Iowa Public Television


World Coffee Prices Weigh Down Producer Income

posted on April 19, 2002

Growing agricultural commodities is frequently not profitable. Farm bailouts, loan deficiency payments and other agricultural subsidies have become a normal part of the Rural American economy.

In coffee-producing countries, the situation is more grim. Like their U.S. counterparts, coffee farmers suffer from weather woes and low prices. They also have to endure political uncertainty. This week, hundreds of Guatemalan peasants blocked roads and took over 14 coffee fincas to protest the Guatemalan government's land distribution policies.

Unlike their peers in the United States, coffee producers in Guatemala and elsewhere are often subsistence farmers. They receive little, if any, government support and rarely have a voice within the political system or the world market.


World Coffee Prices Weigh Down Producer Income

The bulk of all coffee produced in the world is raised on small farms of only a few acres or less. The typical path from those farms to the consumer's coffee cup is a long one. Hand-picked arabica beans are taken to a nearby town where buyers, called "coyotes" by the coffee farmers, offer the lowest possible price. In 1999, that price was estimated at 35 cents per pound, less than half the world trading price for arabica beans. Over the past twelve months, the coffee market has consistently been below 60 cents per pound. The depressed market price has likely pushed farmgate prices even farther below the break even point.

Once in the hands of the local buyers, the coffee moves through a long and expensive journey that includes other middlemen, shippers, creditors, brokers, processors, and distributors. Each hand that touches the coffee takes some value from the commodity, ultimately leaving little for the producer.

Rink Dickinson, Equal Exchange: "The profits are with the processors and with people who have access to the market. So, the producer has very little ability to impact the price and just has to take the price and compete on terms that don't work for the producer and don't work for the planet."


Tags: agriculture coffee farms news trade