Fair Trade Coffee

Geography 3104 Environmental Problems, Population, and Development

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Figure 1: A Farm with coffee (6)

Introduction  
Globalization in the modern world and the increased interaction of economies has put a great deal of emphasis on international trade.  One product that has become extremely popular in recent years is coffee.  However, there are major issues within the coffee industry regarding production conditions in export countries as well as the amount of profits being received by farmers.  This crisis is especially prevalent in the United States, where coffee drinking has evolved from a simple beverage choice into a social activity.  Problems with fair trade would not be nearly as critical without the help of major consumer nations, thus the analysis begins there.

Consumption
The global economy is driven by supply and demand and the prices that people are willing to pay to obtain goods; coffee is no exception.  In the past fifteen years coffee consumption has soared worldwide, as well as in the United States where Americans consume around one fifth of all of the world’s coffee (3).  The trend has been fueled by the rise of the gourmet coffee industry, the rise of intense marketing from companies like Starbucks and Dunkin Donuts, as well as the increased role of coffee in social interaction.  In the United States the National Coffee Association found that 54% of the adult population drank coffee daily in 2000.  This consumption contributes over 9 billion dollars to the retail sector and almost 9 billion dollars to the food service sector every year (2).  Virtually one hundred percent of this coffee being consumed comes from outside countries, mostly due to the fact that the coffee bean is most easily cultivated in tropical climates.  Thus, with the amount of money being exchanged in the coffee industry each year, one would think that all parties involved are reaping the benefits.  However, as you will discover, this is not the case. 

 

 

Figure 2: Fair trade coffee tastes delicious (7)

Production
While most coffee drinkers remain oblivious to market prices, the global price of the coffee bean has plummeted.  This price crash has occurred while domestic coffee companies have held prices, meaning big profits for coffee firms.  The problem with this scenario is that the small farm producers are not receiving any profit shares.  A statement form the Global Exchange describes the crisis, “For coffee farmers it's a different story. A price crash in the world coffee market has pushed farmers into bankruptcy, with thousands losing their lands, and starvation looming all too close”(3).  The inability of small-scale farmers to make money has hurt the overall industry as thousands of farms have shut down in order to find income elsewhere.  Besides obvious economic consequences, the coffee crisis has also proved harmful to the environment.

Environmental Impacts
The coffee industry causes few negative effects on surrounding ecosystems mostly due to the crop’s need for tree shade.  However, the coffee crisis has caused many former coffee farms to shut down and make way for other farming.  The resulting agriculture does not utilize shade growth like coffee and thus must clear trees to make space in fields.  Therefore, deforestation has become the principle environmental effect of the trade issue.  The World Bank notes this aspect with special attention to pristine areas, “A larger threat thus arises: widespread deforestation affecting buffer zones vital to the preservation of wildlife sanctuaries and primary forests”(1).  The disappearance of small coffee farms has also allowed big business large-scale farms to move in on the vacated land.  While large scale farming increases productivity in the short term, it also permanently clears thousands of acres of forest due to the amounts of land needed for large scale farming equipment. 

Figure 4: A producer harvests his coffee (8)

 

Cultural Impacts
There are also many cultural effects of the coffee crisis that stretch far beyond the rural areas of exporter nations.  More and more nations are experiencing urban slumming as thousands of formers coffee families more to cities looking for work.  This is especially true in the case of Mexico as MSNBC reports, “Villages have turned into ghost towns as their inhabitants, no longer able to make ends meet, crowd into the dangerous and ever-expanding shantytowns that ring major cities in the developing world. Mexico City, one of the world's largest urban sprawls with 21 million inhabitants, is filled with such refugees" (4).  The issue of overpopulation within urban centers leads to other environmental problems such as excessive pollution and water shortages.  Consequently, the coffee crisis affects much more than just the lives of small scale farmers in developing countries. 

 

Case Study
One place where fair trade has been especially prevalent is the world’s largest coffee producer, Brazil.  In a 2006 article from the Washington Post small farmers from a Brazilian cooperative discuss a newly formed relationship with Wal-Mart.  The mega-company had contacted these particular producers because “they are fair trade certified, charging above-market price for beans because it meets certain social and environmental standards” (5).  Buying from fair trade farmers is part of Wal-Mart’s attempt to reshape its image from an exploiter of small-scale suppliers to a new, more market-friendly identity.  While this would mean more money for the farmers, it would potentially mean complete dedication to the company, which might not be in their best interests.  


Conclusion
The solution to the coffee crisis does not lie in the “say now do later” attitude that is applied to so many problems in the modern world.  Rather there an inherent need for a complete restructuring of the coffee market system.  While there are programs to compensate farmers with a portion of profits, these tend to be flat rates that do not change regardless of how much profit companies like Starbucks or Green Mountain are making.  Furthermore, as the global price of the coffee bean continues to drop, the amount of profit being made by farmers continues to diminish.  Global policy makers such as the World Trade Organization, NAFTA, and the United Nations need to monitor the profits of large corporations and ensure the compensation of farmers relative to the amount of money being made by large corporations. 
 

 

1 http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/0,,contentMDK:20606092~pagePK:146736~piPK:146830~theSitePK:258554,00.html
2 http://www.coffeeresearch.org/market/usa.htm
3 http://www.globalexchange.org/campaigns/fairtrade/coffee/background.html
4 http://www.msnbc.com/modules/ps/020716coffee/launch.asp
5 http://www.washingtonpost.com/wp-dyn/content/article/2006/06/11/AR2006061100813.html
6 http://www.gourmet-coffee-beans.com/images/coffee-cattle-doneveliofarm%5B1%5D.jpg
7 http://www.crsfairtrade.org/coffee/img/index2.jpg
8 http://www.uniterra.org/uniterra/uploads/recits_volontaires/images/Guatemala/Guatemala%20222.jpg