Devouring profit - International Coffee Organization

This appendix reviews the economic importance of coffee in six countries, as a contributor
to GDP, exports and as a generator of foreign exchange.
Coffee production has increased in most of the countries studied, most notably in the
1970s and 80s with the advent of new varieties and production subsidies. Surprisingly
though, yields are still poor in many parts of all countries. This is because coffee is still
produced by a large number of smallholders who have mostly not benefited from the
technology on offer.
In all the six countries, coffee is of declining economic significance, both as a percentage
of GDP and of foreign earnings, a circumstance that is a natural consequence of
the development of their mostly city-based industries. But if we take into account its
continuing importance as a generator of employment, coffee’s importance remains
mostly unchanged. From this we conclude that coffee is now of more social significance
than pure economics may suggest. Thus a recent report (Ramírez et al., 2002),
analysing the coffee institutions of Colombia, states that the coffee sector has developed
into a social issue of very high importance which has a role in national stability.
Indeed because of the secular decline of agriculture, coffee may now be more important
than previously, for when it suffers a downturn there are few alternatives for
members of this already depressed rural sector. We believe that such societal externalities
must lead to hidden extra costs that are still to be calculated but which are
beyond the scope of this book. We merely note that of the six countries studied, four
have faced significant rural-based guerrilla activities in recent years, all of which have
included coffee-growing zones.
India
The agricultural sector contributes 25% of the country’s GDP although this participation
is declining. E.g. in 1947, 85% of the population depended on agriculture, which
contributed to 70% of the Indian GDP; currently 75% of the population still depend on
agriculture. The main agricultural products are rice, wheat, oilseed, cotton, jute, tea,
coffee, sugarcane, potatoes, and a range of livestock. Coconut, cashew nuts, and
vegetables are also important.
Agricultural exports have fluctuated between 12 and 20% of total exports, though in
dollar terms they remain relatively constant, suggesting a gradual transition from a
predominantly agricultural production base to a broad-spectrum of industry and services.
The major agricultural exports are cereals, spices, cashew, oilcake/meal, tobacco,
tea, coffee, and marine products. Coffee exports have remained above US$400 million
over recent years with the exception of 1999-2000 (US$315 million) and 2000-
01.
Menon (2001) points out that the fall in international prices of robusta coffee as well as
pepper has adversely affected the coffee farmers from Karnataka and Kerala states.
Pepper is an important extra income for many coffee farmers but its productivity has
been low (275–300 kg/ha). Additionally the price has seen reductions from Rs 22,600/
97