world trade in commodity: coffee Flashcards
where is coffee grown
brown in warm countries around the country
- grown in hot, wet areas
- production= dominated in S. America, Carribean, Asia, Africa—> biggest producers= Brazil, Vietnam, Ethiopia, Indonesia
what are the two types of coffee bean
ARABICA
- higher quality + more expensive to produce
- mainly grown in S. America + Eastern Africa
- around 70% of coffee production
ROBUSTA
- cheaper + lower quality
- grown in Western Africa + Asia
where are coffee plants grown in and moved to
coffee plants growing in nurseries
after 6-12 months moved to farms where they produce coffee beans
issues with coffee production
- Beans be susceptible to disease e.g. Bacterial Blight, coffee lead rust (prevents growth)
- insects + pests e.g. Black Twig Borner
- Weather e.g. can make outbreaks of disease + pests more likely e.g. Bacterial Blight need wet conditions to spread, other pests need droughts
- Fertilisers and pesticides are expensive and have to be exported in
Brazil
- coffee normally produced in LDECs and consumed by HEDCs
- Brazil is largest coffee producer in world (exported 20% of world coffee in 2015)
- has 300,000 coffee farms and produces 2.5 mill tonnes a year
USA
- largest importer of coffee in the world
- 2015 imported 20% of global coffee
- European countries, Russia etc also import lots of coffee
price fluctuations
- due to supply and demand
- demand increase and supply is the same= price increases
- supply increase, demand the same= price decrease (good for consumers)
- if price is high ppl more attracted to make coffee—> causes price to fall
- if price low ppl will buy more —> price will rise again
- price fluctuations impacts coffee farmers
example of price fluctuations being a problem
Vietnam
- amount exported gradually increase since 1987.
- 1999- Vietnam exporting over 450 mill kg of coffee per year= prices fell = S. America coffee growers went out of business as couldn’t afford to produce at such a low price —> Vietnam flooded the market
- price fall was $1.19/kg in Jan 2000 to $0.68/kg in March 2001
how is coffee dominated by TNCs
- 7-10% of price of coffee bought beans goes to coffee farmers as they only see unprocessed beans (low value)
- TNCs buy these beans and roast them to increase their value and receive most profits
- means most profits go to developed countries as this is where TNCs are based, coffee farmers= in developing countries
- most coffee producers= small-scale farmers with little land + who depends on selling coffee= they have little power to dictate prices MEANWHILE TNCs have lots of power over global coffee market —> 4 companies control 40% of global coffee exports
- TNCs pick and choose where to buy coffee —> normally from country/farmers selling beans at lowest price
- so coffee producing countries compete to cut wages, labour regulation + environmental protection to attract TNCs —> known as ‘race to the bottom’
—> can cause farmers to go out of business (long-term damage to farmland) e.g. loss of wildlife + habitats
FairTrade when was it set up and what does it aim to do
- set up in 1992 (FairTrade foundation) to help promote brands that support coffee farmers
- worked with producer organisations and aims to set a minimum FairTrade price (minimum price coffee buyer has to pay the producer organisation to lower farmers costs) —> aims to prevent farmers from entering poverty
- also works to maintain environmental standards + prohibit child labour + forced labour
growth of FairTrade?
number of producer organisations increased from 175 to 329 from 2002-2011 —> in this time global sales increased from 15,000 tonnes a year to 80,000
FairTrade premium what is it
a communal fund that aims to help local communities and help them develop —> with this extra money and economic security = farming communities in LEDCS (e.g. Peru) have been able to invest in computers, machinery and schools
- it is an extra sum of money paid on top of selling price —> some goes towards improving coffee production + quality
is FairTrade approach ethical
yes (especially with treatment of producers)
how many ppl does FairTrade help?
helps 125 million ppl worldwide
—> improves farmers living standards
how does FairTrade make a difference?
- FairTrade minimum price coffee buyer—> safety net and protections from sudden price drops= better financially and can make investments to increase future income e.g. roasting machines
FairTrade - some things it does and Uganda
- fights effects of climate change = e.g. disease and drought resistant coffee
- empowerment of small-scale farmers
UGANDA - use Fair Trade premium to build a school —> better education —> scholarship schemes —> empowered women to leadership roles e.g. farm managers
negatives of FairTrade
- FairTrade products can cost more which may put customers off
- limits choice of suppliers for a business
fairtrade some benefits
- company reputation improves if they choose FairTrade as seen as more ethically responsible
- long-term benefits
- FairTrade makes products for customers
are the distribution of FairTrade benefits even?
no UNEVEN
- certification system biases poorest countries due to high costs (particularly for small producers)
- certifications costs are same everywhere but relatively higher for poorer countries and cheaper for large producer organisations
who has dominance
- Latin America receives largest share of FT benefits (coffee and bananas = key certified products)
- accounts for 56% of FT certification demand (Africa= 29%, Asia= 14% etc)
- LDCs are only 13.5% of certification demand vs MEDCs are 54% of certification organisations
- countries dependent on few primary exports= underrepresented in FairTrade —> demand higher in Peru and Mexico where there’s more diversified exports
Fair Trade other facts
- FT specializes in agricultural exports= benefits Latin America, not LDCs who focus more on non-agricultural exports
- FT follows ‘plutocratic logic’ —> benefits wealthier countries (not poor)
- FT need to prioritise poorest countries more
