Updated: Apr 15
If you are reading this whilst enjoying a cup of your favourite coffee it may leave a somewhat bitter taste if you are still drinking before you reach the end of this particular post.
One-third of the farmers in the ICC (International Coffee Organisation 124-6 4 March 2019) study on Latin American coffee production shows Colombian farms sampled did not cover their cash outlays. When the full costs of producing coffee are considered, a staggering 53% of Colombian farmers are operating at a loss.
Colombia has 560,000 coffee farms and is the worlds 3 largest producer of coffee beans; coffee is also Colombia’s 2nd largest export behind Crude Petroleum so it plays a major part of the countries overall GDP, yet approximately 296,000 farms are in the statistics of operating at a loss.
You may ask why coffee farmers are so badly off when we pay so much for a cup of coffee in a café or a bag / jar to take home from a local store.
From the ICC figures the cost to a Colombian farmer to produce 1 lb (453.592 grams) of coffee is $1.39, unfortunately due to how coffee trading prices are set between December 2018 & December 2019 the prices ranged between $1.18 and $1.24 and average of $1.21.
Therefore 53% of Colombian coffee farmers are running at a production loss on average of $0.18 per 1 lb of coffee (approx $0.39 per KG).
It is important to remember that a majority of the remaining 47% of farms are running at break even, a fortunate few at margins above this threshold.
Even with organisations such as Fairtrade International making sure certified farms receive a minimum price for their coffee $1.40 just $0.01 over the break-even point of production and an extra $0.20 to use as they see fit, $0.05 must be used to improve productivity etc, yet the cost to place a new plant is £0.09 and does not include the labour or land cost both needed to expand productivity.?
Unfortunately as much as certified schemes are in place to try and help farmers and give consumers confidence in the product they buy these hidden costs show there is much work still to be done to keep Colombian coffee a sustainable industry. (By the way to become a Fairtrade certified farm it is NOT free, the farmer has to find considerable funds to join in advance which is why Fairtrade coffee only accounts for 1% of the worlds coffee trade)
As a consumer you may feel these figures don’t actually mean much to you so if we take a look at where a farmer sits in the profitability of the supply chain between production and retail cost you will understand why these workers struggle to survive in business and in general life!
If you take and average price of a supermarket 227 g (0.5 lb) bag of coffee at $5.02 (£4) or $10.02 (£8) for 453.592 g (1 lb bag) and the farmers average price received above at $1.21 (£0.96).
This means in the supply chain there is $8.81 (£7.01) per lb going to whom?
OK, to ship a 20 ft container (41887 lb of coffee) costs approximately $2638 (£2100)
So shipping cost of coffee per lb = $0.06 (£0.04), (Based on recent DHL shipping quote door to door delivery).
Packaging costs are already covered by farmer
So if we start with the supply chain & retail profit after the farmer is paid:
$8.81 (£7.01) less shipping per $0.06 (£.04)
= $8.75 (£6.97) lb Supply chain profit, or $19.25 (£15.33) per kg.
This is where we ask why are farmers paid so little for all the hard work and still in the majority of cases make a loss or break even at best, miss out on these huge profits generated after the coffee has left the farm gate and shared between unnecessary buyers (middlemen), roasters & retailers.
Farmer gets $1.21 the rest share $8.75 per lb….
This formula is no longer sustainable and has further impact not only on livelihoods, but labour exploitation and the impossible task of mitigating climate change.
We at NOT 1 BEAN have the solution, part 2 the bitter taste of coffee to sweet success coming soon…..