Socioeconomic Effects of Coffee Trade on the Ethiopian Farmer

Topics: Coffee, Fair trade, Ethiopia Pages: 5 (1541 words) Published: October 7, 2012
Socioeconomic effects on farmers in a volatile Ethiopian coffee market and the promise of the Fair Trade movement

Coffee and Ethiopia have shared a lengthy and highly tumultuous relationship. According to some, their history dates back to the fifteenth century, but it is widely acknowledged that extensive trade didn’t begin until the late eighteenth century (Aregay 1988, 19). As world coffee consumption skyrocketed in the nineteenth and twentieth centuries, Ethiopia’s economy grew increasingly dependent on the industry. By the mid 1970’s, it’s estimated that coffee accounted for a staggering 55% of all Ethiopian exports. This figure has since declined, and today it’s estimated to be somewhere around 35% (Daviron, Ponte 2005, 61-62). The steady decline in production from the 1970’s to today has been attributed mainly to increased coffee production elsewhere, notably Brazil and Vietnam. These nations have developed massive coffee industries and are recognized as fierce competitors to African nations. Though today’s market is highly saturated thanks to globalization, world coffee prices are still rising. Why is it that an increase in availability leads to an increase in cost? Daviron and Ponte, authors of The Coffee Paradox, suggest “the growing gap between the price of the raw material and the final product is the result of oligopolistic rents captured by an increasingly concentrated roasting industry” (Daviron, Ponte 2005, 3-4). Ethiopia has suffered greatly as a result of these systematic transformations; the average Ethiopian coffee farmer makes merely 2-3% of his coffee’s retail price. Due to volatility in world coffee trade, stemming from overproduction and the excessive profits of roasters, today’s coffee farmer in Ethiopia faces tremendous socioeconomic strain. To combat this strain we must look to fair trade, the logical and ethical solution.

It’s important to examine the history of Ethiopian coffee to best understand its status today. A notably disastrous blow to the worldwide coffee market happened in 1989 with the collapse of the International Coffee Agreement (ICA). The ICA, initiated in 1962, served as a regulatory effort to keep consumers and producers at set levels of supply. They set high benchmarks for coffee prices and were responsible for regulating the exports of producers. The ICA was successful in keeping coffee prices at relatively high and stable levels for over twenty-five years, but the 1989 council failed to reach an agreement due to violations by countries outside the agreement and “the rigidity of ICA quotas” (Daviron, Ponte 2005, 87-88). The deregulated, post-ICA coffee markets quickly grew to be dominated by bigger, more economically stable nations, particularly Brazil and Vietnam. While Brazil had always been a prominent player in the coffee industry, Vietnam was entirely new to it. The Asian country, after a period of heavy economic liberalization, planted over a million hectares of coffee in the 1990’s (Shively, Ha 2008). Ethiopia, while still a major producer, began to suffer heavily from decreased regulations and falling coffee prices in the 1990’s. This brings us to Ethiopia today, where the average coffee farmer makes just around $1.25/day.

“There is clearly an intangible value in the specialty coffee of Ethiopia, but it’s not being captured here,” says Ethiopian government official Getachew Mengistie (Faris 2007, 3). This quote provides a succinct explanation of the main paradox in Ethiopian coffee trade: in comparison to the market price that consumers pay, farmers are profiting at appallingly low rates. It’s been estimated by Landell Mills Consultans that some farmers make back only 60% of production costs (Gresser, Tickell 2002, 9). Case studies done by Oxfam, like the following, are testaments to the injustice. “Mohammed Ali Indris, an Ethiopian coffee farmer from Kafa province interviewed by Oxfam in March of 2002, gave a graphic sense of how the rice collapse has affected...
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