The morning cup of coffee made from your favourite El Salvadoran beans may become an expensive treat in a few years as struggling coffee farmers face “dangerously low” profits.
Coffee growers around the world are suffering from low revenues from their beans at the same time as facing increasing costs, according to the International Coffee Organization. “The producers are not in a good shape,” warned Juan Esteban Orduz, head of the Colombian Coffee Federation, at an ICO meeting in London this week.
Many growers in countries including El Salvador and Costa Rica have been suffering from losses, according to latest research by the ICO. As a result, farmers are switching to other economically attractive crops or leaving farming altogether, threatening the industry’s ability to meet growing international demand.
About 70 countries in the world produce coffee, but a prolonged period of losses or low profits could mean that only the stronger, more efficient growers and producing countries will be able to survive, leading to the market being held in the hands of fewer growers.
The diversity of coffee in the market is expected to be sharply reduced, as “smaller farmers and smaller producers will become marginal”, said Mr Orduz. He added: “The market will be in the hands of two to three origins.”
Growers in Brazil, Vietnam and Colombia, the world’s top three coffee-producing countries, are among the few that are expected to survive if losses continue, he said.
A more concentrated production base will mean less choice for consumers as well as heightening the risks of wider-scale damage caused by extreme weather, disease and pests, said the ICO.
Grower revenues have been depressed due to two main factors — the coffee price, and the low share of the retail price that ultimately goes into growers’ pockets.
For the last 18 months, the ICO’s composite benchmark has been below the 10-year average of $1.37 a pound. Bumper harvests thanks to benign weather, rising productivity in some larger producing countries and lower local currency levels against the dollar have all weighed on the coffee price. In real terms, the benchmark is unchanged from its level at the start of 2000.
And of the $200bn revenues generated via the retail market, farmers only receive $15bn, according to the Colombian growers’ federation. Rising costs thanks to higher prices for labour, fertiliser and pesticides have steadily weighed on farmers. In El Salvador, for example, farmers saw operating losses for most of the past decade, while Costa Rica’s growers have not made operational losses for the three years to 2016.
Low profitability is also driving younger generations away from farming. “The average age of coffee farmers is 55. In Colombia, for example, younger people are chasing other jobs,” said Joel Brounen at Dutch NGO Solidaridad.
He added that the coffee industry faces an array of challenges in the shape of climate change, an ageing coffee farming population and increasing risk of disease about to hit supplies.
Continued losses for growers will also limit their ability to invest in replanting trees and modernising their farms. Depending on the variety and climate, the lifespan of coffee trees range between eight to 20 years and replanting is crucial to mitigate the impact of changing temperatures, disease and pests.
Alejandro Keller, president of the National Coffee Association of Guatemala, said: “We’ve been suffering from this situation for many years,” warning that the situation will impact the supplies coming on to the market. He added: “If the supply chain breaks down, it would be a problem for the coffee industry.”
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