United Nations Conference on Trade and Development UNCTAD-ICO - - PowerPoint PPT Presentation

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 Report By 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 Sänger

UNCTAD-ICO Workshop Palais des Nations Geneva, 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

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

GDP per capita PPP Human Development Index (HDI)

Non-Coffee Coffee

RELATIONSHIP OF 1% 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 cents/lb

• 28%

10-yr average

* ICO Composite Indicator

Root causes of the decline in 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 ARE ON THE RISE

Colombia Brazil El Salvador Costa Rica

70 120 170 220 270 2006 2008 2010 2012 2014 2016

Index of per-hectare cost in local currency, 2006=100

ACHIEVING EQUITABLE GROWTH

COMPARISON OF GROWTH IN COFFEE CONSUMPTION BY REGION (INDEX OF VOLUME)

5.5% 1.7% 3.1% 3.2% 1.1% 150 300 450 1990/91 1999/00 2008/09 2017/18 Index of coffee consumption 1990/91=100 Asia* Central America & Mexico South America Africa Traditional markets

OVER 90% OF COFFEE EXPORTED IN GREEN FORM

94% 91% 0.1% 0.3% 5.9% 8.2%

40 80 120

million 60-kg bags

Green Roasted Soluble

2014-2018 1994-1998

KEY AREAS FOR ACTION

CONSULTATIVE PROCESS IDENTIFIED KEY AREAS FOR ACTION

• 50 potential solutions
• Considered:
• Barriers to implementation
• Potential impact
• Trade-offs
• Leading actors:
• Producers
• Industry
• Governments and international organizations
• Public-private partnerships

Lead actors Solutions (according to barriers to implementation and potential impact) Low barrier / Narrow-scaled impact Medium High barrier / Wide-scaled impact

• A. Solutions to address price levels and demand-supply imbalances

Producers

• Investment in farm

profitability and sustainability

• Income diversification
• Alternative livelihoods

Market actors

• Market promotion
• Producer support services
• Full traceability, supply

chain partnerships

• Price and premium

management

• Community development,

landscape management Public sector and international

• rganizations
• Sustainable public

procurement

• Market promotion
• Regulation on quality

assurance and social & environmental practices

• Investments in R&D
• Supply management by

reduction of hectares under coffee production

• Landscape management
• Basic services e.g.

healthcare and education

• Direct income transfers
• Differentiated taxes and tariffs
• Rural infrastructure

development

• Land tenure reform
• Promotion of alternative uses
• f coffee
• Supply management by

international production and export quota

• B. Solutions to address issues related to price volatility

Producers

• Physical strategies
• Hedging strategies

Market actors

• Contract farming
• Floor prices, access to

hedging services Public sector and international

• rganizations
• Farmgate price-setting in

relation to export price

• Purchase guarantees
• National strategic buffer

stock management

• Modifications to futures

exchange

• Price stabilisation funds
• International coordination of

buffer stocks

• C. Solutions to address risk and value distribution in the value chain

Producers

• Product differentiation,

aggregation and marketing

• Roasting at origin / value

addition

• Branding

Market actors

• Purchase of certified

coffee, premiums

• No unfair trading practices
• Full traceability and

supply chain partnerships

• Price and premium

management

• Pre-finance
• Decoupling sourcing strategy

from futures markets Public sector and international

• rganizations
• Upgrade existing market

information systems

• Benchmarks of production

and living costs

• Observatory for costs,

prices, margins

• Export auctions
• Regulation on due

diligence and unfair trading practices

• Farmgate price-setting in

relation to export price

• Anti-trust regulation

Lead actors Solutions (according to barriers to implementation and potential impact) Low barrier / Narrow-scaled impact Medium High barrier / Wide-scaled impact

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