Why are coffee farmers paid so little?

In the morning,

when you put the kettle on to make a cup of coffee, do you ever wonder Where the coffee beans come from?

Who actually grows the coffee?

H

ow much is it really worth?

It all starts with coffee farmers. Coffee farmers play a vital role in making sure the coffee we drink meets the high-quality requirements that we as consumers demand. Farmers are often seen as the least important person in the trading process despite them being the vital source of production. Yet, most of what we eat and drink come from cultivated land, sometimes even from a country we may have never visited before. So why are they paid relatively less than the average wage?

Production of coffee

Usually, coffee is grown on a small-scale of land where it thrives naturally at the right climate. Coffee can only be harvested seasonally during the months between March-June or September-December, where within this short time frame requires laborious work. Farmers can only receive income for their beans, only when they are ripe and ready to be traded as green un-roasted coffee. With competition around different parts of the world, it is difficult for a farmer to produce more than what they can.

Colombia was the second country in the world to produce the most coffee but since the coffee rust in 2008 (known as leaf disease), sales have plummeted so much that it resulted in a production drop as much as 40%.

In 2020, Brazil is at the top of the list, followed by Vietnam, with Colombia pushed back to third place on the list of world coffee suppliers. This may not appear as a massive difference to us as consumers, but this shift from second to third place can determine many worrying factors for Colombian coffee farmers. For the farmer, they must anticipate alternative crops to harvest other than coffee, and for ex-farm workers, its the anxiety of looking for alternative jobs that are available to them.

Living wages

Overproduction of coffee in other countries means it is harder for Colombian farmers to keep up with the demand in the market. 

Having small farms requires a small number of workers to cultivate the land. Even though there are many keen people looking for work to support their families and finance the education of their children, there is simply not enough income to provide for all. Sometimes the wages which coffee owners receive are invested in caring for their land, including the replacement of damaged trees, purchasing the right fertilisers and effective pesticides.

Coffee pickers in Colombia are paid about $0.15 (£0.11) for every kilogram of beans they collect.

This is then sold for $2.40/kg (£1.75) in the global market, giving back farmers less than half of what their coffee is worth.

The commodity price of coffee in the market is generally low, ranging between $0.90 and $1.25 but in early 2019, the price for a pound of coffee has dropped to its lowest point since 2006, resulting around $0.88 (£0.70) per pound.  

Trading in the C Market

So how is the price of coffee decided? Once the coffee is ready to be sold, logistics take over and the trading process begins in the C market, also known as the coffee commodity market. This is highly observed by buyers and sellers who target goods like cocoa and sugar.

The majority of buyers are coffee roasting companies and the sellers are consumers, like supermarkets. Both buyers and sellers have “futures contracts”, which is a sales negotiation that usually takes place at the New York Stock Exchange (NYSE). The wage price for farmers is not only influenced by the dealings of these stakeholders, but it is also determined by the supply and demand of coffee at the time of trading.

This process can be complex, especially when many large corporations are deciding the ultimate price for coffee. For buyers, they tend to purchase coffee when the price is low on the market and sell them for a higher price in retail stores, leaving farmers with the lowest minimum wage that are insufficient when it comes to everyday living.

What we aim to change at Lomitas

We understand how exhausting the trading system is for farmers, especially when there are many who precede them during the process. We want to eliminate this intimidating barrier and use a direct trading approach that simply involves us, and the farmers.

With reduced third-party involvement and less stakeholders demanding prices, we have more time to listen to our farmers in Colombia. We want to work as a team and be active listeners who acts accordingly to their needs. Instead of having a buyer-and-seller relationship that often feels distant, we aim to build a warm, close and strong relationship with the people who grow our coffee beans. We want to take action and provide them with reassurance that their plantations will be cared for.

With less people in the chain, we want to get down to work and coordinate the best strategies that benefits the farmer, the workers and the environment.

Check out Our Story to find out more.

Photo from Mercanta