Opinion Piece: What's the real cost of a cup of coffee

Friday, 7 February, 2020

By David Walstra, Hostex 2020 ambassador, owner of SEAM Coffee Roaster and Thirdspace coworking space and coffee shop. David is ultra-passionate about the sustainability of quality coffee and the people who produce it. He tackles some coffee pricing issues in this article brought to you by Hostex 2020. The Coffee Magazine will see you there 1-3 March, Sandton Convention Centre.

Is the cup of coffee you sell and serve – or buy and drink, depending on which side of the counter you are on – driving a farmer into poverty? The sustainability of the coffee industry is under intense scrutiny globally to redress the unrealistic costing of coffee.

As a commodity, the coffee price has recently been below the cost of production, and the vast proportion of coffee is paid for as a commodity. A range of factors affect this price, including an over-supply in Brazil as well as a messy equation of supply, demand and speculation from commodity traders.

But this means that, most specifically, small coffee farmers in Africa are making so little money – often just cents on the kilogram of coffee they produce – that they are being forced into poverty, invariably taking their communities with them.

Some small farmers are giving up on coffee and pulling up their valuable plants, replacing them with crops such as cassava, which represents an overall loss to the coffee industry.

Changes are happening and awareness of this significant inequity is growing worldwide – but the pace needs to pick up, and many countries, South Africa included, are lagging behind in their response.

While most coffee is grown in South America and Vietnam, several East African countries produce some of the best coffee in the world, notably Burundi, Rwanda, Ethiopia, Uganda, Tanzania, Zambia, and others. In many areas conditions are ideal for growing coffee, which needs cold mornings and evenings and heat through the day, slowing the rate of cherry development and increasing the sugars. But with below production cost prices being paid, being a small-scale coffee farmer in Africa invariably means hardship for the farmer and their community. It’s estimated that for close on 10 million households in Africa, coffee is their primary source of income.

The situation is different in Brazil which has ‘uberised’ its coffee production, and massive coffee farms use automated processes that reduce their costs and ensure profits can be made below what it costs to produce coffee elsewhere.

Gradually though, the reality of the impact of the coffee price on smaller-scale farmers is gaining purchase, and organisations and NGOs are getting involved in creating a more equitable market in Africa. Apart from paying for coffee above the price of production, a lot is being done to educate and train the farmers on practices to improve the quality and yield of their coffee, while farming sustainably. A lot more awareness and action are needed throughout the coffee value chain.

Fair Trade is making a difference; creating awareness and ensuring that the growers earn a fair price on their crops, while other organisations such as Transparent Trade Coffee are taking it further with a policy of ‘pricing to quality and not the commodity market’.

The good news is that the quality of the coffee is directly proportional to the sustainability of coffee, so paying more means having better coffee.

So, as coffee consumption and the expectation of great quality and great-tasting coffee in South Africa grows exponentially, an understanding of the real cost needs to grow too. Everyone in the coffee market – roasting, making, selling and drinking – needs to understand the importance of paying for a cup of coffee at an ethical price.

South African corporates must be given much credit for the role they are playing in their coffee buying choices. Many are committed to sustainability and understand that fair pricing and transparency in the coffee value chain are crucial. Corporates are the biggest consumers of quality coffee in the country and are encouraging a preference for great coffee among their staff, who are then more discerning in their coffee choices.

Greater traction is needed to make a meaningful difference and questions need to be asked about the sourcing and pricing of the coffee. Does this coffee put someone back into poverty?

As a roaster and wholesaler, David Walstra and his partner Ben Jenkin subscribe to transparent practices and ensure that their coffee is sourced from businesses that pay fair prices to farmers and deliver excellent quality. The company is on a journey to become a member of Transparent Trade Coffee (www.transparenttradecoffee.org)

Join David Walstra at Hostex 2020 where he will be presenting more valuable and interesting insights on the sustainability of coffee – at IndustryLIVE! on Monday, 2 March at 15h00.

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