PERSPECTIVES ON SUSTAINABILITY AND GLOBALIZATION

AND THE CHALLENGES FOR THE COFFEE SECTOR

by: Lakshmi Venkatachalam*

Introduction disorderly and even contradictory” 1.

The supply constraint caused by the frost
Over the last five years, the in Brazil in the mid nineties was
global coffee industry experienced its followed by a period of abnormally high
worst crisis which necessitated prices which in turn prompted a surge in
fundamental re-thinking on the future production that substantially altered the
challenges and strategies required to global production structure, whose
ensure survival and growth, from the impact we experienced in the form of
producer’s perspective. In the ensuing the worst coffee crisis ever seen in terms
debate, the issue of sustainability has of producers’ income. In several
loomed large. In my paper, I shall countries across Africa, Latin America
attempt to address the theme of and Asia, the slump in coffee prices
sustainability against the backdrop of resulted in a deep socio-economic and
liberalization and globalization and its humanitarian crisis.
implications for the small producers,
who dominate the coffee industry On the other hand, the evolution
(Box 1). of the coffee economy in the consuming
countries (which comprise for the most
Overview of the Developments part, developed nations in the Western
Hemisphere) was not only less painful or
It has often been said, that the chaotic, but showed a positive growth
world coffee economy has evolved over pattern with a sustained improvement in
the last decade or so in a manner, which profits. This was facilitated by the
can be characterized as “erratic, emergence of a coffee culture that has

WORLD SUPPLY AND DEMAND FOR COFFEE

140
55
Supply / Demand (000 bags)

120
Stocks (000 bags)

100 45

80 35
60
25
40
15
20

0 5
1997 1998 1999 2000 2001 2002 2003 2004

World supply World demand Stocks

Source: ICO data

* former Chairperson, Coffee Board of India

1
manifested itself in new and innovative technologically advanced and cost
retail formats. Rightly has it been efficient producer who seriously
observed, “today’s international coffee threatens the future of the less efficient
culture transcends the globe, producer. In a World Bank paper on the
transforming an ancient commodity into coffee crisis, it was observed “the
a phenomenon of the consumer age” 2. history of coffee prices can be regarded
Coffee brands such as Starbucks, as a series of shocks that some times
Nescafe, and Illy have become global introduced a new paradigm shift. The
icons. current shifts are among the most
substantial ever experienced”3. The
Several studies, which have emergence of Vietnam and resurgence of
analyzed the fall in prices in major Brazil have lowered the cost structure
agricultural commodities in this period, for coffee production. Today, the
have underscored the fact that coffee has average production of the three top
shown the greatest fall. In the late 80’s producers viz., Brazil, Vietnam and
and part of the 90’s, earnings by coffee Colombia constitutes around 55%
producing countries, which in terms of (average of three years) of global
export f.o.b. were around US$ 10-12 production. The outlook for coffee in
billion, dropped to the range of around the medium term is likely to be
US$ 5-6 billion at the peak of the crisis. dominated by the biennial nature of
This was in stark contrast to the Brazil’s production that will
continued growth in value of retail sales significantly influence the annual
in consuming countries from around demand supply balance. While coffee

WORLD COFFEE PRICES

200
180
160
140
US cents/lb

120
100 ICO Composite Indicator Price
80
60
40
20
0

Month/year

Source: ICO data

US$ 30 billion in 1980 to more than US$ prices started recovering towards the end
80 billion at present. of 2004, they are likely to remain within
a range that will leave many producers
unprofitable with differentials of origin
Yet another significant feature of not being able to make up for higher
the coffee industry over the last decade production costs. In other words,
has been the emergence of a new, traditional producers, who are not cost

