Cost of coffee.indd - RISC

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s Analyse the photos used and the overall design (make notes in the margin): ◆ Look at the photos: • who is shown? • what are they doing? • what words come into mind when you look at the photo? • why have these photos been chosen? ◆ Does the design and layout of the booklet (fonts, arrangement of photos, use of space) help to communicate its message? Why? ◆ Why has Nestlé produced this booklet? ◆ How effective is the booklet in: • gaining your interest – why? • providing information – why? ◆ How does this information affect your attitude towards Nestlé and its products? ◆ Does the leaflet convince you that Nestlé is “committed to giving a good deal to coffee growers”? Why? 28
actionpage: a good deal for growers?* page 14/15 As in any market, the price of green coffee is ultimately governed by the relationship between the amount of coffee available to be sold (the supply) and the amount which people want to consume and hence the amount roasters need to buy. The day-to-day price of coffee… reflects the changing international relationship between supply and demand. The amount a farmer receives is ultimately determined by this free market mechanism. Although coffee-growing is usually a small-scale enterprise, often carried out in remote and somewhat inaccessible areas, it would be wrong to think that farmers are ignorant of the market price of coffee. Because of this widespread knowledge, farmers are well aware of what prices they can attain for their coffee, and so will ensure that they receive what they consider to be a fair price… However … there are some intermediaries who behave badly and they may take advantage of farmers who need cash immediately… As the booklet says, supply and demand will ultimately determine the price in a free market. In such a market, when the price drops, producers will no longer find it profitable to produce the crop, so ‘supply’ drops and the price rises to a ‘fair’ level again. In an ideal market this should result in a stable equilibrium around a fair price. However, what we see is very different: the price swings wildly in a way unrelated to demand and supply and the price is in a real long term decline, far below the cost of production for long periods – as is true of many commodities. There are several missing pieces of the jigsaw: ◆ ◆ ◆ It is not a free market There are several ways in which the coffee market does not operate freely: • There is an assumption that there should be ‘perfect knowledge’ of the market place. Many small farmers will not have the information that the buyers have access to. The most obvious is knowledge of how prices are likely to change. If prices are set to rise, farmers could choose to keep their crop, but the traders will say prices are dropping to push for a quick sale at harvest time when prices are low. Knowing the price of coffee in the local market is not the same as understanding the world market. • Farmers are poor and have little access to capital or loans at a fair rate. This means they incur debts to care for and harvest the crop. They need to clear these as soon as possible. Traders, who have access to capital, can afford to buy the crop and ‘play the market’. • There are normally many small farmers and a much smaller number of traders; in such a market it is normal for the buyers to be more powerful – they can pick and choose from many farmers and can threaten not to buy in order to force the price down. Producer prices Because it is not a free market, the prices received by farmers are often well below the ‘market price’. Obviously, there is a fair margin to be made by traders, but the margin can be as much as half the world price. While you can argue that the world price does, to some degree, reflect supply and demand, this is by no means the case for the producer prices. Lags in the system Coffee bushes take four or five years from planting to the first coffee harvest: a major investment for a small farmer. So, if prices drop, she is unlikely to give up straight away. To dig up the bushes and plant something else is a big risk – especially when there is a secure coffee market (even though at a low price) and no clear market for other crops. Diversification, which is necessary to make the ‘free market’ more than a theory, is very difficult and risky. * analysis by Phil Wells 29
Page 2 and 3: credits devised, written and design
Page 4 and 5: “ A company that adopts and imple
Page 6 and 7: the instructions What you need - ge
Page 8 and 9: glossary bluewash The ploy used by
Page 10 and 11: coffee file Coffee: adaptation of A
Page 12 and 13: 8 the story of coffee D the coffee
Page 14 and 15: wet method D requires the use of re
Page 16 and 17: 200 Robusta coffee market 1986-2005
Page 18 and 19: drinker roasted, ground, instant CO
Page 20 and 21: 16 key ideas ◆ ◆ ◆ ◆ ◆
Page 22 and 23: Profit margins are high - Nestlé h
Page 24 and 25: key ideas ◆ ◆ ◆ ◆ In respon
Page 26 and 27: • because of past price fluctuati
Page 28 and 29: aim a fair price? ◆ To analyse th
Page 30 and 31: ◆ Although in The coffee cycle Ne
Page 34 and 35: ◆ ◆ Real costs A supply and dem
Page 36 and 37: aim how fair’s fair? ◆ To explo
Page 38 and 39: actionpage: how fair’s fair? s Re
Page 40 and 41: 1990 european fair trade associatio
Page 42 and 43: Actionpage: Pros & cons 38 PROS Gua
Page 44 and 45: aim fair marketing ◆ To analyse t
Page 46: Actionpage: Logo ® 42
Page 49 and 50: actionpage: press release Statement
Page 51 and 52: appendix 1: the coffee crisis The I
Page 53 and 54: demand sides in which the coffee cr
Page 55 and 56: demonstrating that traditional shad
Page 57 and 58: appendix 4: co-op’s fairtrade cof
Page 59 and 60: appendix 5: mugged introduction The
Page 61 and 62: women earn less, work longer, have
Page 63 and 64: appendix 6: rescue plan A Coffee Re
Page 65 and 66: Consumer governments 1 Provide poli
Page 67 and 68: joining forces we believe that we w
Page 69 and 70: of shortfalls that occur (see Nestl
Page 71 and 72: appendix 8: robbing coffee’s crad
Page 73 and 74: appendix 9: behind the mask the rea
Page 75 and 76: • change the law to enable people
Page 77 and 78: Fair Trade in Action - KS 3-4 Fairt
Page 79 and 80: ackground reading* Behind the mask:
Page 81 and 82: useful contacts Anti-Slavery Intern
Page 83 and 84:
International Coffee Organisation w
Page 85 and 86:
isc Reading International Solidarit
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Cost of coffee.indd - RISC

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