DECEMBER 20, 2018
With coffee prices falling to a 12-year low earlier this year, the economic sustainability of coffee has been left in more doubt than ever. We are facing the questions: Is coffee farming profitable? How much should a producer be earning? And what separates a profitable farm from an unprofitable one?
Last year, US-based green coffee importers Caravela Coffee published a report on the costs of production in the six Latin American countries they operate in. Following on from this, the company recently calculated the theoretical profitability of a farmer in those countries and contrasted that with the World Bank’s international poverty line.
Alejandro Cadena, Caravela Coffee’s CEO, recently presented his findings at Sustainability in Coffee in Portugal. So, I reached out to him to discuss his findings.
Let’s first understand why this study is important.
Low prices are not a new concern: for years, farmers have been abandoning coffee, describing it as unprofitable and unsustainable. But in August, the international coffee price (the C-price) fell below US $1 per pound. The following month, it reached its lowest level in 12 years.
Yet according to World Coffee Research, despite the falling prices, the demand for coffee is predicted to rise constantly. If things continue as they are, and the impact of climate change is also taken into account, then we can expect to see a production gap of between 60 and 122 million bags by 2050.
Will there be enough coffee in the future to satisfy our growing demand? One thing is clear: if we want the coffee industry to thrive, we need to improve farming profitability.