2
competitive and cannot differentiate, are Box 1: Small coffee holders
being subjected to a severe competitive Coffee is cultivated in about 80
squeeze and will find it difficult to return countries across Africa, Asia, Central and
to profitability. If the market South America and the Carribbean. It is
mechanisms were to take their ultimate estimated that there are 25 to 30 million
course, the outcome would be that coffee coffee farmers and nearly 70% of global
production will be concentrated among a coffee is grown in farms of less than 5 ha.
few efficient producers at the cost of loss Apart from being constrained by their weak
of jobs, livelihoods across several socio-economic conditions, small holders
developing countries and a potential loss across the globe are typified by a similar
in quality and variety that has mindset that makes them particularly
characterized the consumption of this vulnerable in a crisis situation. They are
ancient beverage. risk averse, susceptible to political
influence, generally cautious yet gullible,
have aspirations of economic well being
The challenge therefore is, how but have an enormous sense of inadequacy
to achieve an orderly market balance regarding their ability to go it alone. As
where coffee prices will guarantee a they lack the ability to combine, there is a
reasonable return not just to the efficient dependency syndrome vis-à-vis the
producer but also to the average government often resulting in
producer, bearing in mind that coffee is disproportionate expectations. They have
grown in many parts of the world, in found it most difficult to adjust to free
remote, environmentally fragile regions market conditions especially in those
where there are few alternate economic countries where they were hitherto
activities arising from constraints in protected by pooled marketing systems,
infrastructure, the perennial nature of the administered by marketing boards. In terms
coffee tree and limited diversification of risk factors affecting production, a
opportunities due to agro-climatic majority of the small growers rank order
conditions, statutory restrictions, and weather risk as most critical, followed by
market access problems. It is in this price risk and other factors.
context that the search for sustainable The livelihoods of small growers
solutions, albeit within the framework of focus mainly on survival. It is
a market economy, has occupied the characterized by fragile entitlements, self
centre stage in the current debate on the exploitation and unwaged family labor
coffee crisis. income, weak or depleted human and
natural resources with livelihoods crisis-
Concept of Sustainable Agriculture crossed by periods of off farm work and
temporary migration.
From a niche concept, Even the relatively better endowed
sustainable agriculture has entered medium growers who typically constitute
mainstream thinking and has become a the politically and socially mobile group
major issue in defining the strategies and among the rural coffee community in
goals for agricultural development. developing countries, have modest to low
levels of capitalization, and face declining
returns and increasing risks from
agricultural commodity production.

3
 A number of sustainability of sustainability relate to food safety,
concepts are in use. For the most part, biodiversity, working conditions, land
they are centered on farming practices, holdings, nature of proprietorship, etc.
use of inputs, biological control and Some of the questions that are frequently
organic farming methods. Other aspects raised on the issue of sustainability are

Box 2: How eco-friendly is coffee?

In most producing countries, coffee is cultivated under traditional farming
methods, which include (in certain areas) varying patterns of shade. As coffee bushes
are perennial in nature, there is very little soil disturbance in the form of tillage as
practiced in many field crops. Soil conservation measures like contour planting,
terracing, mulching etc. are also common features in coffee farms. Use of chemical
fertilizers and plant protection materials is generally of lower intensity in traditional
farms. It is now also recognized that coffee trees contribute positively to carbon
sequestration.
In a country like India, owing to peculiar agro-climatic conditions arising from
a wide range in temperature and lack of even distribution of rainfall through the year,
there is a compulsion to grow all coffees under shade so as to maintain the ideal
microclimate. While this has distinct advantages, it also inhibits overall productivity,
relative to coffee grown under open conditions.
With the improvement in coffee prices, specially during the decade of the
nineties, there was a trend towards greater “technification” in cultivation practices
mainly by recourse to intensive cultivation methods, increased density in planting of
bushes, and the development of “sun grown” coffee. Around the same time, thanks to
the research efforts at the Smithsonian Institute’s Migratory Bird Center, there was a
concerted attempt to raise consumer awareness about the beneficial impact of “shade
grown” coffee, mainly as being a hospitable habitat for migratory birds. Soon “shade
grown coffee” became something of a buzzword in niche coffee markets with
oversimplified conclusions on the relationship between shade and environmental
sustainability. This was notwithstanding the fact that there are several countries, in
Central and South America, where sun grown coffee co-exists with large tracts of
adjoining virgin forests, which are conducive for preserving a wide variety of flora
and fauna.
The above situation serves to illustrate the inherent complexity and
contradictions surrounding sustainability in terms of best agricultural practices. Given
the diverse production patterns and systems across the coffee growing world, it is
difficult to come to a uniform conclusion about the important elements of
sustainability. As rightly observed, “the coffee ecosystem, together with the human
socio-economics of the region and the different prices that might be put on
endangered species makes for an extremely complex situation”. Thus, sustainability
as a concept “lacks serious theoretical underpinnings…there have been no rigorous
attempts to relate human demography, climate, soils, economics, agronomy, bio-
diversity etc., to any region’s agriculture to develop rational long term goals. This is
not just a question for coffee but a reality for agriculture as a whole”4.
A further challenge to the sustainability movement in coffee is to find agreement
“upon what role coffee is expected to make to conservation and what the true costs
and benefits of this is to the farmer and civil society”5.

