As of writing this, the price of coffee on the commodities market sits a $1.05 per pound. This number is criminally low, but still somehow almost 20 cents higher than the 88 cent mark hit in May, the lowest price in a decade (to speak nothing of inflation). To combat this, Colombia’s National Federation of Coffee Growers (FNC) has now suggested setting an international base price of $2 per pound.
As reported by Reuters, the Colombian government has set aside $79.5 million in subsidies for coffee producers who are currently feeling the weight of the pricing crisis. To stem the tide as well as “[preventing] farmers [from] abandoning the sector,” the FNC is advocating for the new price floor. Though almost double the current commodity price, the proposed baseline is still 50 cents below the “price threshold for profitably,” per the Specialty Coffee Association.
“Is it fair to trade when someone buys your product below the cost of production?” said the head of the National Federation of Coffee Growers, Roberto Vélez, at a fair trade conference in Bonn, Germany.
Reuters notes that the call for the increased price comes with few potential avenues for achieving it. In the past, Vélez has suggested “decoupling” high-quality Arabica coffee from the commodity price. But one single country opting into a pre-defined minimum won’t suffice; coffee companies would simply buy from other producing countries still operating within the confines of the commodities market pricing. The Wall Street Journal states that the international body of coffee producers may be heading toward an OPEC-style cartel to help fix the price. The article notes that farmers from Brazil, Colombia, and over two dozens other producing countries will meet in Brazil later this week to discuss “how to get more money to farmers suffering from the lowest prices on world markets in more than a decade.”
The call for a price floor is ambitious. Nearly doubling the price of coffee seemingly overnight would have a significant impact on a company’s bottom line, and much of the new fees would presumably be passed onto the consumer. Yet, not doing anything isn’t an option. If producers aren’t financially able to grow coffee, they won’t. As it stands, the price of coffee may put an end to production before global warming even gets a chance.
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Source: Coffee News