Coffee Development Report · • Contract farming • Floor prices, access to hedging services...
Transcript of Coffee Development Report · • Contract farming • Floor prices, access to hedging services...
United Nations Conference on Trade and Development
UNCTAD-ICO Workshop on
Fostering sustainable development in coffee-exporting countries
18 February 2020, Palais des Nations, Geneva
Coffee Development ReportBy
Christoph Saenger, Senior Economist, International Coffee Organization, London
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD.
Dr Christoph SängerUNCTAD-ICO WorkshopPalais des NationsGeneva, 18 February 2020
Download at: http://www.internationalcoffeecouncil.org/
COFFEE AND ECONOMIC
DEVELOPMENT
COFFEE IS LIVELIHOOD SOURCE FOR 25 MILLION FARMERS
COFFEE IS PRODUCED IN COUNTRIES THAT RANK LOW IN GDP AND HDI
0
20,000
40,000
60,000
80,000
100,000
120,000
0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
GD
P pe
r cap
ita P
PP
Human Development Index (HDI)
Non-Coffee Coffee
RELATIONSHIP OF1% CHANGE IN COFFEE PRICE AND…
3%
1%
-4%
Rural employment rate
Agriculture value added % of GDP
Poverty headcount ratio at $1.90 a day
0.08
-0.02
Political stability index
GINI index
(a) ECONOMIC AND SOCIAL OUTCOMES (b) FOOD SECURITY
(c) POLITICAL STABILITY AND SOCIAL COHERENCE
* Results are significant for countries which are highly dependent on coffee (share of coffee in total export value)Results are statistically significant at least at the 10% level.
10%
-9%
Supply of protein of animal origin*
Undernourishment *
CURRENT STATE OF THE
COFFEE MARKET
INTERNATIONAL COFFEE PRICE*DROPPED BY 28%
50
100
150
200
250
Feb-10 Aug-11 Feb-13 Aug-14 Feb-16 Aug-17 Feb-19
US
cent
s/lb
-28%
10-yr average
* ICO Composite Indicator
Root causes of the declinein coffee prices
• Fundamental factors of demand and supply: overproduction
• Non-fundamental factors:
– Financialisation of futures markets
– Exchange rate volatility
– Mergers and acquisitions in the coffee industry à potential shift in market power
PRODUCTION COSTS AREON THE RISE
Colombia
Brazil
El Salvador
Costa Rica
70
120
170
220
270
2006 2008 2010 2012 2014 2016
Inde
x of
per
-hec
tare
cos
tin
loca
l cur
renc
y, 2
006=
100
ACHIEVING EQUITABLE GROWTH
COMPARISON OF GROWTH INCOFFEE CONSUMPTION BY REGION
(INDEX OF VOLUME)
5.5%
1.7%
3.1%
3.2%
1.1%
0
150
300
450
1990/91 1999/00 2008/09 2017/18
Ind
ex
of
coff
ee
co
nsu
mp
tio
n
19
90
/91
=1
00
Asia* Central America & Mexico
South America Africa
Traditional markets
OVER 90% OF COFFEE EXPORTEDIN GREEN FORM
94%
91%
0.1%
0.3%
5.9%
8.2%
0
40
80
120
milli
on 6
0-kg
bag
s
Green Roasted Soluble
2014-20181994-1998
KEY AREAS FOR ACTION
CONSULTATIVE PROCESS IDENTIFIED KEY AREAS FOR ACTION
• 50 potential solutions
• Considered:
o Barriers to implementation
o Potential impact
o Trade-offs
• Leading actors:
o Producers
o Industry
o Governments and international organizations
o Public-private partnerships
Leadactors Solutions(accordingtobarrierstoimplementationandpotentialimpact)
Lowbarrier/Narrow-scaledimpact
Medium Highbarrier/Wide-scaledimpact
A.Solutionstoaddresspricelevelsanddemand-supplyimbalancesProducers • Investmentinfarm
profitabilityandsustainability
• Incomediversification • Alternativelivelihoods
Marketactors
• Marketpromotion• Producersupportservices
• Fulltraceability,supplychainpartnerships
• Priceandpremiummanagement
• Communitydevelopment,landscapemanagement
Public sectorandinternationalorganizations
• Sustainablepublicprocurement
• Marketpromotion• Regulationonqualityassuranceandsocial&environmentalpractices
• InvestmentsinR&D
• Supplymanagementbyreductionofhectaresundercoffeeproduction
• Landscapemanagement• Basicservicese.g.healthcareandeducation
• Directincometransfers• Differentiatedtaxesandtariffs• Ruralinfrastructuredevelopment
• Landtenurereform• Promotionofalternativeusesofcoffee
• Supplymanagementbyinternationalproductionandexportquota
B.SolutionstoaddressissuesrelatedtopricevolatilityProducers • Physicalstrategies • Hedgingstrategies Marketactors
• Contractfarming • Floorprices,accesstohedgingservices
Public sectorandinternationalorganizations
• Farmgateprice-settinginrelationtoexportprice
• Purchaseguarantees• Nationalstrategicbufferstockmanagement
• Modificationstofuturesexchange
• Pricestabilisationfunds• Internationalcoordinationofbufferstocks
C.SolutionstoaddressriskandvaluedistributioninthevaluechainProducers • Productdifferentiation,
aggregationandmarketing• Roastingatorigin/valueaddition
• Branding
Marketactors
• Purchaseofcertifiedcoffee,premiums
• Nounfairtradingpractices
• Fulltraceabilityandsupplychainpartnerships
• Priceandpremiummanagement
• Pre-finance
• Decouplingsourcingstrategyfromfuturesmarkets
Public sectorandinternationalorganizations
• Upgradeexistingmarketinformationsystems
• Benchmarksofproductionandlivingcosts
• Observatoryforcosts,prices,margins
• Exportauctions• Regulationonduediligenceandunfairtradingpractices
• Farmgateprice-settinginrelationtoexportprice
• Anti-trustregulation
Leadactors Solutions(accordingtobarrierstoimplementationandpotentialimpact)
Lowbarrier/Narrow-scaledimpact
Medium Highbarrier/Wide-scaledimpact
Priority actions –increasing value addition at origin
• Improving coffee quality and adopting of VSS to
enable producers to tap in high-value market
segments / reduce costs & increase competitiveness
• Improving quality requires investment at farm level
and post-harvest processing (e.g. wet mills)
• Create enabling environment for investments and
FDI
• Remove tariff and non-tariff trade barriers (tariff
escalation) to boost processing at origin
Priority actions –foster sustainable sourcing practices
• Finding optimal mix between company action, pre-competitive initiatives and government policies
• Company level:
– Long-term contracts (sharing of value & risk)
– ’Flow of intangibles’ (credit, technical assistance, etc.)
• Industry initiatives
– Joint sustainability objectives, broad impact
• Government policies and regulation
– Creating a level playing field
– Smart regulation
In collaboration with
Thank you