Global Exchange Statement on the Coffee Crisis
October 2001

For most Americans, drinking coffee is a daily ritual. And whether you're drinking gourmet blend or freeze-dried instant, the price is about the same from one day to the next.

For coffee farmers it's a different story. A price crash in the world coffee market has pushed farmers into bankruptcy, with thousands losing their lands, and starvation looming all too close.

Specialty coffee, which retails for about $10 a pound, has recently taken a dive in world export prices from around $1 to less than 50 cents a pound. Farmers generally receive less than half of the world price--way below the cost of production. This has caused a giant upheaval for 20 million farmers and workers around the world who depend on coffee for their survival.

To protect the livelihood of millions of farmers and their families, a dramatic restructuring of the coffee industry must take place, and those who have profited in the midst of mass impoverishment must contribute to the solution.

Reports say tens of thousands of Mexican coffee farmers have fled their fields in search of incomes to feed their families. El Salvador recently acknowledged that over 30,000 jobs have been destroyed because of the price slump. Many of the 60,000 coffee producers in Nicaragua are facing losing their land because of mass indebtedness. Farmers in all three countries have taken to the streets to demand government support for farmers on the brink of starvation.

In many countries the crisis has been exacerbated by "structural adjustment" programs imposed on local governments by the World Bank that have meant cuts in rural credit, technical assistance, health care and educational infrastructures. In addition, trade liberalization has forced many countries to deregulate their coffee sectors, removing the state as a buffer between the farmers and the world market.

Until 1989, the International Coffee Agreement (ICA) helped stabilize prices by regulating world supply. The US worked to abolish the ICA in 1989 in favor of a "free market" in the coffee trade. Many countries have since then worked to expand their coffee exports to generate foreign revenues to help finance debt. The result is a worldwide coffee surplus that has led to a crash in market prices and huge profit growth for coffee companies at the expense of farmers around the world.

The coffee crisis gives new urgency to efforts to promote the alternative--Fair Trade. Fair Trade corrects market imbalances by guaranteeing a minimum price for small farmers' harvest, and encouraging organic and sustainable cultivation practices. Fair Trade farmer cooperatives are assured a minimum of $1.26 per pound. With a fair and stable income, coffee growers are able to invest in their families' health care and education. The Fair Trade system currently benefits 550,000 farming families in 20 countries. Consumers can purchase Fair Trade coffee at approximately 7,000 retail locations in the US.

The big players in the coffee industry, however, don't seem to be that concerned with finding solutions to the crisis. Perhaps that's because while it is a crisis for farmers, it is a bonanza for multinational companies. While some companies have increased their purchasing of Fair Trade, many, like Starbucks and Sara Lee, are still offering only one Fair Trade line. And the big three, Folgers, Kraft, and Nestle, haven't even begun to address the crisis.

A windfall tax on the profits of the coffee industry could help finance a stabilization plan, including the setting of a minimum price per pound for farmers and the removal of excess coffee stocks from the market. In addition, the debt of poor countries must be canceled immediately so that they can put scarce resources into health care and education. And the coffee industry as a whole must fully endorse Fair Trade as a solution for small farmers.

Jerónimo Bollen, Director of a Fair Trade coffee cooperative in Guatemala, says, "With world market prices as low as they are right now, we see that a lot of farmers cannot maintain their families and their land anymore. We need Fair Trade now more than ever."