What is the real cost of a cup of coffee?

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 however 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, DRC and others. In these areas conditions are ideal for growing arabica 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 (25% above the commodity price), while other organisations such as Transparent Trade Coffee are taking it further with a policy of ‘pricing to quality and not the commodity market’.

Coffee is a business of pretty pictures and harsh realities, but an increasing number of actors in the coffee industry have recognised that the only way to secure the production of great coffee is to increase its sustainability along the value chain. Being transparent can enable actors along the supply chain to make informed choices. Transparency can also contribute to challenge current pricing mechanisms based on commodity stock market prices.

Consumers should know how much the grower was paid for his/her green coffee. Roasters and importers need to consider the green prices (GPP), and/or the effective return to origin (RTO) when making our coffee purchase decisions. 

Transparency can contribute to challenge current pricing mechanisms based on commodity stock market prices. Consumers should know how much the grower was paid for his/her green coffee. Roasters and importers need to consider the green prices (GPP), and/or the effective return to origin (RTO) when making our coffee purchase decisions.

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

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 green coffee buyer and roaster, SEAM Coffee subscribe to transparent practices and ensure that their coffee is sourced directly from producers that pay quality premiums to farmers and deliver excellent quality. SEAM Coffee is on a journey to become a member of Transparent Trade Coffee (www.transparenttradecoffee.org)

Seam coffee @ thirdspace is a top 50 finalist in the recent 702 Nedbank Business Ignite

The Coffee Mag’s “Best New Roastery” 2018 and “Café of the Year” 2019 and 2020

 

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