The ICO’s unfinished business

Few would disagree that 2013 has been a testing year for the global coffee industry. With the memories (and effects) of the South American coffee leaf rust outbreak still fresh in everybody’s minds, Central America has now been hit by the worst outbreak of the disease in that region’s history. While the toll of the Central American outbreak continues to be counted, the global price of coffee refuses to stabilise, adding to uncertainty for many farmers who are already struggling with the increasing unpredictability of growing conditions due to climate change. Amid all of this turbulence, the International Coffee Organization (ICO) is marking its 50th year. The anniversary is being acknowledged at a five-day conference in Belo Horizonte, Brazil, from 9 – 13 September. Some 500 representatives from member countries and the industry are expected to attend. But, as the ICO’s Executive Director Roberio Silva tells Global Coffee Review, the occasion will not be given over solely to celebrations. Instead the organisation will focus its attention and resources on overcoming the challenges currently facing the industry. “Our biggest priority is the question of price stabilisation,” Silva says. “We want price stabilisation at a remunerative level for the producers and a fair price for the consumers.” The fact that the ICO was established in 1963 to address this exact issue is not lost on Silva. He says one of the main reasons for the current instability is the proliferation of contradictory analyses of the market from many of the trading and roasting houses. “This is what makes the markets astonished and makes the market go absolutely crazy, because someone says that the crop is going to be very big, when we [the ICO] say that the crop is going to be absolutely within the estimates of the consumption,” Silva says. “It is very difficult, that’s why you need a central institution to try to give some orientation to the market.” The ICO brought together analysts from many of the big traders and roasters for an informal meeting in London in July to try to figure out why there is such a big contradiction in the figures being released by all of the different parties. Silva says dialogue of this sort is essential, and is something the ICO will continue to facilitate, including at the meeting in Brazil. “At the 50th anniversary meeting we are bringing together all of the actors in this process,” Silva says. “For example the big traders and the big roasters are going to be present in Belo Horizonte and we are going to create special mechanisms for talk between the farmers themselves, members of government and these big industries.” Aside from recalibrating the market information out there, Silva points to risk management instruments as essential tools for farmers and the rest of the industry. This issue is going to be addressed in the Consultative Forum on Coffee Sector Finance at the Belo Horizonte meeting. The Forum will present information about cooperatives as a platform to access to finance and risk management more effectively. However, Silva acknowledges there is more to the pricing problem than just the plethora of different market data. “What we can say is that the markets are not properly functioning,” he says. “What we see now is that farmers are not getting [the prices] they should be getting for their coffee, and the customers are still paying the same price [that they usually do]. So there is a big disconnection on the ground.” Silva says that ensuring the financial sustainability of the coffee industry is about much more than just the effective flow of coffee beans. “It is important because coffee provides the livelihoods of millions of farmers around the world,” he says. “They depend on coffee for their survival, and this is what makes it so important.” The other big issue at the front of many peoples’ minds is the Central American coffee leaf rust outbreak. The ICO published a report on the Central American situation in May this year that identified the cost of the outbreak at US$500 million and some 400,000 jobs in the region. More ominous yet was the warning that the worst of the impact is not expected to be seen until the coming 2013-14 coffee year. The ICO has an action plan that includes raising public awareness about the outbreak; promoting more sustainable growing practices; a coffee plant renovation program; and assisting the World Bank in developing a study looking at how improved risk management across the coffee sector, in particular for small coffee farmers, might result in better access to finance. Despite this outbreak being acknowledged by the ICO as the worst to ever hit the region, Silva is optimistic that it will be addressed. “I am absolutely clear in my mind that we can handle it,” he says. “The ways to go forward with solutions to this is to first of all help recovery in prices, to improve husbandry, and to address the impact of climate change – there is no doubt that climate change is a factor in this crisis.” To this end, the ICO will present its first World Coffee Outlook, which contains a comprehensive overview of the global coffee sector spanning over the past 50 years. The other big work ahead is on the issue of expansion, particularly in the developing economies of Asia. One market in particular that the ICO is focused on is China. “We are going to present a study on China,” Silva says. “We are going to tackle this question on how to get there and how to improve the growth of the coffee market.” It is estimated by traders MTC Group that some 200,000 bags of coffee will be produced in China in the 2012-13 coffee year. While China is a coffee producing nation as well as a consumer, it is not yet a member of the ICO, a situation Silva hopes will change. “It’s an ongoing conversation with the Chinese authorities and with a lot of people who are involved in the coffee industry in China,” he says. It is work like this, Silva says, that will guarantee the future of the industry. “We have to continue the growth of the coffee sector. We have to stimulate new markets coming into the coffee sector,” he says.