Trouble Brewing

Climate change, speculation and coffee

Noticed higher prices for coffee? Coffee prices, along with many other agricultural commodities, have increased dramatically over the past few years, reaching levels not seen in over 30 years. Why the sudden increase? Two of the factors to blame are climate change and speculation.

Coffee requires a long rainy season and a long hot, dry season to flourish. In Nicaragua and Guatemala, farmers have reported rain during the dry season and drought during the rainy season, and say that as a result, coffee trees are flowering early, and beans are coming to maturity out of season, with lower yields as a result. Extreme weather events such as tropical storms are wreaking havoc on supply, with swaths of productive coffee trees wiped out by mudslides.

At the same time as world supply levels are dropping, speculation on the agricultural commodities market has caused an increase in prices for green beans. After the financial crisis began in 2008, many investors moved their dollars over to the agricultural commodities market. Much of the increase in coffee prices is due to high levels of speculation. Of course, not only coffee has risen – prices for commodities such as sugar, wheat and cocoa have also increased dramatically.

What’s the impact for small-scale farmers like the ones Café Ético buys coffee from? Farmers are enjoying higher prices, but with climate change wreaking havoc on production, crops are increasingly vulnerable, making farmers’ income less and less secure. At the same time, farmers are also dealing with rising food prices along with increases to farming costs such as fertilizer and labour.

How is Café Ético responding to price increases and supply issues? We run a pretty tight ship here, and we’ve found a few ways of reducing some of our costs, but, like pretty much all other coffee companies, we’ve had to raise our prices in order to remain sustainable. However, we are responding to supply issues proactively, working with farmers to ensure we pay a higher-than-market price and tweaking our payment schedule to get more money to farmers sooner, thereby ensuring our coffee supply. We’re also thrilled to be working with a private donor to help farmers increase their coffee quality and production efficiency. We think this is a perfect example of how direct, fair trade relationships benefit both farmers and importers.

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