News & Insights
True or false? Six things you may not know about coffee
It’s not often that coffee producers, exporters, roasters and baristas find themselves in the same room. But earlier this month, about 10,000 people from throughout the coffee value chain converged in Seattle for the Specialty Coffee Association of America (SCAA) Event and Symposium. This annual event is a major opportunity to network and build relationships, as well as exchange ideas on important issues affecting the coffee industry.
Several Global Partnerships team members attended SCAA’s lectures and events. We also hosted an open house for our coffee cooperative partners that were in town. We value these opportunities to learn from our partners and others in the industry. Many of the things we heard reaffirmed our knowledge, while other things were new to us. Test your own coffee knowledge and see if you can correctly identify what is true or false.
1. Coffee prices reflect coffee production costs.
False. There is no direct correlation between coffee production costs and coffee prices. Furthermore, most farmers face substantial risk and volatility that is not priced into cost. The poor correlation threatens the livelihood of smallholder farmers. This can be addressed by guiding producer organizations to understand the gap between trading relationships and farming practices.
2. Coffee producers need higher coffee prices in order to improve their incomes.
True, but coffee price is not the only factor that matters. Inefficient or non-existent value chains (the linkages between coffee farmers/producers, processors, exporters, buyers, etc.) contribute to increased costs of production and delayed payments, both of which impact farmers’ incomes.
3. Coffee production costs are pretty stable and consistent from country to country.
False. For example, the infrastructure for coffee production in Latin America is much more developed than in Africa. Yet, Fair Trade pricing provides a flat minimum price for coffee throughout the world. Although Fair Trade does promote more sustainable farming practices and helps farmers earn higher incomes, there are still many disparities in coffee farmers’ profits.
4. Diversifying the kinds of products produced on coffee farms can help improve coffee yields.
True. Several co-ops told us that they would like to start beekeeping on their farms. This is because bees pollinate coffee crops, strengthening the quality of coffee yields. In turn, the bees also produce a high-quality coffee-infused honey that provides farmers with a new revenue stream. Diversification enables farmers to build resiliency against fluctuations in the coffee market.
5. Financing is the only thing coffee farmers need to run their businesses.
False. Coffee farmers need financing to pay for many inputs and other costs, such as fertilizer, coffee plants and labor. But technical assistance and access to markets are just as important as financing. For example, many farmers need technical assistance to learn how to calculate their cost of production or improve their farming techniques. And with access to specialty markets, farmers can sell their coffee for higher prices. GP invests in cooperatives that provide loans alongside technical assistance and access to markets.
6. Impact investors, like Global Partnerships, can play an important role in helping coffee producers improve their livelihoods
True. Impact investors like Global Partnerships can provide cooperatives with much needed working capital. Working capital is vital for cooperatives because it enables them to provide their members with access to financing, technical assistance and markets. GP invests in co-ops that go beyond providing financing to farmers. Impact investors can also better serve cooperatives by staying abreast of changing financing needs (such as longer-term loans for replanting coffee trees or new financial products that facilitate crop/product diversification).