Coffee supply chain is failing farmers in value distribution: IDH

GLOBAL – A new study into the coffee value chain has found out that knowledge gap exists on how value is distributed in the supply chain and how much of it reaches coffee growers.

The study, conducted by Global Coffee Platform (GCP), IDH and Solidaridad commissioned BASIC (Bureau d’Analyse Sociétale d’Intérêt Collectif), further reveals that there are inequalities in the coffee supply chain, with an important number of coffee farmers having limited insights, opportunities and control over the final form and destination of the coffee they produce/export.

This puts most farmers in a disadvantaged bargaining position when it comes to getting value for their coffee. The disconnect between end-product and farm production leaves farmers with limited, if any, points of leverage to capture a share of the end-product.

Considering that many coffee farmers are smallholders, labour is the largest share of farm costs, but is often unpaid and unaccounted for, meaning farmers’ net incomes can seem higher than they are.

In addition, rising costs of labour and inputs have hit the most vulnerable coffee producers hard, having farmers in a disadvantaged position is a long-term risk for the sector.

The complexity of the coffee market and price volatility also brings risks for all stakeholders in the supply chain. However, risk mitigation has led to a concentration of value away from producers, in the hands of coffee buyers and brands.

“The long-term impact of underpaying smallholder and family farmers ultimately affects the whole industry, and it will take an economic perspective to systemically and sustainably address this issue,” the report concludes.

“The coffee industry is so diverse and complex that there is no quick fix. Trading conditions need to account for this complexity…”

With over 2.25 billion cups of coffee consumed globally every day, the international coffee market generates substantial and growing value.

Even as farmers get the minimal profit in the value chain, coffee farmers connected to certified supply chains generate a higher net income than those connected to noncertified supply chains.

Going by these statistics, the publication, dubbed “THE GROUNDS FOR SHARING” recommends the value chain should enhance farmer prosperity through joint sourcing practices and mechanisms for value redistribution.

This includes the sector engagement to develop sourcing principles that enable value redistribution in the supply chain and enhance farmer prosperity.

The report commented that the goal of this cooperation was to convene a sector commitment around industry preferred mechanisms to distribute value.