Coffeenomics

Updated: Sep 18 2003, 05:30am hrs
The pitiable plight of millions of coffee growers in developing countries of Africa and Asia has been underscored in a study by Oxfam International. A 70 per cent fall in coffee prices over the last seven years reflects more than a demand-supply mismatch or depressed prices. It has more to do with the political economy of MNCs such as Nestle, Philip Morris, Neumann and Volcafe and their nexus with powerful lobbies in the developed countries that has distorted the economics of coffee. In the absence of any price assurances or crop insurance in many coffee growing countries, such MNCs have exploited rock-bottom prices of coffee to rake in huge profits. As the Oxfam International study points out, the average farmgate price of Tanzanian coffee accounts for just nine per cent of Nestles retail and grounded coffee prices in the US market. Elsewhere in developed countries, it is just about four per cent. This explains the paradox of coffee farmers miseries and coffee MNCs profits.

Developing countries that sell about 90 per cent of coffee beans to the MNCs in developed countries suffer from low beans prices in the absence of domestic processing or value addition. Perhaps, the dismantling of coffee boards that used to assure minimum prices for the beans in many developing countries is an inevitable consequence of the clout of MNCs in blocking coffee to developed markets. Even the Coffee Board in India and the Coffee Futures Exchange of India have had limited success in stabilising coffee prices. Falling coffee prices have fetched lower forex earnings of Rs 700 crore in 2002-03 from Rs 1,901 crore in 1999-00. At home, there is no alternative to modern farm practices to step up output at competitive costs and spreading the coffee culture through sustained campaigns. There is also a need to beef up marketing skills to prevent the middlemen from emerging as price setters. Though much of the good that has happened in recent times to Indian coffee owes to the shift from pooling to open market, there is a greater need to look at coffee as a cultural commodity and spread its consumption in metros and towns. Coffee has played a significant role in the emergence of Paris as an intellectual and artistic city over the years. Nearer home, Kolkatas coffee addas too have their distinct flavour.