Fresh Cup January 2003

A New Year’s Resolution
By Mark Inman

Over the past year, I have wrote to you on the many ways to minimize your businesses impact on the environment, improve the biodiversity in coffee producing countries, supporting organic and bio-dynamic farming practices, and helping improve the livelihood of coffee farmers involved in democratically-run cooperatives world-wide. In this month’s column, the first of this New Year, I ask you to consider something that will help alleviate the devastating impact of the coffee crisis for all farmers (large, small, coop, estate, organic and conventional). I ask that you consider this effort to be added to your list of your new years resolutions.

A recent report by Oxfam International pointed out that, “The price of coffee has plummeted 70% on the world market since 1997, resulting in a widespread humanitarian crisis for 25 million coffee growers in over 50 developing countries.” The prices have been driven to these unprecedented levels, the lowest in a hundred years, by a structural oversupply caused by over production and increasing quantities of low quality coffee. This is not the boom and bust cycle being played out. It is not, and will not be corrected by market forces in the near future.

Fortunately, there has been, over the past years, some effort to minimize the impact of this crisis on those who produce coffee. Fair Trade, Direct-Relationships and Certified-organic are a few programs that have made inroads on tackling this immense problem and I encourage you that are participating in these programs, to continue to do so. To those who have been sitting on the fence, I encourage you to jump over and lend a hand.

Unfortunately the current coffee crisis is far too complex to be solved by a handful of progressive programs. I have learned over the past years that to bring relief to this crisis, a combination of ideas needs to be enacted and supported. While some of the ideas do not seem as progressive and dramatic as the current popular offerings, they are nonetheless important or helpful. Two ideas that are gaining momentum are encouraging consuming countries to re-join the International Coffee Organization (ICO) and changing the current U.S. import laws on coffee purity.

The ICO: Past and Present

Until 1989, coffee- like most commodities- was traded in a managed market, regulated by the International Coffee Agreement (ICA). Governments in both producing and consuming nations attempted to agree to pre-determined price levels by setting export quotas for producing countries. The aim was to keep the price of coffee relatively high and relatively stable, within a “price band” ranging from $1.20.lb to $1.40/lb. To avoid oversupply, participating countries had to agree not to exceed their “determined” level of coffee exports. In the event that prices rose above the top of the “price band,” producers were permitted to increase their exports to meet market demand.

Politically motivated disagreements about this “price band” caused the ICA to collapse in 1989. The United States, which opposed this scheme, renounced their membership, becoming a contributing factor to the demise of the ICA.

From the perspective of producing countries, the ICA and it’s agreement delivered an era of stable and livable prices, compared to the present free market. While prices significantly fluctuated during the years of the ICA, they remained relatively high and rarely fell below the ICA’s price floor of $1.20/lb. In comparison, upon the United States’ departure and virtual collapse of the ICA in 1989, prices plummeted, to levels below the cost of production.

While this “price band” agreement is still technically alive, it is now in the hands of the International Coffee Organization (ICO), an organization that the United States is currently not a member of. While the ICO does not feel it has the ability to regulate the supply of coffee through quotas and “price bands,” it does have a plan to regulate price…to reduce the amount of coffee traded on the grounds of quality. This plan by the ICO will only work if it has the support of consuming countries, green buyers and roasters of coffee.

The ICO Plan and Coffee Purity

Whether you like it or not, the world predominately consumes low-grade commercial coffee roasted by a small handful of corporations. And the public consumes this low quality coffee (getting lower each year) at a rate that makes all the efforts of the specialty coffee folks seem fruitless. But what if members of the specialty coffee market could eliminate 5 million bags of byproduct, sold as coffee, from the market, causing a price change of up to 20 percent and providing between $700m and $800m in additional export income for coffee producing countries? What if we could “raise the bar” by making all coffee (commercial and specialty) higher in quality, possibly increasing demand through an increase in cup quality? What if we could make it much more difficult for the “Big 4” to be able to clobber us on price and keep us and even our playing field a bit?

Did you know that unlike Europe and Japan, which allows coffee to be imported only if it contains defects (black, unripe, sour, moldy, insect damaged beans and/or foreign matter) below 5% in weight, the United States allows imported coffee to contain up to 30% defects? Think about it, a roughly 152lb sack of coffee could legally contain 46lbs of defects in the United States. Although some exporting countries (and the state of Hawaii) have strict standards of quality that do not allow significant number of defects in green coffee, the United States has no laws or regulations governing purity of coffee. The only thing that passes for quality control in the United States is a 50-year-old FDA "guideline" for import.

In recent years, explosive growth in production and sale of low quality coffee has set off a chain reaction of overproduction and falling prices. As Ted Lingle, Executive Director of the SCAA, recently reported to congress, “Low prices mean farmers invest in less in the quality control required to remove defects from coffee. Less quality control means MORE coffee on the market. If defective beans and foreign matter are not removed from coffee, the defects and foreign matter are sold as coffee. More defects mean more coffee. More coffee means lower prices. Bad coffee is driving good coffee from the market.”

Markets are said to be most efficient when "tiers" and "transparency" are the regulating factors. We see this in any number of agricultural products from meats to eggs, from milk to juices, from produce to jams and jellies. Minimum purity standards in the United States would go a long way toward resolving this problem. Standards would ensure that U.S. consumers were not mislead about what was in their cans of coffee, because they would be ensured that their coffee of choice met a set purity standard to be labeled as coffee. Commercial roasters would no longer have a short-term incentive to buy triage for 10 cents on the dollar to create a "price blend" that ruins the coffee market for the long term. Specialty coffee roasters would continue to have access to a wide diversity of high quality coffee beans for their roasting operations. And, the coffee industry would not have to fight an uphill battle for consumer's palates.

A recent resolution by the International Coffee Organization commits member countries to purity standard that is approximately 95 percent. If supported, this resolution could remove between 3 and 5 percent of all coffee produced from the international market and end the current destructive path we have been traveling. If the US does not follow suit with similar standards, it is hard to believe the ICO's action will have any impact in the world market place. More likely, the US will become the dumping ground for the world's low-grade coffees, and as a result US consumption will continue to decline, further exacerbating the crisis.

Resolutions, like this one, historically never get beyond the “concept” stage without a consolidated effort. Your representative is only going to support a resolution such as this, if they know that coffee companies and consumers in their districts want it so. A “Purity Resolution,” seems so bland and basic, that it can seem easy to shelve it in the “would be nice to do someday” file, in the back of our minds, because concepts like Fair Trade, and being involved with Coffee Kids, seem so much more topical and helpful. But this much needed standard will bring relief and is equally as urgent as the aforementioned programs. Now, I am not asking that you give up one for the other. You can still be helpful in everything you are currently participating in and lend a hand to this effort by simply spending a few minutes with your computer.

The SCAA has created a wonderful sample letter that you simply “Copy” and “Paste” onto your companies’ letterhead (I do recommend that you do try to personalize the letter a bit). There is also a link to get the addresses of your representatives to make this new years resolution almost too easy to accomplish. You can get all you need on the front page of the Specialty Coffee Association of America’s web site at: www.scaa.org.

Remember our opportunity is now if we as desire this concept to ever become law. Your letters need completed and in the mail as soon as possible. Remember, there is power in numbers, so the more friends, loyal customers, family members colleagues, etc. that we can get to participate will ensure that this will also be a very good year for our friends and partners who produce this wonderful product. Now about that resolution on exercising more…