4
as follows: What and whom do we want spread of the new Information and
to sustain? What are the geographical Communications Technology (ICT)
dimensions of sustainability? (Box 2) which has contributed to the increase in
What are the principles of sharing of trade and investment, with the latter
costs and benefits of sustainable particularly remarkable in the form of
agriculture? What type of cross border production by multinational
ownership/institutional structures is companies and their network of affiliates
conducive for sustainable agriculture? and partners. As a result we witness
What is the role of technology and what today, “the simultaneous economic
are the key issues in the research integration of countries and
agenda? disintegration of production processes” 6.
All of these developments, as we shall
Lack of a precise definition of see have influenced the fundamentals of
sustainability is indeed a problematic the farming landscape, quite
issue. However this has not diluted its significantly.
authenticity. Moreover even if there are
differing views on sustainable goals and As a commodity, coffee has been
priorities, there is broad agreement that integrated into the global process, being
as a concept, sustainability is not only mainly an exportable product for
vital but also critical in our appraisal of virtually all producing countries.
any problem we face in the 21st century. However, the nature of this integration
Also, prioritizing the issue of economic got substantially altered with various
sustainability in agricultural production liberalization and deregulatory measures
is inescapable and inevitable, without that occurred in the early nineties,
which other aspects of sustainability, be following the dismantling of quotas.
it environmental or social, are largely This (as we now know) did not result in
unattainable or at least seriously uniformly enhancing the income earning
threatened. capacities of producers – in fact
disparities across geographic regions
Globalization and Sustainability actually widened. Studies suggest that
this phenomenon (not unique to coffee)
Adding further complexities to is attributable to the nature of
the debate on sustainable agriculture are participation in the global process or
the forces of globalization, a value chain, which is fraught with
phenomenon, which if not new, has several constraints, and not participation
however manifested itself in new forms per se. Therefore, “the key challenge
over the last few decades. Two aspects thus confronting policy design and
of the current globalization drive are implementation is not whether to take
interesting and significant. The first is, part in the global processes but how to
the global ideological shift in terms of a do so in ways which provide for
realignment of national policies towards sustainable income growth”7.
economic liberalization and the
dismantling of the state’s role in Liberalization of agriculture in
economic management and greater many developing countries, which saw
opening of the economy to international the dismantling of institutions such as
trade and investment. The second is, the marketing boards and other forms of
deregulation, also witnessed the removal

