20Island%20Countries.pdf

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AgriUT

AgriUT

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AgriUT is a digital utility token system that engages consumers through direct interactions and a means to reward and thank farmers that grow our food.