The ICO recently announced devastating, if expected, news: coffee farming is less profitable. Some farmers are operating at a loss. Others profit from their current crop but lack the funds to properly care for their farm – meaning that, if this trend continues, their yield and quality will slowly decrease.
SEE ALSO: An Unstable Market: The Economics of Global Coffee Prices
Coffee prices since 2000. Credit: ICO; graph taken from Assessing the economic sustainability of coffee growing (2016) under Fair Use policies.
Why Is Coffee Profitability Down?
Lower coffee prices: Since March 2015, the ICO composite price has been below the 10-year average. What’s more, the price is similar to that of 10 years ago – but 137 cents was worth more in 2006.
Increased per-hectare costs: While per-hectare costs and per-yield costs can vary, and the results differ between countries, the cost of production has gone up. This is partly due to increased labour costs and agro-chemical prices (e.g. fertiliser). The fact that high-yield hectares cost more to farm than low-yield hectares muddies the water somewhat, but this is still a worrying trend.
What Happens Next?
There no easy fix to complex situations like this. The ICO note that high-yield farms can weather volatile prices better than low-yield ones, but even then the risks are still high. Instead, they urge further research and risk mitigation. They also note that some countries have fared better than others – such as Colombia and Costa Rica – and advise communication among producing countries.
Perfect Daily Grind
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