5
of quantitative restrictions in trade. The complex web of relationships thanks to
WTO agreement on agriculture is global integration, competition and
critically centered on the issue of market emergence of new technologies (ICT
access and subsidies that has caused having a significant impact). In the new
enormous distortion in agricultural trade. age, consumers are becoming better
One of the key constraints facing small informed and more demanding and to
holders in agriculture is direct access to meet this challenge companies are
markets and pricing which in turn is consolidating in pursuit of new
related, in a wider sense, to the terms of efficiencies and economies of scale.
trade between farming and the rest of the
agricultural food chain. The liberalization of agricultural
markets has been accompanied by the
An important feature of the gradual lessening of governments’
liberalization in trade, post WTO, is the involvement in agriculture, especially on
emergence of a distinct trend where the marketing side. On the other hand
international markets trends influence there has been a perceptible rise in the
price and quality standards in domestic private sector’s direct dealings with
markets. Agriculture and more so farmers. Against such a backdrop, an
agriculture which is oriented towards the important issue to be addressed is the
export sector (and this is true of coffee) apparent deficiency in terms of a well-
is required to turn out products at similar informed private sector policy and
cost and quality as those that can be regulatory mechanism that facilitates
bought in the world market. proper governance in the agribusiness
chain. To appreciate this, certain
Modern agribusiness value chains important features that characterize
agribusiness value chains need to be
Modern agriculture is being discussed as they are relevant in the
reshaped by many of the technologies context of a sustainable coffee economy
transforming other industries. It is also as well.
being subjected to unique political and
economic constraints and coffee has not
escaped this. Today, the coffee grower a. First, there is the growing
has not only to produce efficiently and importance of “ buyer-driven value
cost effectively, but he also needs to take chains” which have “sophisticated
into account environmental concerns, forms of coordination and integration
welfare of workers and health of and rules of participation”. In
consumers. vertically coordinated supply chains
which are increasingly adopting
Further, modern agribusiness, common standards, rise of contracts
which for a long time and for the most and specialized intermediaries are
part was basically an orderly chain of proving to be “powerful drivers of
companies and institutions - a spectrum divergence and marginalization
extending from supply of inputs at one within farming communities” 8. In a
end to processing and retailing at the traditional scenario, where
other with family farms central to the controlling tangible means of
system - is now transforming itself into a agricultural production such as land,

6
 water, labor etc. is a critical variable development and this is the growing
in capital accumulation, the exploitation of the potential for
superimposition of supply chain differentiation (Box 3) that has
dynamics has resulted in ownership spread to primary agricultural
and control of intangible assets – products in order to gain a
such as market literacy, brands and competitive edge, basically by
patents – providing the key to securing a release from the low
attainment of competitiveness and barriers to entry and declining terms
hence increased capital of trade that inevitably afflicts
accumulation. Governance of supply commoditised products over time.
chains which is understood as “ the
power to define who and who does c. In a globalized and buyer driven
not participate in the chain, the supply chain, management and
setting of the rules of inclusion, control of information is directly
assisting chain participants to related to industrial size and
achieve these standards, monitoring concentration. “Size confers
their performance”9 acquires distinct logistical control, reduced
characteristics in buyer driven value transaction cost, economies of scale,
chains in that it “hinges on improved market and meteorological
controlling means of co-ordination intelligence, access to and control of
rather than means of production” 8. valuable intellectual property and a
comprehensive distribution
b. This brings us to another important network”8. Size also confers

Box 3: Differentiated Coffees

It is now acknowledged that coffee as a product, offers a high degree of variety

and variation in taste depending on the area where it is grown and the manner in
which it is processed. Differentiated coffees are those coffees that can be
distinguished on account of distinct origin, specialized process or exceptional
characteristics such as superior taste or zero defects. A good part of these
differentiated coffees are those coffees that are distinct in terms of “sustainable”
attributes viz., fair-trade coffee, eco-friendly coffee, organic coffee and so on.
There are accompanying standards prescribed for each of these categories by
different bodies and established procedures for certification. These coffees,
though small in terms of volumes trade, are rewarded with a premium price and
other benefits that can help producers improve their sustainability. Of course,
these niche coffees do not necessarily guarantee sustainability though it would be
fair to say that they possess intrinsic qualities that most closely fulfill the balanced
social, environmental and economic requirements necessary for sustainability.
These coffees also constitute the fastest growing segment in the coffee market
growing at an average7%to 8% per annum. However, they account for less than
1% of global sales. With specialty coffees accounting for approximately 8% of
global sales, mainstream or commercial coffees still account for a hefty 90%.
However the propaganda value of these “niche” coffees is certainly growing.

