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THE WORLD | COLUMN ONE

Coffee's Bitter Harvest

Farmers from Central America to Africa are struggling to survive as oversupply cripples their earnings. Retail prices have fallen far less.

October 05, 2002|T. CHRISTIAN MILLER and DAVAN MAHARAJ | TIMES STAFF WRITERS

MATAGALPA, Nicaragua — Ernesto Alonso has coffee in his blood.

He grew up on coffee farms. He planted the dark green bushes on steep and shady mountains. He helped workers harvest the bright red coffee berries. He spread the beans in the hot sun to dry.

And so now, when the 56-year-old looks around the ruins of his 100-acre coffee farm, despair crosses his face. He has laid off most of his workers. The bank wants to seize his farm. The coffee that has sustained his family for generations is nearly worthless.

"I don't know what is going to happen," Alonso said, sweeping his arm across rows of coffee bushes on a hillside overgrown with jungle.

From Africa to Latin America, coffee farmers like Alonso have been hit hard by a glut that has sent wholesale prices tumbling to their lowest levels in real terms in more than 100 years.

The 25 million families who depend on coffee for jobs face an economic and social crisis similar to America's Dust Bowl in the 1930s. Thousands of families camp out by the side of the road. Violence and social unrest have soared. Hunger, misery and fear stalk entire towns.

In Colombia and Kenya, coffee growers have begun planting drug crops.

In Vietnam, which is largely responsible for the glut, farmers clearing forest land to grow more coffee have clashed with local ethnic minorities.

In Central America, more than 540,000 part-time and permanent jobs have been lost.

"Many people are emigrating because of coffee's low price. We are living in poverty," said Luis Toledo, a 28-year-old from Oaxaca, one of Mexico's coffee-growing regions. "Many people have gone to the U.S., including almost all the young people. There are more jobs in the north than here."

With coffee prices at record lows for the third year in a row, the fall harvest promises to be even more bitter.

The extent of the crisis has largely been masked by robust retail coffee sales. The big coffee companies have continued to report healthy profits. Coffee outlets such as Starbucks have maintained, and in some cases even increased, their prices for coffee.

But those profits aren't trickling down.

Robert Kanyi, a 90-year-old Kenyan coffee farmer, grabbed his head in disbelief when a visitor told him that coffee drinkers in the United States pay up to $3 for an espresso made with Kenyan beans.

"We don't see that kind of money here," he said. "If we did, we wouldn't be poor."

*

There's a simple explanation for the fall in coffee prices: too much coffee.

This year, worldwide coffee consumption is expected to equal about 105 million 132-pound bags of coffee. But coffee producers are expected to harvest 10 million more bags than that. Worse, coffee-growing countries already have 40 million surplus bags stored up.

The problem began with the fall of the Berlin Wall. For years, a worldwide coffee agreement had kept prices artificially high to prevent the development of pockets of poverty that would be susceptible to Communist takeover. When the agreement collapsed, the markets opened up and prices began to vary widely. Countries such as Vietnam and Brazil sharply stepped up production. Vietnam's output has soared from fewer than 2 million bags a year in the early 1990s to 14 million bags, making it the world's second-largest coffee producer, behind Brazil.

The huge oversupply has allowed the coffee traders and big corporations to offer ever-lower prices to farmers for coffee, but the savings have not been passed on to the consumer.

The price paid to coffee farmers for a pound of coffee has dropped 75% since its most recent peak at $1.81 a pound in May 1997. During the same period, the retail price for a pound of coffee in U.S. supermarkets has only fallen 28%, according to the Bureau of Labor Statistics.

The difference has meant more profits for companies such as Procter & Gamble, Nestle, Sara Lee and Philip Morris, which together control about half the coffee market. (Despite Starbucks' ubiquity, the amount the company buys accounts for only about 1% of coffee purchases.)

This has meant an increasingly smaller share of the profits for farmers. Ten years ago, coffee-producing countries got about a third of every dollar spent on coffee. Now, they get less than 8 cents.

Prices have dropped so much that, in most countries, it costs more to grow a pound of coffee than it's worth on the open market.

*

The resulting misery can be seen everywhere in Nicaragua's northern mountains, the heart of this nation's coffee zone.

Coffee dominates daily life here. Great yellow sheets of coffee beans dry by the roadsides. The mountainsides are covered in coffee bushes. Coffee exporters, producers or co-ops seem to occupy every other building.

But now that coffee has gone bust, so has the region. More than 100 coffee farms have been seized by banks. Tens of thousands of workers are jobless.

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