Coffee in Colombia: A Case Study on the Colombian Coffee Industry

It seems anywhere you go in a city in the United States nowadays there is one thing for certain, you will most likely find a café. Take for example here in Ann Arbor, Michigan, where it seems I’m not able to walk around for ten minutes without seeing Starbucks upon Starbucks upon Starbucks. Each of these filled with college students, people on their way to work, friends catching up, etc. A nice cup of coffee gives us that boost in the morning after a long night, say after writing a long paper, and it gives us the energy to tackle a long day of work ahead. No matter the reason, one thing seems certain, many of us search for a nice cup of coffee. However, most people are not aware of the story behind a cup of coffee.

Coffee, after oil, is the second largest traded commodity in the world. The coffee trade constitutes $100 billion in the global trade system (Lennart Schüβler 2009). Coffee is produced in roughly 55 countries but is concentrated around three main players: Brazil, Vietnam, and Colombia (Gonzalez-Perez et al. 2012). For the purposes of this analysis on coffee, I shall be focusing on Colombia as the representative for the coffee industry and its effects on environmental, sociopolitical, and economic issues in the country. To understand the impact the coffee industry has had on Colombia, it is necessary to go back to its origins as an important export product way back in the early 20th century.

Before the beginning of the 20th century, primarily before the Thousand Years War (1899-1902), Colombia’s coffee industry revolved around big plantations settled in Eastern Colombia. After the war, Colombia’s coffee industry shifted to small farmers (<5 hectares per farmer) (Cerquera Losada et al. 2014). Nowadays, the Colombian coffee industry is populated by about 553,000 growers, of which 95% are small-scale farmers (Ibanez et al. 2015). Although 95% of growers are small-scale, they account for 69% of the total coffee production in the country. This means Colombia is now a mix of some large-scale coffee plantations and a multitude of small farmers. Whether small or large, all of these growers have one thing in common and that is that they represent a very important industry to Colombia’s economy. The Colombian coffee industry represents almost $2 billion in exports for Colombia, comprising 16% of its GDP (FAO 2015, Andrade et al. 2013). Now, up until 1989, coffee, from both Colombia and the rest of the world, was traded on a regulated global market governed by what used to be known as the International Coffee Agreement (ICA). The ICA had the purpose of maintaining export quotas in order to maintain coffee prices stable and high thus benefiting both producing and consuming countries. However, this all came down when the agreement failed to be renewed in 1989 and the free-market trade ideology came roaring into Colombia and the rest of the world.

After the fall of the ICA, many countries, including Colombia, surrendered their ability to regulate the coffee trade as they had once done under the ICA. As a result, Latin American coffee agencies, such as the National Federation of Coffee Growers of Colombia (FNC), that worked to regulate, finance, and market coffee production were weakened by pressures of the free market. At the same time, multinational corporations, like Nestlé, began to stockpile large coffee reserves in order to strengthen their influence over the international coffee industry. As a result of these pressures, the price of coffee dropped dramatically after 1989 eventually reaching a historic low in 2004. Once the multinational corporations had taken over as the main influence over the coffee industry and regulations by coffee agencies were eliminated, the crisis of overproduction struck.

The Green Revolution brought with it the use of chemical fertilizers, pesticides, and mechanized production processes that were adopted all over the world, especially in Brazil, Colombia, and Costa Rica. Along with these new processes, a new variety of coffee was introduced, sun-grown coffee, which had the capacity to grow in reduced or non-shade environments and allowed for increased overproduction. With the fall of the ICA and the introduction of industrial agriculture methods in the coffee industry, the profitability and global price of coffee began to fall causing big coffee plantations to quit the industry. As a result, Colombia’s coffee industry was soon dominated by small coffee farmers which accounted for 95% (Ibanez et al. 2015) of the total number of growers.

These small-scale farmers joined the coffee industry since there are not a great many other options any of them had to support themselves and their families. As a result, they were left to the mercy of the multinationals that controlled the coffee industry and the middlemen involved with them. Here we see how the major players come to play in a bottleneck fashion where 553,000 coffee growers in Colombia are at the mercy of multinationals, such as Nestle, who control the production, price, and quality of the coffee focusing on providing a commodity for millions of consumers around the world. As a result, the Colombian coffee industry is now flooded with small farmers struggling to make a living off an overproduced commodity at the mercy of multinational corporations. This overproduction then leads to the diverse environmental issues that Colombia experiences today which will be the focus of the paper.

