Wednesday, September 18, 2002

Coffee [FT]
The world's four largest coffee roasters, Nestle, Kraft, Sara Lee and Procter & Gamble, will be targeted today by Oxfam in an international campaign aimed at raising the price of coffee to levels which will provide decent livelihoods for farmers.

Coffee prices have slumped to a 30-year low because of massive overproduction: world output was about 115m bags in 2001-02, compared with consumption of 105m-106m.

Vietnam's entry into the market and a steep increase in Brazilian production have meant that output is growing at more than 2 per cent a year, while demand is growing at 1-1.5 per cent.

If I were feeling reactionary, this would make me wonder why we pay $1.50 for a cup of coffee. Oxfam says: "Coffee farmers are getting, on average, 24 cents a pound while consumers in rich countries are paying roughly $3.60 a pound � a mark-up of 1500%." Instead, I am wondering what would happen if some of this land were taken out of coffee production and devoted to staple crops. So I indulged myself in some extremely rough calculations (which I had to base on yield statistics for Brazil, among other issues), which suggest that if Zambia and Zimbabwe (numbers here) grew corn instead of coffee, they could produce an extra 42,000 metric tons of the former a year. Coffee and corn presumably favor different growing conditions, which would significantly alter this number in one direction or another, but it's food for thought. Note also that some high-quality coffe is grown in Zimbabwe at least, and presumably commands more than 24 cents a pound.


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