The Great Divide and the Coffee Industry


This is a paper I wrote for my Ethnobotony class in college. The paper was basically a report on “Black Gold”: A Documentary on the Economic Gap Between Ethiopian Co-ops, Coffee Farmers and Large-Scale Multinationals. Most of the research was strictly from the movie (that was the prompt, although a decent amount of it came from other sources because, well, I can’t help myself) Admittedly, I wrote this a while ago…but I felt like posting it anyway because it’s an important aspect of our commercial lives that our society likes to shut out. If you haven’t watched “Black Gold” yet, I sincerely recommend it. You’ll never look at western consumerism the same again.

The American dream has expanded. In addition to the white picket fence, two cars in every driveway, and a 401k in every retirement plan, we have now added to the mix. A part of the ideal existence is the obsessive infatuation with personalizing everything. We personalize the colors of our laptops and ultra thin cameras. We personalize our cars, our cell phones, and our décor. Now, with the advent of having a Starbucks “on every corner,” the personalized latte has taken hold in our society. We spend our lives rushing around at the crack of dawn in order to get to the first café where we can personalize our cup of one of the last legal drugs. In cities like New York, Seattle and London, people have developed an addiction to coffee. According to an Italian barista, “Coffee is the first thing for Italians in the morning—without it we are all miserable”

In fact, aside from petroleum, coffee is the most heavily traded commodity in the world. But, while sipping our frozen coffees while we read the latest issue of some innocuous magazine, the origins of that beverage are often far from our minds. We know that we’re paying between $3 and $5 to add whipped cream and substitute soymilk, so we assume that the coffee market is doing just fine. And it is. Last year, the global market (including all of the middlemen involved in getting that coffee into your Styrofoam cup) reached an unprecedented $140 billion. This does not, however, mean that the market is a fair one.

The International Coffee Agreement (ICA) was a Cold War mechanism designed to maintain stable coffee prices. The idea was to avoid social turmoil that many feared communists might exploit. The Agreement worked between 1975 and 1989. Even though prices still fluctuated, they never fell below the minimum price established by the ICA ($1.20/pound).[1]  At the end of the Cold War, the US abandoned the ICA.[2] This sparked the Agreement’s collapse and, as a result, coffee prices fell drastically. During most of the nineties, coffee prices remained low—usually below the cost of production—and in the last ten years, the price has hit an all-time low.

If you look at the facts, demonstrated in the Sundance Film Documentary, Black Gold, we can see that the cause for this is not a lack of demand. The year after the ICA collapsed; coffee was a $30 billion market. Since then, it has soared up past $80 billion. Globally, an estimated more than 2 million cups of coffee are drank a day. However, the individual co-operatives are not given accurate, up-to-date information on prices, and so they are being taken advantage of.

This is a significant problem for coffee co-operatives and their respective farmers in Ethiopia, which is Africa’s number one producer of coffee. 67% of Ethiopia’s gross domestic product is centered around the coffee industry, so when prices are low, they affect every aspect of the country’s economic infrastructure.

Tadesse Meskela manages the Oromia Coffee Farmers Co-operative Union, representing over 74,000 coffee farmers. Tadesse’s farmers union buys coffee from 101 individual co-operatives spread across southern Ethiopia. According to Meskela, for every Kilo of coffee harvested, bagged and shipped, approximately 80 cups of coffee are brewed. A cup of coffee in the western world costs approximately $2.90. If you multiply that by the 80 cups of coffee each Kilo produces, the amount the multinationals are making off of each Kilo is approximately $232.

