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World Coffee Producers Forum sets stage for change

From the September 2017 issue.

FNC’s first World Coffee Producers Forum finds greater industry sustainability must start with the farmers.

Attendees at the World Coffee Producers Forum

While sustainability has been the topic of discussion and the objective of many initiatives in the global coffee industry over the past several years, hundreds of attendees from more than 40 producing countries truly put it at the forefront of their conversations in July at the first-ever World Coffee Producers Forum.

Held in Medellin, Colombia, and organised in part by the Colombia Coffee Growers Federation (FNC), sustainability was the core industry issue being addressed at speeches, panels, presentations and workshops during the three-day event.

Where sustainability initiatives are often focused on social and environmental aspects, the economic aspects took center stage throughout this event – particularly focused on the growers.

“Coffee growers’ incomes – economic sustainability – is not sufficient,” FNC’s CEO Roberto Vélez told Global Coffee Report in May, prior to the event. “It seems to be regarded less in spite of the apparent care for environmental and social sustainability worldwide.”

The International Coffee Organization’s (ICO) new Executive Director José Sette echoed these sentiments in his remarks at the forum: “Many times, sustainability work focuses too narrowly on social and environmental questions, while the economic welfare of parts of the value chain, especially growers, is relegated to a secondary plane. We must strike the right balance among all three pillars of sustainability: economic, social and environmental. But above all, sustainability must be grower-centric, since farmers are the basis of the entire coffee value chain.”

In his panel discussion with former US President Bill Clinton, Colombian President Juan Manuel Santos referenced ICO’s early efforts to ensure fair green coffee prices and, ultimately, fair incomes for growers. The international organisation’s existence is actually rooted in the very first International Coffee Agreement, a global export quota system established in 1962 to help keep global coffee prices competitive. It has since seen numerous extensions and iterations.

Bill Clinton and Juan Manuel Santos

“To maintain dignified incomes for producers has been an objective throughout all these years,” said Santos, acknowledging the tremendous impact the agreement had on Colombia’s prosperity and well-being.

“But at that time and still today, the difference between the price of coffee in the United States or Paris or Tokyo and what the producers receive is obnoxious. For a US$3.50 Starbucks in New York, producers receive less than five cents.”

Clinton agreed with the Colombian President, suggesting pursuit of “a way to help people up and down the chain cut costs so their profits don’t go down but the farmers’ incomes go up”.

The neglect that economic sustainability sees was one of the motivations of the forum, and why FNC sought to bring together “all the actors in the coffee world” to analyse the industry’s core challenges “mainly from the perspective of the coffee growers”.

“The coffee value chain is inequitably distributed, [so] we must care for the economic sustainability of all the links of the chain, starting with producers,” Vélez told GCR. “If this link is not sustainable, the whole chain won’t be sustainable.”

Under the sustainability header, other issues identified and addressed throughout the forum included low productivity and high production costs as a result of climate change, a declining workforce amid low profitability and generational gaps, and excessive volatility in green coffee prices. All of these issues have a direct effect on the global coffee industry’s long-term sustainability (or lack thereof).

As part of the forum’s greater objective to analyse the industry’s biggest challenges, it facilitated four working groups with representatives from all links of the coffee value chain to collectively address the issues. By the end of the forum on 12 July, an official declaration with goals and action items based on the working groups’ results was created and approved.

The “Final Declaration” highlighted the industry’s challenges and their effect on economic sustainability, including increasing poverty and instance of growers leaving the industry. Despite the popularity of specialty coffee in the past several decades, its premium prices have done little to offset its higher production costs.

As such, the declaration deduces that “if corrective actions are not taken … the world may face a crisis characterised by a structural reduction of the global coffee supply, with the consequent impacts on quality of life of producers and their regions’ social stability [and] undesirable imbalances in the coffee market that may put sustainability of the global chain at risk”.
The results of the working groups were six actionable items, starting with the development of an Action Plan in collaboration with the ICO.

In his speech at the forum, Sette noted the ICO’s own goal to create a new organisational Action Plan.

Among the steps in the plan is to improve decision-making in the sector through “the provision of accurate and comprehensive data, especially with regard to production”, he said. “Efforts will be concentrated on strengthening the quality of our statistics and economic analysis.”

A second action item is “to enhance ICO’s role as a forum for the discussion of coffee matters [by providing] a platform for dialogue between the public and private sectors to improve the consistency of coffee policy-making on a global level”. To achieve this, Sette recognises that the ICO must increase the engagement of its members and other stakeholders.

In an interview with Global Coffee Report in May, shortly after being appointed Executive Director, he emphasised the ICO’s goal of better engaging its members. “I’m focused on reaching out to our members to canvas them to see what their concerns are and what they believe are the best ways to add value,” he said. “They are the people who sustain us, who make our way.”

At that time he also cited the neglect on the economic pillar of sustainability that he called attention to at the forum.

The Action Plan’s other priorities include greater access to financing for farmers and the promotion of coffee consumption. While the ICO proposes to address other industry challenges as part of the plan, these steps and Sette’s speech were centered on addressing that aforementioned neglected pillar.

Roberto Velez

In line with the ICO’s move to leverage data and analysis, one of the next action items in the declaration is to commission an independent study on the behaviour of coffee prices compared to production prices in the past 40 years. To facilitate this study, in addition to other action items, fundraising will commence and a committee will be established with representatives from a diverse collection of producer countries, as well as from North America and Europe.

By March 2018, at the ICO’s International Coffee Council, the committee will submit a report on progress toward the Action Plan, and ultimately progress toward addressing greater economic sustainability.

“Coffee is further advanced on the road to sustainability than other agricultural products,” said Sette. “However, much still remains to be done, especially in regard to economic matters.”

In concert with many of the forum’s other speakers, President Santos sees farmers’ incomes as the biggest priority.

“No other commodity has a better effect on the well-being of the rural areas than coffee,” he said, pointing to poverty’s concentration in rural areas.

“It’s in the interest of everybody to make some kind of friendly agreement to buy a little better and pay a little more to the producers. The social benefit on 60 countries – more than 25 million families – would be enormous.” GCR

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