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Wednesday, September 22, 2004 - Page updated at 04:55 P.M.
Q & A: Central America and coffee
Really enjoyed your three-part series on coffee production at the farm level. You really focused on specialty coffee and how the production of high-quality coffee is helping farmers to hang on to their farms and make a living. Given the growing consumer demand for specialty coffee, and the growth plans for companies like Starbucks to capitalize on this market, did you get the feeling that the supply of high quality coffee will keep pace with the growing demand? Joel Paisner
Jake Batsell: Thank you. You pose an excellent question that has captured the attention of executives at specialty coffee companies: With farms shutting down across Central America as a result of the coffee crisis, will there be enough high-quality beans to support growing demand?
Starbucks has addressed this by starting a farmer-support center designed to teach more farmers how to tailor their growing methods to the company's needs and standards. Some industry sources I spoke with expressed concern that as more farms shut down around the world, the best beans may become more expensive maybe even someday costing as much as rare coffees like Hawaii's Kona varieties that cost around $30 a pound. I'm not sure it will ever come to this, but your question is one the industry is grappling with as we speak.
When you reported that a glut of lower grade coffee sent prices down and forced many farms to close, is there no organized group, such as OPEC, that regulates supply and demand? And if not, why not? Jacqui Banaszynski, Seattle Times
Jake Batsell: The coffee supply is largely determined by the weather. This year, frost in Brazil ruined many crops, which drove prices up because there was a more limited supply (the 2003-04 global coffee harvest produced 101 million 60-kg bags, compared with 121 million bags the year before). Demand shifts as well. Industry experts I spoke with said that while there is more demand in the U.S. for gourmet coffee, European coffee drinkers are buying more of the cheaper stuff the blends and canned coffees).
I wouldn't say there's an organization that mirrors OPEC in the coffee industry. Prices are determined on the commodities exchanges. However, earlier this month the U.S. State Department announced that the U.S. intends to rejoin the International Coffee Organization, which brokers international coffee agreements and coordinates international industry initiatives.
I am currently teaching in a Catholic High School in the Los Angeles area. One goal I have is for the students to be aware of and choose Equal Exchange or Fair Trade (Starbucks carries this) coffees, which assure a more adequate pay to the farmers, growers and pickers. Sara Goggin, Bishop Alemany High School
Jake Batsell: Fair Trade Certified coffee is becoming increasingly common at coffeehouses and grocery stores and is especially popular at churches, synagogues and other houses of worship, as well as on college campuses. Consumers who support these coffees seem to like the idea that they can help small farmers survive by making such a simple, everyday purchase. But there are alternative approaches to ensuring fairness to farmers, as our Day Two stories examined.
What accounts for the markup on coffee? If farmers are paid 70 to 90 cents a pound and coffee retailers charge $11.95, is it possible to account for where the money goes, and could more of it go to the farmers? Al Scott, Seattle Times
Jake Batsell: Profit margins and markups vary, depending on whether you are talking about a hand-crafted latte at a coffee house or a 12-ounce bag of whole beans at the grocery store. The New York Times and the Specialty Coffee Association of America collaborated on an analysis in which they determined that a coffee-shop owner makes a profit of about 25 cents for a $3.75 latte. The other $3.50 is spent on buying, processing, importing and roasting the beans; the milk; the cup; labor costs at the coffee shop; and other overhead costs.
According to the Specialty Coffee Association of America, retailers buy roasted gourmet beans from wholesale roasters for anywhere between $3 and $7 a pound. Profit margins on bags of whole beans can be a bit higher than for specialty drinks because of the labor costs involved in making the latte, cappuccino or whatever. And if a retailer has its own roasting plants, as is the case with companies such as Starbucks and Tully's, their profit margins can be even higher than those of coffee retailers who have to buy their beans from a wholesale roaster that sells to many coffee retailers.
Several times in the series, you mention children working in the fields. While you say that they work only when they aren't in school, does the work interfere with their education? Did the children you met seem to be benefiting from their schooling? Do most leave school early in their lives to help their families? Mark Deichmiller, seattletimes.com
Jake Batsell: When we went to Costa Rica and Nicaragua in late January, the school year had not begun, so more kids than usual were picking with their families. This happens for several reasons: Workers have limited daycare options; and children's efforts add to the families' earnings, which helps the families pay for school uniforms and supplies.
More roasters are trying to encourage farms to provide workers with perks such as daycare by paying farmers higher prices for their beans if they provide their workers with such benefits.
The farms I work with actually pay their workers BETTER than the "fair" trade (system). Note also that the farmer/co-op member is paid a little more in a "fair" trade scheme, but that farmer's WORKERS are not necessarily paid any better. Tim Castle, Santa Monica, CA
Jake Batsell: This is a point that came up quite a bit when we were in Costa Rica and Nicaragua. While farming cooperatives often receive above-market prices for gourmet arabica coffee, the extra money doesn't always filter down into the pockets of the small farmers who grew the beans and the pickers who harvested them.
I have found that to get a great coffee you have to have good conditions on the farm, otherwise the workers can't do their jobs at the level that's required for a great cup of coffee. I personally believe that the best approach is to educate consumers to demand better-tasting coffee. This places value on the work of the pickers, the folks at the lowest rung, and tells them the better the job they do, the more money they can make. But it all depends on an educated and demanding consumer. Tim Castle, Santa Monica, CA
Jake Batsell: Achieving fairness for coffee farmers is an issue in which reasonable people can and often do disagree. Our story on coffee labels tried to give an overview of some of these different approaches. For some in the industry, guaranteed Fair Trade prices provide much-needed stability and insulate farms from the highs and lows of global commodities markets. Other farms and roasters prefer to reward workers for a job well done at the end of the harvest by improving their communities with such projects as schools or medical clinics.
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