7
 absolute cost advantage in so far as What are the implications of
providing the ability to outbid small these developments for the farming
farmers for resources/ideas, raise community and more particularly for
resources for R&D, to set predatory sustainable agricultural production? In
prices, and take up promotional the new agribusiness environment, small
campaigns. producers, through the modus operandi
of contract farming, can integrate
themselves into the global food chain.
d. While size can be achieved through Such arrangements, which are actually
acquisition, the more common being actively encouraged in developing
feature in buyer driven chains are countries, are being fuelled by new
strategic alliances between technologies and turning bulk
stakeholders in the agribusiness commodities into tailor made products.
value chains. Such alliances or But this also has other implications for
global clusters extend across national agriculturalists and key among them is
borders and have the capacity to the weakening link between farm prices
transcend national and transnational and food prices, as much of the value
regulations. Consequently, the addition does not accrue at the farm
concentration upstream and level. For instance, it is estimated that
downstream in the global agrifood 78-85% of value added in the agrifood
business has been noteworthy. In chain in the developed world, is not done
many developed countries, we have by farms8. In an analysis of inter
seen the growing power of retailers country input and output relations in the
and their increasing ability to coffee value chain, it was estimated that
influence the agribusiness chain. around 40% of the final product price (at
The industry has seen widespread supermarkets) accrues to the developing
mergers among supermarket chains, countries (based on prices prevailing in
giving them more purchasing power 1995) 9. The actual percentage of retail
and increasing their global reach. value added at the farm level was still
less.
e. Apart from growing economic power
of retailers, processing industries are As we see market access for
also rapidly concentrating their producers has less to do with efficiency
economic and market power as a in production, though this does confer
response to the rapidly consolidating cost advantage, and has more to do with
retail environment. With the the ability to exploit market advantage in
emergence of food processing, retail terms of meeting the demands for
and food service industry as key efficient logistics and compliance with
agents in the buyer driven value standards. This is where small and
chain, there is a combined pressure unorganized producers are specially a
for increasingly stringent levels of disadvantaged lot as they lack the strong
quality, compliance with standards and direct relationship with the market
and codes of conduct (including enjoyed by large or institutional
proof of sustainable agriculture producers via contracts with processors
production techniques). and large scale retailers.

