14 Jun 2018 --- The future of the coffee sector looks bleak due to a wide variety of complex and systemic social, economic and environmental issues threatening the future of coffee production, according to the Coffee Barometer 2018. The collaboration between of Conservation International, COSA, Hivos, Oxfam-Worldshops and Solidaridad says that price volatility, climate change and recurring outbreaks of pests and diseases threaten a structurally increasing global supply of good quality coffee, while consumption and, therefore, demand is expected to increase.
The report says that without significant efforts to adapt production to climate change, increase transparency in the value chain and improve social conditions on farms, global production will not be able to keep pace with rising demand.
According to the Barometer, investors are spending billions in coffee company acquisitions and mergers, but coffee production on the ground is under threat from all sides.
This is negatively impacting future value creation throughout the sector.
“In this new edition of the Coffee Barometer, we pinpoint some gaping holes in our collective knowledge that urgently need to be tackled. For example, coffee production has been growing by over 20 percent (+26 million bags) since 2010, but we do not know how much-forested land has been converted into farmland used for coffee production,” it says.
“Furthermore, it is assumed that 20-25 million smallholder farmers produce 70 percent of the coffee globally, an estimate that stands unchallenged in the last 15 years. The coffee harvest, therefore, depends on millions of farmworkers; an important but invisible group of stakeholders. They remain largely voiceless in the discussions about a sustainable coffee sector.”
Economic inequality between roasters and producers is rising as a result of downward pressure in the value chain coupled with falling coffee prices since the early eighties.
Moreover, there is tremendous lack of transparency about costs and benefits along the coffee production chain, which impedes value redistribution. Consequently, many producers leave coffee farming for other crops.
While coffee is increasingly lucrative with an estimated global turnover of US$200 billion, less than 10 percent is earned in coffee producing countries and a futile two per mille is invested in sustainability by the industry (a 0.002 percent share).
On the topic of sustainability, the Barometer says often it is an afterthought for many CEOs, especially when it does not directly coincide with the business goals of increased sales, profits and market control.
Many companies “relegate” social and environmental issues to their Corporate Social Responsibility (CSR) departments which separates them from core operations and strategies.
“The fact that companies are preoccupied with scaling their business seems to undermine the level of ambition, investment and impact of their sustainability commitments,” says Sjoerd Panhuysen, lead-author of the Coffee Barometer and Project Manager at Hivos, a Dutch non-profit providing financial support to organizations in Africa, Latin America and Asia.
“What’s more, companies shy away from incorporating social and environmental costs of coffee production. This hampers a more fundamental shift in the industry’s business model and is a real threat for value Click to Enlargecreation in the long run.”
In the crop year of 2016/17, coffee farmers produced a record crop of almost 160 million 60kg bags (ICO 2018).
Deforestation is the primary source of new coffee lands in almost all countries where coffee production is rapidly expanding such as Vietnam, Indonesia, Ethiopia and Peru, says the report.
And, if coffee consumption continues to rise at a rate of 2 percent per year, the Barometer estimates that the coffee sector will need 300 million bags of coffee by 2050, doubling the current world production and potentially doubling the amount of land required for production.
However, without significant efforts to adapt coffee production to climate change, global production will likely be lower in 2050 than it is today.
The Barometer details how there is very little effective public regulation in many coffee producing countries, the coffee sector has invested in Voluntary Sustainability Standards (VSS) to drive improvements in the economic, environmental and social sustainability of coffee production.
While nearly half of production meets one of these standards, they do not provide a magic bullet and require a commitment to ongoing capacity building and long-term investment, says the Barometer.
In the face of climate change, it is paramount the coffee sector encourages an integrated coffee production system with lower environmental impact at the landscape level, to meet both ecological and social goals.
Furthermore, to sustain coffee production, the economic structures in countries of origin need to be strengthened through the close collaboration of producers, exporters and national governments. This will improve the economic viability of farmers and enhance the position of bargaining of exporters.
In conclusion, the Barometer says that poverty and labor shortages at the grassroots level, lack of transparency through the value chain and climate change will bring shocks and surprises.
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