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The Nicaraguan Coffee Crisis

THE ORIGINS OF THE COFFEE CRISIS

Although the price we pay for a cup of coffee remains virtually unchanged, a severe drop in wholesale price of coffee has devastated producers worldwide. Many producers are forced to sell their coffee for less than it cost them to grow it, leaving them unable to feed and support their families, or to make payments if they borrowed to buy land. There are several reasons for the overproduction that lead to this crisis. Some of the most notable are:

· Frosts in Brazil caused price hikes in 1994, 1995, and 1997, which encouraged other countries to expand or initiate coffee production. Brazil has recovered from the frosts, leading to a glut on the market.

· Vietnam, which until a few years ago grew an insignificant amount of coffee, is now the second largest producer in the world. The Vietnamese government subsidized coffee production with World Bank and IMF loans intended to increase agricultural exports.

· The breakdown of the International Coffee Agreement, which had regulated coffee prices and the amount exported by each nation. An unregulated market has lead to countries maximizing production, causing supply to exceed demand.

· The lack of effective international regulation has also lead to declining quality standards. Coffee enters the market that would be excluded under a set of international quality standards, further contributing to the coffee glut.

· Changing consumer preferences toward flavored drinks, as well as new technologies, have allowed producers to mask the bitterness of robusta coffee beans, even low quality robusta.

· A surplus of 40 million bags in storage ensures that even if production rapidly declines, prices will remain low for quite some time.

· Coffee's "big four" (Kraft, Nestlé, Proctor & Gamble, and Sarah Lee) plus the German company Tchibo purchase nearly half of all coffee beans. This gives them incredible leverage over the market.

The 2001-2 coffee harvest brought in just US$31.7 million (in stark contrast to the previous year's crop, which realized some US$108 million). This staggering 70% fall in the value of the coffee harvest is almost entirely due to the collapse of prices on the international markets. According to Nicaragua's Central Bank 2001-2002 was the first time that earnings from free trade zone assembly plants, tourism, fish, meat and sugar produced more revenue than coffee, hitherto by far Nicaragua's biggest income source. A June 2002 figure calculated coffee revenues at seven percent of national income. The four-month coffee harvest is the only cash producing income for over 200,000 Nicaraguans, yet for last winter's harvest only 50,000 could find work. This means the families of the 150,000 who couldn't find work had no income. As a result: Many have moved to roadside camps and town squares in hope of receiving food and medicine. In These Times reports, "Whole families were living in tents without adequate food supplies or sanitation facilities, and 45 percent of the children under five there suffered from chronic malnutrition, according to UNICEF and the Nicaraguan Health Ministry. "

· At least 15 have died of starvation in the camps and no one knows how many more have died invisibly in isolated mountain communities.

· In June 2002 some 300 coffee-farmers set up a roadblock on the Pan American Highway to protest the Nicaraguan government's lack of response to their needs. When riot police attempted to force them to move the protesters threw rocks and the police responded with tear gas.

· Coffee farmers unable to pay their loans have lost their land to foreclosure. Others have been forced to sell land in order to survive. The result is a worsening of inequalities in land ownership that could be termed "agrarian counter-reform."

· "We can only expect more of the same: more children dead, more desperate families scouring the countryside in search of food, or work, or even a miracle."
-Frank Lanzas, the Matagalpa Association of Coffee Farmers

· "Even though the land is fertile, all land has been planted with coffee. But you can't eat coffee."
-Melinda St. Louis, Witness for Peace

"Today coffee farmers receive one percent or less of the price of a cup of coffee sold in a coffee bar. They receive roughly six percent of the value of a pack of coffee sold in supermarkets and grocery stores." -Oxfam

There is an alternative. A recent trend is for responsible consumers to bypass the large corporate conglomerates altogether and buy from distributors that pay producers a decent price, and only by from local cooperatives and small farmers. By purchasing fair trade coffee you can support coffee production that is both just and ecologically sustainable.