wonkiness: are we hurting or helping farmers?

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Re: wonkiness: are we hurting or helping farmers?

Postby bz on Wed Nov 19, 2008 7:31 am

the interconnectedness is part of my point here, and a valuable reminder. this is why i've tried to include so many perspectives in my thinking and recap of the conference. it may get a bit confusing, but it's important to maintain the margins.

the question i was asking was, (a) if specialty is truly it's own sector to the degree that it's invulnerable to sustainability problems of the market at large -- it's clearly not -- and (b) if it should and can do anything about the inequities in the non-specialty realm. if it should examine its model for perhaps unintentional contributions to the problems of vast swaths of producers.

peter refers to the broader market as an "organism," a not unapt metaphor.

And organisms have a way of adapting and transforming to their environment. Sometimes that transformation is easy, sometimes it is painful, but it is never predictable or simple.

however, this was also the view of free marketers such as greenspan with regard to hedge funds and mortgage-backed securities. it implies that the market will vet itself, and that we needn't worry too much about it. what we're all learning right now is that (a) when people don't understand the interconnectivity of the market and (b) when the market leans heavily on popularized -- but ultimately unsustainable -- securities at its foundation, then (c) disaster of the largest magnitude can ensue, and it drags down parts of the economy no one had anticipated.

this is causing the most die-hard free marketers (bush, paulson) to become incredible interventionists. the consequences are that dire. i'm not saying the entire analogy holds up to coffee, but what i'm hearing here is that no one understands the complexity of the market; that non-specialty trade arrangements are, by and large, unsustainable; that we intend to let the market fix itself; and that specialty is, in fact, economically connected to this entire system. isn't this somewhat scary?

Direct Trade is not the answer, it's really not anything at all, yet. It's a set of principles, sometimes loose depending on the practitioner, which a handful of companies are using. While the C market is influential, a surprisingly small amount of coffee is actually traded there. To say that "Direct Trade hurts the farmer more than the C system does" assumes that both systems are more monolithic than they actually are, and can be evaluated as discrete entities. They cannot, really.

i appreciate this frank assessment. it's helpful toward the point, actually. this isn't about us vs. them, or DT versus non. it's about the role we as a loose group play, and wether it can and should take into account the broader market's economic sustainability.

From where I sit, the macroeconomics look like this: consumption of coffee is increasing everywhere in the world, including new markets in developing countries. Meanwhile, land use pressure and climate change are putting the damper on supply. The world is losing its taste for instant robusta, and becoming habituated to milky arabica-based beverages which are more expensive but drunk in smaller quantities. All this spells pretty good news for arabica producers in Burundi, Guatemala and Indonesia, if you ask me.

and yet, farmers are going out of business in large numbers there, according to numerous on-the-ground reports at the conference. one area where economists have enormous cred is in extrapolating trends already begun, and they're talking now about the large-scale elimination of coffee production because farmers are at their breaking point.

this sounds like a major tightening of supply. you've said, peter, that supply is a concern of yours. if that's so, then we could be looking at three factors keeping long-term coffee consumption from what it could be in the u.s.: tighter supply, a slow economy and a simultaneous trend toward higher retail prices.

correa do lago's argument (i don't think i fully buy it) was simply that specialty coffee could help itself AND farmers (the first and third of those factors) by keeping retail prices down, boosting demand and sustaining more farmers.

we've hashed out the various flaws in this argument above. but i have yet to hear a lucid alternate view of how broad sustainability can be achieved.
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