Five hundred billion cups of coffee are consumed every year worldwide, but few people know much about the world’s second most traded commodity (behind oil!). So here are five quick facts about how coffee gets from farms around the world to you.
1. Coffee comes from a fruit. If you’ve never seen a coffee plant in person, it’s pretty amazing. Coffee plants grow around the world, but the best coffee is grown in mountainous regions that receive predictable and abundant rain. Once a year, these plants sprout a bright red, cherry-like fruit. Farmers in Central America, for example, spend two months harvesting the brightest red cherries, before the coffee “bean” (the seed of the fruit) is picked, washed, dried, hulled, sorted, graded, polished, packed, and shipped off to U.S.-based coffee roasters.
2. The coffee supply chain is completely broken. Because coffee is a perishable item, ideally it would come directly from the farm to your doorstep, with as few intermediaries as possible. However, the current coffee supply chain is antiquated and inefficient, with up to 20 middlemen and six months between the farmer and you. Many coffee farmers have little market access, forcing them to rely on middlemen to bring their green, unroasted coffee to the market. With so many intermediaries, the typical coffee supply chain excludes farmers from the most profitable activities and is in dire need of optimization. Middlemen, and especially roasters, capture nearly all of the profit after the crop leaves the farm. It’s a stunningly disproportionate reward compared to the amount of time, labor, and know-how farmers put into their product.
A coffee farmer in rural Brazil. (Photo credit: Wikipedia)
3. Coffee farmers have it rough. Of the millions of coffee farmers worldwide, nearly 80 percent are small scale, often living on less than two dollars per day. In the communities we work with in northern Nicaragua, we have seen mothers choosing which of their two children can afford to go to school, women and men walking several kilometers to fetch water, and people flocking to the community center on the one day a doctor visits every few months. Although coffee farmers around the world spend years cultivating their crop and do an incredible amount of labor to grow and harvest their product, they typically receive less than $1.00 per pound (or the equivalent of about $0.03 per cup of coffee), which is then sold in the US for upwards of $20.00 per pound, keeping them trapped in a cycle of subsistence farming.
4. Not everybody is excited about Fair Trade—and few people know what “direct trade” means. The coffee industry is changing rapidly, and, while Fair Trade remains an important tool to protect against price busts in the coffee commodity market, it can be cost-prohibitive for small-farmers and imposes burdensome administrative requirements on its certified farmers. Accordingly, Fair Trade is facing increasing questions, criticism and backlash as coffee lovers around the world look to engage solutions that offer a more substantive and sustainable means of improving farmer livelihoods. With respect to direct trade, there is no standard or commonly accepted definition of what direct trade actually is. Direct trade should mean that your coffee roaster or shop is buying coffee directly from farmers, but what it usually means is that there are fewer middlemen, or simply that the importer can verify the exact farm of origin, even though the coffee still passes through just as many middlemen. What’s more, only a tiny fraction of farmers have the resources to make connections in the coffee-buying world to secure direct market access and take advantage of the direct trade movement.
5. Central America was hit by a fungus that will affect coffee output for years. About two years ago, a fungus called roya (or coffee rust) decimated crops throughout Central and South America. Coffee rust has been present for years in coffee growing communities, but in 2012, because of irregular weather, the fungus exploded throughout the region. The New York Times estimates that in Guatemala alone, production has decreased by over 25 percent and 100,000 jobs directly tied to the crop have already disappeared. Given that coffee seedlings take five to seven years to produce beans for production, replacing the plants and getting back to pre-roya output levels is a daunting task for the four million people in Central America who rely on coffee for their livelihood.
The good news is that, as the plight of coffee farmers gains prominence and the public becomes increasingly aware of their struggles, more and more organizations are getting involved to substantively transform the economic conditions of farmers. For example, Root Capital recently invested $23 million to fight the coffee rust plague. This initiative comes on the heels of years of investing in infrastructure in coffee growing communities, strengthening cooperatives and developing processing capacity.
What’s more, social enterprises have a real opportunity to disrupt the coffee supply chain with market driven solutions. For example, my own company, Vega, is working on an innovative model to enable farmers to capture more of the value chain. Vega empowers farmers to roast coffee themselves, so that all of the processing is done on the farm and farmers earn up to four times what they currently do selling raw green beans alone.
So, next time you go to buy coffee, take a few moments to think about its journey. Try to find information about the producers that make your coffee and where they fit in the supply chain. You have the power to affect a farmer in Nicaragua, or Ethiopia, or Indonesia simply through your decision of which coffee to buy and drink. It’s one extra step, but just imagine if each of those 500 billion cups of coffee consumed every year contributed to a more sustainable future.