The Global Coffee Trade (case study) Flashcards
Where is Coffee grown?
Coffee grows in hot, wet areas close to the equator. Coffee production is dominated by countries in South America, the Caribbean, Asia, and Africa.
Coffee plants are grown in nurseries, and after 6-12 months they are moved to farms where they produce the beans that are used to make coffee.
What are the issues in coffee production?
> Coffee plants can be susceptible to a range of diseases e.g. bacterial blight and coffee leaf rust.
> Coffee farmers have to look out for insects and pests. e.g. the black twig borer is an insect known for destroying coffee plants.
> Certain weather conditions make outbreaks of disease and pests more likely. Diseases such as bacterial blight can be easily spread in very wet weather, while droughts make pest infestations more likely.
> Farmers often use fertilisers and pesticides, but these are often imported into the country, so can be expensive.
Coffee is traded globally
Mainly produced in less developed (LICs) countries but consumed in
developed (HIC) countries.
Brazil is the largest producer and exporter of coffee 300,000 coffee
farms produce 2.5 million tonnes per year, whereas the USA is the largest importer of coffee with 20% of all coffee produced going to the USA.
European countries, Japan, Canada and Russia are other
major coffee importers.
How does the price of coffee fluctuate depending on supply and demand?
> Supply is how much coffee is produced and demand is how much coffee
consumers want to buy.
> Demand increases and supply remains the same then the price of
coffee goes up, but if supply increases and demand stays the same then coffee price will
decrease.
> When the price is high, then people will produce more coffee to get a share of this
money, but this leads to more supply which causes the price to fall.
> If the price falls then more consumers may buy coffee but this will eventually lead to the price rising again.
> A low price is good for coffee consumers, while a high price is good for coffee producers.
The coffee trade is dominated by TNCs
1) 7-10% of the price of coffee bought in a supermarket will end up with the coffee farmer. This is due to selling an unprocessed bean (primary industry) at so a low value.
2) While coffee farmers are based in less developed countries, the TNCs are mainly from developed countries- the profits go to the developed countries rather than being reinvested into less developed countries.
3) TNCs receive the majority of the profits by selling processed coffee to consumers. TNCs are from developed (HIC) countries so they declare their profits there, so this money is taxed and reinvested in the developed countries’ economies rather than where the coffee bean was produced in less developed countries.
4) Most coffee producers are small-scale farmers with little land who depend on selling coffee, so they have little power to dictate prices. In contrast, TNCs have a lot of control over the global coffee market- just 4 companies control around 40% of global coffee exports.
5) TNCs pick and choose where they buy their product so buy from the cheapest sellers. This leads to a ‘race to the bottom’ where coffee producer countries cut wages, labour regulations (rules on hours per week to work) and environmental protection to keep their coffee selling going and the tax revenue that this generates.
How does the fairtrade coffee campaign help farmers?
1992 set up to support coffee farmers. It has a minimum price that a coffee buyer
has to pay to the producer to cover all the farmer’s costs. This prevents farmers from going out of business or falling into poverty.
Maintains environmental standards and prevents the use of forced labour and child labour.
Global sales now have reached 80,000 tonnes per year.
The communal fund adds a Fairtrade Premium that the community uses to invest in computers, farm machinery and schooling. The fairtrade approach is more ethical than traditional trade, and is fairer, particularly to the coffee producers.