8
 The price pressure inherent in a producers and particularly for the long
system as described above forces term survival of small producers, thus
farmers into unsustainable practices in undermining the sustainability of the
order to sustain family income from a coffee economy”10.
fixed land base. Overstocking, neglect
of agricultural practices which favor bio- How can better governance of
diversity or soil qualities are inevitable markets improve sustainability?
consequences of farming areas under
price pressure. What then happens when It is now increasingly clear that
requirements for standards of sustainable massive changes are taking place in the
agricultural practices are introduced into sphere of agricultural production in
the agricultural supply chain in response response to the restructuring of
to pressures wrought by NGOs and the agricultural markets and increasing
like? These translate into process importance of buyer-driven supply
standards which by their very nature are chains. The increasing involvement of
more amenable for adoption by non-agricultural stakeholders in the
producers who are more capitalized i.e. private sector, and the impact of
large or institutional growers – more so technological advances in processing
because the system is so structured by and vast improvements in logistics
processors and retailers to push all costs efficiencies, has made global sourcing an
to the producers/suppliers. If such imperative in order to stay competitive.
standards are confined to the domain of This has exacerbated the divergence
niche markets, there is perhaps less within agricultural communities creating
cause for concern. A real danger a distinct divide between the well
however rises when such standards organized and capitalized producers and
move out of niche market to the the fragmented and scattered small
mainstream market. In the absence of holders/family farms who are rendered
effective regulation mechanisms, most vulnerable economically as there
inevitably all compliance costs and risks are less resources/less opportunities
are pushed to the producers. Small available to invest in sustainable
wonder then that, there has been a rising production practices. The challenge
storm of protest by coffee producers therefore is, how to reshape public and
against the recent developments vis-à-vis private sector policies so that market
the Common Code for the Coffee liberalization, which cannot be reversed,
Community (4C). Because at the heart is made an inclusive process that
of the protest is the realization that such facilitates a closer link between the
Codes invariably favour the more producer and the ultimate value of his
organized and well capitalized producers product and does not exacerbate
to unorganized small growers who get inequalities in the rural economy.
further marginalized for want of
effective bargaining power. Recall how From the perspective of the small
at the last meeting of the International grower, and specifically the small coffee
Coffee Council in May 2005, the grower, the key issue would be how to
producers unanimously declared among create conditions that will transform the
others that “ the 4Cs project may have nature of his participation in the value
disastrous consequences for coffee chain so as to derive such economic

9
benefits that ensure a sustainable the final consumer, which increases the
production system and livelihood i.e.- market power of the roasting and
“production from farming methods that retailing companies. “The big (multi-
maintain farmers in profit and in good national) companies have become the
health with minimal damage to the governance force in most of the global
environment4” coffee chains…. defining production and
trade conditions”11. At the other end of
In coffee, we are only too aware the chain are the small holders with little
of the fact that “ the sustainability of the or no market power who sell
linkages between coffee growing in the “atomistically into commodity markets”9
developing countries and final (Box 4) and “get less than one tenth of
consumption in the developed ones has the consumer price in the chain”11.
been under considerable pressure”11.
The recent crisis has further underscored One of the oft-quoted
this. In consumer markets where non- suggestions in the context of improving
price competition is more critical as economic sustainability of small
consumers prefer buying more producers is to create capacity for
differentiated and new products, we see upgrading them to cater to the market for
more downstream value addition near differentiated coffees by producing

Box 4: How liberalization can result in decreased value add

Prior to liberalization of coffee marketing in the mid nineties, all coffee grown in
India was required by law to be channeled under a centralized pooled marketing system
operated by the state run Coffee Board. Raw coffee processed at the farm (through wet
and dry methods) was to be delivered by all growers to licensed curing works operating
under an agreement with the Board. The cured coffee (clean coffee) was sold at a
periodic auctions conducted by the Board to exporters and traders in the domestic
market. Based on the total proceeds of the season, the individual growers were paid on
the basis of a structured price differential scale (which in turn was based on well
established quality parameters).

Post liberalization, majority of the coffee growers, and especially small growers,
sell their coffees in an unprocessed form (of cherry or parchment) at the farm gate to
agents of processors / exporters. There is only one major auction centre, where the
Indian Coffee Traders’ Association, conducts weekly auctions. On an average, less than
10% of the total coffee sold is routed through the auction platform.

Clearly this demonstrates the very real difficulties experienced by small farmers
(in the absence of viable cooperative institutions) in achieving full vertical integration
for producing clean coffee owing to fragmented production and lack of economies of
scale. Value addition through production of differentiated (specialty) coffees, which
requires smaller volumes, may be an attractive alternative proposition for groups of
likeminded small growers but here too, there are constraints in terms of the stringent
quality requirements and innovative relationship marketing.