When Meskela took the camera crew of Black Gold into the Kilenso Mokonisa co-operative, the difference between today’s market and the farmers’ understanding of that market was made glaringly apparent. He asked how much they thought a cup of coffee costs in the Western World. None of the farmers had any idea what the going price for their product was. Where they live, in Hagere Maram, the price for a cup of coffee is one birr, which translates to $0.12. When told that, in western societies, coffee goes for 25 birr, they were enraged because, for every Kilo of coffee they sell, they are receiving 2 birr while the corporations are turning around and selling that same amount of coffee for 2,000 birr.  It is the private traders who have gotten fat, leaving hard working, impoverished farmers with nothing.  “Our problem is when our coffee ripens and is ready for sale, a man comes to our farm and says to us, ‘I will take your coffee and pay you 0.75 birr ($0.08) for a kilo.’ There’s no negotiation, one person decides to buy our coffee at 0.75 birr ($0.08). We have no up-to-date price information, and one person controls the market. When our coffee is ready, please take it at the right market price.”

The market is controlled by four multinationals: Nestle, Procter and Gamble, Sara Lee, and Kraft Foods. They keep offices in Addis Ababa, where Ethiopia’s Government Coffee Auction takes place. There, coffee collectors and coffee exporters bid on coffee. Their prices are based off of the international coffee price—established at a centralized market in New York City and London. If the price is down by five cents in NYC and London, then those bidding on the coffee will buy it for five cents less in Ethiopia. While this may sound appropriate on the surface, it is important to acknowledge the enormous discrepancy between what those multinationals are making versus what the Co-operatives are making and—even further—what the farmers that are members of said co-ops are making. “It is said ‘coffee is gold,’ and on the radio, they’re always talking about coffee, coffee…we listen to it, but gain nothing,” says one of the farmers from the Kilenso Mokonisa co-operative.

The prices are affecting all of the people in the coffee industry. In the farmers’ corner of the market, things are, by all stretches, difficult. It takes 4 years for coffee trees to grow to their full size and an extra year on top of that before they are able to produce proper beans. They toil all day in the dirt without shoes because their side of the market is down.

After the coffee has been harvested, it goes to sweatshops to be sorted. A cup of coffee usually consists of approximately 50 beans. Every bean must be perfect because if it isn’t, it’ll throw off the aroma and flavor, thus decreasing the blend’s quality. In order to ensure that the quality of each shipment is kept up to par, every single bean must be examined by hand and sorted at the Coffee Export Processing Center in Addis Ababa. Women perform this task for 4 birr (less than $0.50) a day even though they are working full 8-hour shifts.

On top of that, overall employment is down. If the prices were even a little higher, all of the machinists could be full engaged at the co-operatives’ processing plant. The prices, however, are too low and so there aren’t a lot of people working at the plants.

Burte Arba, a coffee farmer from Yirgacheffe, says that, “since the price of coffee has fallen drastically, I have not been getting a fair reward for my years of work. We would soar high above the sky if we got 5 birr ($0.57) for a kilo of coffee. Forget 20 or 10 birr. I say 5 birr would change our lives beyond recognition.”

Alemayhu Abrahim, an Ethiopian school principal, agrees. “The economy of the community is based on coffee production—nothing else. Since the fall of the coffee price, people are not able to survive and the community as a whole does not have any money to help with the development of the school. For as long as the coffee price goes up and down, the school will continue to be affected in very many ways. We can’t even afford to buy blackboards and I doubt if we can pay the salary of our teachers in the near future.”

Once the coffee is bought from the Government Coffee Auction, the coffee buyers upload the coffee from the warehouse. They process it and sell it to their buyers abroad. From there, the buyer distributes the coffee to roasters. The roasters roast the coffee and sell it to the retailers and cafés. By the time the coffee reaches the consumer, it has been through six different links of a middlemen-infested chain. Meskela wants to eliminate 60% of the middlemen that stand in the way of allowing farmers to benefit fairly from their hard work. “Our main aim is to bring more money into the coffee growers pocket…to improve the farmers’ life… I don’t mean ‘better life’ as in having a car, having electricity or a motorbike…at least to feed his family with nutritious food, to have clean water and to have clean clothes, and send his children to school.” Meskela’s union is “ready to look for a better market…to sell the coffee for a better price and return to you [the farmers] the profit.” In return, Meskela is asking the farmers to make sure the coffee is washed properly for their co-operative. They all applauded in response.


One response »

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