Before the boom of overproduction habits, coffee was traditionally grown under some form of shade and, in the most traditional case, under a diverse canopy of forest trees. With the pressure to overproduce from multinationals and the surge of sun-grown coffee, shade tree richness and diversity on coffee plantations have dropped and an intensification of the coffee growing process has been common. With the surge of sun-grown coffee, which is able to produce higher yields of coffee, there was an accompaniment of increased use of agrochemicals in the form of pesticides, fungicides, and fertilizers (Jha et al. 2014). The increased use of agrochemicals presented a very strong degradation of ecosystems in Colombian rainforests. Since the growers are pressured into extracting the best yields from their coffee farms, Colombia now has about 70% of its coffee harvest areas under low or no shade systems (Jha et al. 2014). The continued elimination of shade-grown coffee systems in Colombia presents a bevy of conservation and ecosystem issues including deforestation, loss of biodiversity, water pollution, soil erosion, and the increased use of chemicals.

Shade coffee systems are valued immensely for the variety of ecosystem services they provide such as pest control, erosion control, water management, nutrient cycling, and carbon sequestration. These ecosystem services are directly related to the levels of biodiversity present (Jha et al. 2014) in the system and as biodiversity goes down the level of effectiveness of these services follows suit. Now, one may ask himself or herself why we cannot just switch to just shade production of coffee since there is already an overproduction of coffee? Well, it’s not as simple as that. Sun-grown coffee is not grown by small farmers out of choice. If farmers had the choice of the type of coffee they could produce, they would most likely opt for shade systems since they know that it is more beneficial for their farms and the environment which they cherish. However, the issue of overproduction and the pressure to grow more environmentally damaging varieties of coffee rebounds to the influence multinational corporations have over the coffee market.

Even though coffee prices have dropped and stagnated over the last couple of decades and workers only receive a minuscule fraction of the total price a cup of coffee sells for, overproduction still reigns supreme. Why? Ever since the end of the ICA, the control over the coffee market has been consolidated into a few global corporations (Starbucks, Kraft, Proctor & Gamble, and Nestlé). As a result, the coffee industry has turned into an oligopsony in which these few corporations are the only buyers for the product and if the growers don’t meet their demands they might leave and take their business elsewhere. The demand for overproduction assures the coffee buyers of reduced prices and increased profits of the commodity. Since there are no contracts these companies make with neither the growers nor the cooperatives these workers belong to they do not have any legal obligations to assure a minimum wage or stable living conditions. So why not leave the coffee industry and find another way to make a living? Well, for many in Colombia, coffee represents more than their next paycheck.

In Colombia, coffee is more than just a trade good and a form to make a living, it is a symbol of their culture. Colombia is a country redeemed for the quality of their coffee and is an important part of their cultural and social history. Even their national soccer team, nicknamed Los Cafeteros, speaks to the cultural ties they have with coffee. However, it is not just the cultural tie Colombians have to coffee that does not allow them to pursue another life. Simply put, it is because they have no other choice. As much as consumers value coffee in their everyday life, Colombian coffee growers value it as their only legal form of survival. Some coffee growers even leave the crop in favor of producing the coca plant which is used for cocaine (Rice 2003). Even though it is a big risk to transition to the drug industry some families have had no other choice.

So, what? Do the corporations just get to rule over coffee growers in Colombia with an iron fist and we’re supposed to sit here and watch? Even though that is how the narrative seems to be going, the answer is no. In Colombia, coffee has been reduced to a smaller portion of the national GDP and, as a result, the national government has left the problem-solving of the coffee crisis to non-governmental agencies (NGO’s). NGO’s work on a variety of ways to improve the situation of coffee growers and fair-trade systems for them. The most prominent NGO in the coffee industry in Colombia, and frankly the world, is the National Federation of Coffee Growers of Colombia (FNC). Founded in 1927, their main purpose is to promote the coffee growing business and be the national voice for coffee growers in the eyes of the national government and the multinational corporations. It is seen highly as the NGO for the people by the people. The FNC works closely with the coffee growers to assure a good exchange value for their product and provide them with fair compensation for their coffee beans. The FNC is actually an exporter of coffee, exporting 30% of Colombian coffee (Andrade et al. 2013), whose product competes against that of the multinationals. In contrast to the business model of multinationals, the FNC focuses on promoting Colombian coffee as the premier coffee product and works to assure the majority of the value gained from these exports goes towards the growers. In order to do this, the FNC has a particular marketing campaign based on a character known as Juan Valdez. Through this form of marketing, they help to distinguish pure Colombian coffee in the market to ensure more income for the coffee farmers.

