July
16, 2014
Five hundred billion cups of
coffee are consumed every day worldwide, but few people know much about the
world’s second most traded commodity (behind oil!). So here are five quick
facts about how coffee gets from farms around the world to you.
1.
Coffee comes from a fruit. If you’ve never seen a coffee plant in
person, it’s pretty amazing. Coffee plants grow around the world, but the best
coffee is grown in mountainous regions that receive predictable and abundant
rain. Once a year, these plants sprout a bright red, cherry-like fruit. Farmers
in Central America, for example, spend two months harvesting the brightest red
cherries, before the coffee “bean” (the seed of the fruit) is picked, washed,
dried, hulled, sorted, graded, polished, packed, and shipped off to U.S.-based
coffee roasters.
2. The
coffee supply chain is completely broken.
Because coffee is a perishable item, ideally it would come directly from the
farm to your doorstep, with as few intermediaries as possible. However, the
current coffee supply chain is antiquated and inefficient, with up to 20
middlemen and six months between the farmer and you. Many coffee farmers have
little market access, forcing them to rely on middlemen to bring their green,
unroasted coffee to the market. With so many intermediaries, the typical coffee
supply chain excludes farmers from the most profitable activities and is in
dire need of optimization. Middlemen, and especially roasters, capture nearly
all of the profit after the crop leaves the farm. It’s a stunningly
disproportionate reward compared to the amount of time, labor, and know-how
farmers put into their product.
3. Coffee
farmers have it rough. Of the
millions of coffee farmers worldwide, nearly 80 percent are small scale,
often living on less than two dollars per day. In the communities we work with
in northern Nicaragua, we have seen mothers choosing which of their two
children can afford to go to school, women and men walking several kilometers
to fetch water, and people flocking to the community center on the one day a
doctor visits every few months. Although coffee farmers around the world spend
years cultivating their crop and do an incredible amount of labor to grow and
harvest their product, they typically receive less than $1.00 per pound (or the
equivalent of about $0.03 per cup of coffee), which is then sold in the US for
upwards of $20.00 per pound, keeping them trapped in a cycle of subsistence
farming.
4. Not
everybody is excited about Fair Trade—and few people know what “direct trade”
means. The coffee industry is changing
rapidly, and, while Fair Trade remains an important tool to protect against
price busts in the coffee commodity market, it can be cost-prohibitive for
small-farmers and imposes burdensome administrative requirements on its
certified farmers. Accordingly, Fair Trade is facing increasing questions,
criticism and backlash as coffee lovers around the world look to engage
solutions that offer a more substantive and sustainable means of improving
farmer livelihoods. With respect to direct trade, there is no standard or
commonly accepted definition of what direct trade actually is. Direct trade
should mean that your coffee roaster or shop is buying coffee directly from
farmers, but what it usually means is that there are fewer middlemen, or simply
that the importer can verify the exact farm of origin, even though the coffee
still passes through just as many middlemen. What’s more, only a tiny fraction
of farmers have the resources to make connections in the coffee-buying world to
secure direct market access and take advantage of the direct trade movement.
5. Central
America was hit by a fungus that will affect coffee output for years. About two years ago, a fungus called
roya (or coffee rust) decimated crops throughout Central and South
America. Coffee rust has been present for years in coffee growing communities,
but in 2012, because of irregular weather, the fungus exploded throughout the
region. The New York Times estimates that in Guatemala alone, production
has decreased by over 25 percent and 100,000 jobs directly tied to the crop
have already disappeared. Given that coffee seedlings take five to seven years
to produce beans for production, replacing the plants and getting back to
pre-roya output levels is a daunting task for the four million people in
Central America who rely on coffee for their livelihood.
The good news is that, as the plight
of coffee farmers gains prominence and the public becomes increasingly aware of
their struggles, more and more organizations are getting involved to
substantively transform the economic conditions of farmers. For example, Root
Capital recently invested $23 million to fight the coffee rust plague. This
initiative comes on the heels of years of investing in infrastructure in coffee
growing communities, strengthening cooperatives and developing processing
capacity.
What’s more, social enterprises have
a real opportunity to disrupt the coffee supply chain with market driven
solutions. For example, my own company, Vega, is working on an innovative model
to enable farmers to capture more of the value chain. Vega empowers farmers to roast
coffee themselves, so that all of the processing is done on the farm and
farmers earn up to four times what they currently do selling raw green beans
alone.
So, next time you go to buy coffee,
take a few moments to think about its journey. Try to find information about
the producers that make your coffee and where they fit in the supply chain. You
have the power to affect a farmer in Nicaragua, or Ethiopia, or Indonesia
simply through your decision of which coffee to buy and drink. It’s one extra
step, but just imagine if each of those 500 billion cups of coffee consumed
every day contributed to a more sustainable future.
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Robert Terenzi is a social entrepreneur in Nicaragua, working on reimagining the coffee supply chain
through his work with Vega, which he founded along with Noushin Ketabi and Will
DeLuca.
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