ICO finds many farmers operating at a loss

Since March 2015, the International Coffee Organization’s (ICO) composite price has been consistently below the 10-year average of 137.24 US cents per pound, raising concerns about the economic viability of coffee production and putting the livelihoods of coffee producers at risk in many countries. As a result, the ICO has detected a widespread concern in the coffee sector that a prolonged phase of low coffee prices could negatively affect the supply of high quality coffee beans and could have adverse effects on household incomes in coffee growing communities. In response to this situation, the ICO is urging that specific policies need to be formed to address the issue of economic sustainability of coffee production, stabilising supply in the future and enabling farmers to be fairly remunerated. The ICO’s new study assesses the cost structure of coffee production in selected countries (Brazil, Colombia, Costa Rica, and El Salvador), and derives recommendations on how to improve the economic viability of coffee production. Research by the ICO shows that price volatility in the coffee market and increasing costs of production for farmers means that many producers operate at a loss in both the short and long term. This is resulting in the living conditions of millions of coffee farmers deteriorating and the growing potential for consolidation of coffee farms and/or disruption to coffee supplies, with farmers choosing to leave the market, or even abandoning their crops, which can pose a phytosanitary threat to neighbouring coffee farms. To combat this, the ICO is recommending that across the board productivity increases (through measures such as more efficient use of fertiliser and new varieties) as well as adoption of modern agronomic techniques with the aim of mitigating production risk can have a positive impact on the global supply of coffee and thus may also reduce price volatility, which is a key component of the trouble facing farmers. The study finds that some countries have developed effective policy responses to factors which negatively affect the profitability of coffee farming. For example, Colombia responded successfully to the threat of coffee leaf rust, while Costa Rica has become a pioneer for measures to mitigate the impact of climate change in the coffee sector. The ICO recommends that these positive experiences should be shared between countries.