I heard this on NPR also. Until I really started getting into coffee and learning about the industry none of this would have even made me twitch but now knowing all it takes to create that cup of coffee makes me look at the prices we drink them at.
You can hear the media information on the NPR site, so the prices have dropped for International coffee's and the worlds largest producers Brazil and Columbia are to meet to see how the prices can go back up.
A few months ago didn't we hear about shiploads of coffee going up in flames? If there is less of it the cost goes up. I went out at 5:30 with a friend to get a cup or two of coffee -- hope that helps
From The Observer "Best daily newspaper
on the world wide web" :
The backdrop to the coffee growers' problems is the collapse in commodity prices, caused by oversupply, a lack of competition among buyers and hypocritical trade rules. 'It's exacerbated by international advice to developing countries to all produce coffee. And there used to be an international coffee agreement that guaranteed a fixed price,' says Lamb.
For instance, Vietnam recently began producing coffee and now supplies 10 per cent of the world market.
Coffee sells on world markets for about 35p a kilo, while a bag of coffee for use in a cafe costs around 16 times that amount. The mark-up is excellent for the end-user or the Nestlés of the world, but the price paid to coffee producers has been pitiful, especially when set against the rewards for cultivating drugs. Independent reports show that oversupply in the coffee market - and the slump in coffee prices from £2,800 per tonne in 1995 to today's £350 - has left many coffee producers selling at below cost.
The Fairtrade minimum price paid to farmers' associations and co-operatives is $1.26 per pound (£1.73 a kilo) for arabica coffee. This includes a 5 cents per pound 'premium' to be used for agreed social and commercial development projects. If the world price climbs above that minimum level, the Fairtrade price is always 5 cents per pound more.
'The heart of the fair trade standards is that farmers must be organised into cooperatives. Farmers know that if they come together they are better able to resist the passing fads of the middle man,' says Lamb.
From grower to supermarket shelf or cafe bar, it is estimated that coffee beans can change hands as many as 150 times. Producers sell to local traders, who sell on to international traders, who sell on to commodity traders. (Illegal drugs, by contrast, have a much flatter distribution network.)
This explains the relatively small cut that is received by farmers. But the slump in prices is also down to the growing power of the big multinationals that buy the produce.
'For some reason or another these markets are not competitive. Big companies can rip off farmers, using their "single buyer" power to drive down prices. In principle this phenomenon, known as "monopsony", is as bad as a monopoly,' says Alan Winters, a trade economist with the Centre for Economic Policy Research.
Companies that profit from the collapse in coffee prices are beginning to be named by campaigning groups.
'Nestlé has made an estimated 26 per cent profit margin on instant coffee. Sara Lee's coffee profits are estimated to be nearly 17 per cent - a very high figure compared with other food and drink brands. If everyone in the supply chain were benefiting this would not matter. As it is, with farmers getting a price that is below the costs of production, the companies' booming business is being paid for by some of the poorest people in the world,' says a recent Oxfam report.
Coffee aside there is the subsidy question. Take the startling example of the Haitian rice industry, put out of business by dumped overproduction from the US, courtesy of massive subsidies. Then there is the Mozambique sugar industry. A country that is desperately looking to trade, following man-made and natural disasters, finds itself up against the might of $1.6bn of subsidies for European sugar producers. Despite it being the world's least efficient place to produce sugar, subsidy has made Europe the world's biggest exporter. Oxfam estimates that British sugar firms received an effective subsidy of £120m last year.
There's also 'tariff escalation' which effectively prevents countries from exporting higher value products. Even some fair trade products, including 'polished' rice from Thailand, cannot be sold in Europe because they attract punitive tariffs.
'The EU has got to get it's act together, because it's vested interests are holding up WTO agricultural reforms,' says Fowler.
Fair trade's minor success has helped thousands of small farmers diversify production, and earn enough money to pay for an education. In South America, the fair trade premium has allowed farmers to resist the temptation to revert to growing coca and opium poppies.
'Fair trade is a fairly radical solution - not only giving a better price but giving producers a say in the supply chain. The question we ask is who has the power, and what fair trade does is give poor disadvantaged producers a bit of a say,' says Barry Coates, of the World Development Movement.
The real problem, of course, is that 98 per cent of trade is not fair.