10
different varieties of coffees of enhanced opportunities, through many means, for
quality. Encourage small growers to farmers to increase their share of value
produce more specialty coffees is advice chain rents. The ICO has rightly been
we frequently hear. But the market for focusing attention on this area, urging
such coffees, even if rapidly growing, is multilateral institutions to seriously
inherently limited and esoteric. This is consider setting apart resources for
also necessary perhaps if the premiums market development in producer
are to be sustained. In fact, production countries. For small growers
and marketing of such coffees requires particularly, growth of the domestic
to be supported with sustained infusion market offers a feasible, alternative
of innovativeness and dynamism – a destination for their coffees, given the
factor that automatically raises barriers fact that the quantity and quality
to entry into this ‘niche’ market. requirements will be different.

An alternative suggestion to In this context, policies of

coffee producers is, to encourage value producer governments should desirably
addition downstream in terms of be aimed at attracting investment in
conversion to roast and ground or instant value added processing from indigenous
coffee before export. But, here again and developed markets, so as to improve
even if barriers to export of products in supply and reach exhaustively by way of
value added forms such as import innovative product development and
duties are reduced or removed, the scope different retailing formats, to cater to the
for exports of such processed coffees by various profiles of demand based on
producers are likely to be limited (in region, income etc. While generic
case of R&G specifically) due to the promotion efforts, which focus on
entrenchment of market specific blends improving knowledge and appreciation
and brands. “Blends are tailor made to of coffee, are to be encouraged these will
appeal to different tastes in the be rendered largely ineffective without
market…also important are the concomitant improvement on the supply
availability of substitutes and seasonality side.
of both supply and demand. These
factors are difficult to handle faraway Market development in producer
from the consumer”12. Besides there are countries and emerging markets thus
difficulties in preservation of quality of constitutes an important measure that
R&G coffee as opposed to the longer will encourage balance in the global
shelf life of green coffee, and the coffee market and “ensure the future of
compulsions of just-in –time deliveries coffee through prioritizing the issue of
in the highly efficient logistics that are economic sustainability”13. Another
demanded by roasters /importers world important area of reform is institutional
wide. development. The recent coffee crisis
brought to light the serious problems
This is where market with respect to institutions concerned
development in producer countries gets with research, extension and
increasingly relevant as a means of development of coffee in producer
increasing producer awareness of countries. Beset with constraints in
consumer preferences and providing terms of financial and human resources

11
which are threatening their viability and such as mid-day meals in rural schools
relevance, a serious introspection is that have the potential to raise demand
called for as to how these institutions for locally grown products. Brazil’s
can reinvent themselves to serve the initiative in encouraging consumption of
interests of small growers and develop a coffee as part of the school meal
sustainable coffee economy in the face program, citing positive health aspects,
of technological, environmental and is worth emulating by other producers.
social challenges. For one thing, these Finally, we are only beginning to
organizations need to reorient realize the commercial potential of
themselves in terms of becoming more coffee farms as “carbon sinks” under the
multi-disciplinary in nature, and Clean Development Mechanism (CDM)
facilitate, through innovative policies of the Kyoto Protocol. The ICO in
and programs, a more structured partnership with multilateral financial
participation of farming communities in institutions and the private sector could
research and developmental activities so well consider a major multi-country
as to develop a new agricultural initiative to explore how Certified
professionalism. Above all, the mindset Emission Reduction (CERs) can be
of the smallholder will need to be earned for viable CDM projects on
transformed from that of a traditional coffee based cropping systems through a
agriculturist to that of a modern range of pilot projects that are targeted at
entrepreneur and this is requires a improving the sustainability of small
wholly new and effective growers.
communication initiative. To meet the
increasingly complex quality and food There are some other important
safety standards, new resources to train initiatives aimed at empowerment of
and equip small growers, need to be small holders and improving
identified and supported. Spread of governance, in the interest of equitable
market literacy through widespread and and sustainable development, which
effective channels will go a long way in need to be mentioned. First and perhaps
overcoming information asymmetries critical would be the need for
that disadvantage small growers strengthening the organization of small
particularly in remote areas. growers. Developing organizational
Participatory research needs to be capacity among small growers via self-
encouraged as an important means of help groups, farmer associations or
building local skills, interests and cooperatives, can facilitate new
capacities. synergies for product improvement and
development and effective bargaining
Participatory research also power, as also better access to credit and
becomes a catalyst to promote viable hedging mechanisms to lower risks.
integrated farming systems by Government, apart from providing
encouraging a diversified range of financial and technical support through
remunerative activities at the farm level appropriate legal and administrative
to supplement the incomes of small frameworks can create platforms which
growers, specially in periods of low accord special status to such groups. To
prices. Such initiatives can get further this end the initiative to create a
strengthened by government programs structured Sustainable Coffee

