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Coffee Crisis Essay

1301 words - 6 pages

Back in 2004, there was a significant decline in the price of coffee. This called for the gathering of the coffee producing nations to get together to determine their best course of action on how to handle this decline. A 40 year low hit the coffee industry in 2001 and continued to remain low since. That resulted in hardships for the farmers and their families, as most children were pulled from school so that they could help on the family farm. Some of the countries that were hit extremely hard created financial programs to help their farmers. Most coffee producing countries are not rich, as a result the financial programs were not able to be sustained for long.
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As what normally happens, the producing countries overreacted to the slow growth and they started producing rapidly. The International Coffee Agreement (ICA) was renegotiated every five years by member countries. In 1989, the ICA collapsed when it was not renewed. In part this was due to a lack of support by the U.S., which had a great deal of power as the largest importing member nation. The U.S. had less political motivation to help major producing nations. Further, the Reagan administration was strongly free market and opposed the ICA on those grounds. These factors played a key role in the demise of the ICA. The International Coffee Organization (ICO); ) started in 1962, exists to implement the International Coffee Agreement, one of whose objectives is to encourage its Members to develop a sustainable coffee economy. The ICO recognizes that sustainable development has an economic and social as well as environmental dimension.
The two countries that expanded their production in the 1990’s was Brazil and Vietnam. Brazil had always been the world’s largest coffee producer, growing arabica in traditional labor methods in the frost-prone portion of the country. In the 1990s responding to the frosts, Brazilian entrepreneurs started in the development of a large scale coffee plantation in areas closer to the equator. Normally, arabica beans are grown on steep slopes; slopes that are often times too steep for a donkey to cultivate or provide transportation. The Brazilians started to find areas that were relatively level and they were able to use mechanical devices to help harvest the product as well as cutting devices. Vietnam, prior to this had not been a larger coffee exporter, but production took off after it privatized the agricultural sector in the 1990s. The government encouraging production of coffee by building new irrigation systems and providing the farmers with assistance. The terrain of Vietnam is more suited for robusta than the arabica beans and most farms were small and still maintained by hand. By decades end, Vietnam had become the world’s largest robusta producer. At the same time, rapid growth in the economy was increasing local incomes and wages.
The major five coffee roasters, Philip Morris, Nestle, Sara Lee, Proctor and Gamble, and Tchibo accounted for 69% of the roasting and instant coffee manufacturing capacity. After the frost in Brazil in 1997, the prices of arabica rose, it stimulated the roasters to be creative and experiment with new processes. Their goal was to mask the robusta beans because they are bitter and considered low-quality, robusta has historically only been used as filler in blends or in cheap coffee. Now methods have been developed by the large coffee corporations to process green robusta beans to make them more palatable. These companies now use a much higher percentage of robusta in their...

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