Other NGO’s also work to promote the growth and resurgence of shade coffee systems and eliminate the environmental degradation that comes with sun-grown coffee. One of the most prominent is the Rainforest Alliance and the Smithsonian’s Bird Friendly Coffee. Both of these NGO’s work to certify shade-grown coffee all throughout Latin America and promote eco-friendly growing systems. However, these certifications do come with differences. The Rainforest Alliance is less stringent and requires less in order to certify a coffee farm as shade coffee. While they do cover a broader spectrum of environmental concerns, they work to be equally broad in certifications requiring less shade than the Smithsonian’s program and gearing its certification more towards large farms. The Smithsonian, on the other hand, works to promote shade certification in farms which had already had a good diversity of trees surrounding the farm. They work more to preserve the biodiversity of coffee farms which in turn helps to preserve the ecosystem services that come with increased biodiversity.

Overall, what all these NGO’s have in common is education. FNC, an NGO working towards bettering social and economic conditions for coffee growers, and the Rainforest Alliance and Smithsonian, NGO’s working to eliminate the environmental issues that have come with the intensification of the coffee industry, both work towards educating consumers on the issues and promoting their coffee as the better options. Thankfully, consumers nowadays actually have a growing interest in where their cup of coffee comes from. They want a story behind the cup of coffee in front of them and NGO’s such as this help to expose them to these stories. Their main idea is to transform the black beverage you see in a cup to a social relationship between consumer and producer. A relationship that understands the workings of the industry and helps to promote a better system for the product. As consumers, they are able to control how the market works by setting the trends that multinationals will try to appeal to in order to gain a profit. If more and more consumers cooperate in the fair-trade system and the observation of organic and ecologically sound coffee systems then the industry can slowly get rid of the image of social injustice, poverty, and environmental degradation that it has long been known for.

As you can imagine, the coffee industry, both in Colombia and around the world, is a complex system where many factors come into play to determine how the system works. As can be seen in the web of causality at the end, the environmental issues that plague the commodity known as coffee are not the result of just a choice. It is due to the complex history and relationships the country has had with the commodity. Multinationals still control the bulk of the coffee market and have a strong hold on the coffee market in Latin America yet it seems this is not an absolute. Colombia still cannot just simply eliminate the use of sun coffee systems or just stop overproduction due to this. Also, overproduction is currently the best hope farmers have to be able to survive in the oligopsony of the coffee trade. However, we know this does not need to be absolute. Through the work and education done by NGO’s, Colombia’s coffee industry is hoping to experience a change but it still has a long way to go. We cannot just simply eliminate the use of sun coffee systems and we cannot just stop overproduction due to Along with the package of having a complex system with problems that need to be solved, there is also a complex set of solutions that we would need to be set to be able to fix the problem in its entirety.

Look, I’m just a college student. I’m not a policymaker, and environmental issues expert, or a fair-trade specialist so it seems hard to be able to provide recommendations to address the issues being faced in Colombia. However, that doesn’t mean I won’t try. As I hope this paper has made obvious, multinationals control the coffee trade in an immense way but as consumers, we have the ability and, I feel, the responsibility to control the way they work. As consumers, we have control over their profits and we can set trends they will have to follow if we begin to reject their products. I feel that the first step in order to tackle these issues is to follow suit with the NGO’s and be educated. The first step in all of this is to educate the consumer and to encourage the purchase of fair-trade and organic forms of coffee such as those sold by the FNC. In order to solve the environmental issues that result from the production of coffee, we must first solve the social and economic issues that affect the growers who have no other option but to stick with these damaging systems of coffee. If we can create a system where there is job security, fair wages, and safe work conditions for coffee producers, then we can be able to tackle the environmental issues related to their craft. Once coffee growers become economically and socially stable we can start moving ahead to tackling the environmental issues. As long as growers and producers are stuck in the loop of the multinational push for overproduction and sun grown coffee we will not be able to come close to solving the environmental issues in as a result of the coffee trade in Colombia.