12
Partnership (SCP) as an alternative NOTES
platform of all stakeholders from the
coffee industry is to be encouraged, at 1. Nestor Osorio, Executive Director,
international, national and local levels, International Coffee Organization –
so as to harness effectively the potential “Lessons from the World Coffee
from different groups to facilitate a crisis: A serious problem for
meaningful dialogue and provide inputs sustainable development –
for policy making. To the extent that it Submission to UNCTAD XI Sao
is widely recognized that “a sustainable Paulo, Brazil, June 2004.
solution for imbalances between raw
material and final consumption”11 cannot 2. The Nestle coffee report – “Faces of
be reached by interventions in individual Coffee”, 2004.
segments of the coffee value chain, and
that “ a coordinated effort along the 3. Bryan Lewin, Daniele Giovannucci,
whole chain should be developed with Panayotis Varangis, “Coffee Markets
the involvement of leading coffee – New Paradigms in Global Supply
companies” 11, the SCP could become an and Demand”, The World Bank-
important platform for facilitating such Working paper, March 2004
coordinated efforts aimed at increasing
“systemic efficiency” 7 in the value 4. G. Cadena, PS Baker, “Sustainable
chain. It could also be a useful forum Coffee” in ‘Coffee Futures – A
where standards for production and source Book of some critical issues
codes of conduct can be widely confronting the Coffee Industry’,
discussed and developed in consultation Edited by Dr. P.S. Baker, 2001.
with producers, taking into account local
realities. 5. Dr. Peter Baker, CABI Bio-Science,
UK, “Sustainable Coffee – the Three
Other instruments to regulate the Pillars of Wisdom”, International
global agribusiness market environment Coffee Forum, 2004.
would be the development of a strong
competition policy that will safeguard 6. A. Wood, “Value Chains: an
against collusions and concentrations of Economist’s Perspective” in Institute
economic power as well as regulate the of Development Studies, 1999.
distribution of profit across the
agricultural value chain. Developing 7. Raphael Kapilinsky, “Spreading the
civil society scrutiny is another pillar of Gains from Globalization: What can
governance in that it raises public be learned from Value Chain
expectations about support for Analysis” IDS working paper
sustainable farming practices and equity 110,2000
issues in sharing cost of compliance of
best practices. 8. Bill Vorley “The Chains of
Agriculture: Sustainability and the
_____________ Restructuring of Agri Food Markets”
in International Institute for
Environment & Development
(IIED), 2001.

13
9. R. Kapilinsky and R. Fitter, “Who 11. Wim Pelupessey, “Market Failures
gains from product rents as the in Global Coffee Chains”
Coffee Market becomes more Development Research Institute
differentiated? A Value chain (IVO) Tilberg University, The
analysis”, IDS Bulletin Paper, May Netherlands, 2001.
2001.
12.Martin Scholer, “Bitter or Better
Future for Coffee Producers?”,
International Trade Forum, Issue
10. International Coffee Organization – 2/2004.
Document No. ICC 93-7,
Declaration of ICO producing 13. International Coffee Organization –
countries on the Common Code for Background information for 2nd
the Coffee Community (May 2005). World Coffee Conference,
September 2005.

_______________________

14