Issue No. 42

Jeffrey D. Sachs proposes to create a World Coffee Fund to finance sustainability of farmers

August, 2019

Analysis

Jeffrey D. Sachs proposes to create a World Coffee Fund to finance sustainability of farmers

• At the opening of the Second World Coffee Producers Forum. Current and foreseeable conditions of the industry, including the low price crisis, require a joint effort from the main industry players, in coordination with governments, to invest in sustainability of producers.
• During his speech Professor Sachs said he is concerned about concentration of coffee production in two countries (Brazil and Vietnam), something he described as very bad for the entire chain.


At the opening of the Second World Coffee Producers Forum, attended by more than 1500 coffee producers from all continents, the keynote speaker, Professor Jeffrey D. Sachs, proposed today the creation of a World Coffee Fund to co-finance sustainability of coffee growers.

This fund, which would be worth USD 10 billion a year, would initially be fed with USD 2.5 billion from the industry, to which public and private contributions worth another USD 2.5 billion for direct investments in farms, budget disbursements of the same amount and donor contributions would be added.

Otherwise, it is difficult for many producers to subsist in the absence of support to reinvest in technology and productivity, which would lead to abandonment of more and more farms, as already seen in Central America with migrants, and would jeopardize the global coffee supply.

By presenting results of the study “Economic and policy analysis for improving smallholder coffee producers’ incomes,” carried out for 15 months, Sachs explained that Brazil and Vietnam, as producers of 50% of coffee in the world (having made important investments in mechanization and productivity), have a great weight in determination of international prices; since 1995 they account for 83% of increase in world production.

For this reason, if the Brazilian real appreciates, the international coffee price rises, while if real devaluates, the coffee price falls, and at current levels prices are only viable for mechanized producers, not for traditional ones.

In addition, other producing countries, such as those of mountain mild washed coffees, face limitations, including lack of investment in science and technology, to widen their coffee agricultural frontier or mechanize harvesting, which puts them at a disadvantage in the industry. In this regard, despite limitations, Colombia has been an example, Sachs recognized.

On the other hand, rising temperatures due to climate change would lead to lower yields in countries and regions such as Colombia, India, Malaysia and Central America, increasing not only deforestation, poverty and inequality risks, but world supply co-dependence on Vietnam and Brazil.

All this requires a joint effort from the main industry players, in coordination with governments, to invest in sustainability of the coffee sector, which, if successful, would become an example for the entire world.

A total 25 million families are devoted to coffee farming in the world.

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