Works Cited:

Andrade, R., Overby, D., Rice, J., & Weisz, S. (n.d.). Coffee in Colombia: Waking Up to an Opportunity. Retrieved November 21, 2017, from http://knowledge.wharton.upenn.edu/article/coffee-in-colombia-waking-up-to-an-opportunity/

FAO Statistical Pocketbook: Coffee 2015. (2016). Food and Agriculture Organization of the United Nations.

Gonzalez‐Perez, M., & Gutierrez‐Viana, S. (2012). Cooperation in coffee markets: the case of Vietnam and Colombia. Journal of Agribusiness in Developing and Emerging Economies, 2(1), 57-73. doi:10.1108/20440831211219237

Greenberg, R., Bichier, P., Angon, A. C., & Reitsma, R. (1997). Bird Populations in Shade and Sun Coffee Plantations in Central Guatemala. Poblaciones de Aves en Plantaciones Cafetaleras en Sombra y Sol en la Region Central de Guatemala. Conservation Biology, 11(2), 448-459. doi:10.1046/j.1523-1739.1997.95464.x

Ibanez, M., & Blackman, A. (2015). Environmental and Economic Impacts of Growing Certified Organic Coffee in Colombia. SSRN Electronic Journal. doi:10.2139/ssrn.2561375

Illy, E. (2002, June). The Complexity of Coffee. Scientific American, 286, 86-91.

Jha, S., Bacon, C. M., Philpott, S. M., Méndez, V. E., Läderach, P., & Rice, R. A. (2014). Shade Coffee: Update on a Disappearing Refuge for Biodiversity. BioScience, 64(5), 416-428. doi:10.1093/biosci/biu038

Losada, Ó. H. C., & Yacué, C.,Felipe Orjuela. (2015). El acompañamiento institucional en el desarrollo del sector cafetero colombiano/Institutional accompaniment in the development of the colombian coffee Sector/O acompanhamento institucional no desenvolvimento do setor cafeeiro colombiano. Revista Finanzas y Politica Economica, 7(1), 169-191.

MUGGED: Poverty in your coffee cup (Rep.). (2002). Boston, MA: Oxfam.

Rau, B., & Gomez, L. A. (2017). Colombia: Coffee Annual (Rep.). USDA.

Rice, R. (2003). Coffee Production in a Time of Crisis: Social and Environmental Connections. SAIS Review, 23(1), 221-245. doi:10.1353/sais.2003.0028

Rueda, X., & Lambin, E. F. (2013). Linking Globalization to Local Land Uses: How Eco Consumers and Gourmands are Changing the Colombian Coffee Landscapes. World Development, 41, 286-301. doi:10.1016/j.worlddev.2012.05.018

Schüβler, L. (2009). Protecting ‘Single-Origin Coffee’ within the Global Coffee Market: The Role of Geographical Indications and Trademarks. The Estey Centre Journal of International Law and Trade Policy, 10(1), 149-185.

Topik, S., Talbot, J. M., & Samper, M. (2010). Introduction Globalization, Neoliberalism, and the Latin American Coffee Societies. Latin American Perspectives, 37(2), 5 20. doi:10.1177/0094582x09356955

Vandermeer, J. H., & Perfecto, I. (2013). Breakfast of biodiversity: the truth about rain forest destruction (2nd ed.). Oakland, CA: Institute for Food and Development Policy.

Whelan, T., & Newsom, D. (2014, May). Sustainable Coffee Farming: Improving Income and Social Conditions Protecting Water, Soil and Forests. Retrieved from https://www.rainforest-alliance.org/sites/default/files/2016-08/sustainable-coffee-farming-report.pdf

Wright, J., Zeltmann, S., & Griffin, K. (2017). Coffee Shops and Cash Crops: Gritty Origins of the World’s Favorite Beverage. Competition Forum, 15(1), 102-112.

#colombia #environmental