Global coffee house CEO calls for price stabilisation fund
Olam Coffee CEO Vivek Verma supports London Declaration but industry and governments must work together to develop a safety net for coffee farmers
According to Olam Coffee, the world’s coffee farmers will be left in a continual limbo unless industry and governments act fast to help them out of the current price crisis and provide future price stability as they face the impacts of climate change.
Speaking on the back of the London Declaration made by the sector following the CEO & Global Leaders Forum (CGLF) on September 23, 2019 and ahead of International Coffee Day on October 1, 2019, Olam Coffee CEO Vivek Verma explained:
“With farmers now in the second year of very low prices, the industry fully recognises the scope of what must be achieved under the London Declaration but we must act quickly. Critical is to find a way to give farmers a safety net that will also help them be resilient in the face of climate change.
“At these very low prices millions of farmers are forced to sell much below the costs of production. Like others, Olam is supporting farmers – 56,000 smallholders are in sustainability programmes with our customers and partners across 18 origins but this is a drop in the ocean. If coffee were a product of the developed world there would have been some price stabilisation mechanism put in place or, at the very least, there would have been subsidies at low prices. Unfortunately, coffee is grown in mostly developing and underdeveloped countries, which do not have the means to support farmers in times of low prices. I believe it is time to seriously look at implementing a price stabilisation fund that will subsidise farmers when prices are low for reducing production capacity over the short-term, while helping them mitigate the long-term impacts of climate change. The fund would then recoup the subsidy when prices are high without any burden to local government budgets. Despite the different situations of producing countries I believe this is achievable if the ICO, development organisations, commercial banks and the industry come together.
“On climate change, it is prescient that this announcement coincides with UN Climate Week because this worries me greatly – what’s around the corner? We are seeing how more extreme weather patterns can alter the flowering and fruiting cycles in producing countries as well an increase in pests and diseases, such as rust.
“Without the means to invest in more resilient hybrids and other adaptation methods for the future, farmers cannot be blamed if they give up. In turn, this could affect consumer choice as certain origins no longer support coffee production. Implementing the declaration is also a race against climate change.”
In 2015, the International Center for Tropical Agriculture (CIAT) forecast that almost 20% of the world’s producing land for Arabica coffee could be unsuitable by 2050 due to climate change, with strong regional differences. 1
Mr Verma continued: “One way Olam Coffee is hoping to achieve greater impact in our sustainability programme is by opening up our supply chains to customers via our new sustainability sourcing offer AtSource. By tracking the whole journey of the coffee beans, AtSource provides our manufacturing and retail customers with a verified social and environmental footprint of their supply chain, right from the farm to the factory gate. The insight gives them greater visibility into how we can together make farmers and landscapes more resilient. Our sustainability and carbon reduction efforts include our own coffee estates.”
Other actions that Mr Verma believes are critical in re-imagining the coffee sector include:
- Upskilling farmers to improve quality for higher income. It is not enough to be training farmers just about yield improvements. Improved post-harvest techniques increases earning potential. Farmers apply the new processes to produce differentiated or specialty coffees, which fetch a higher price on the market and could help to safeguard single-origin blends.
- Become climate advocates and help others wake up and smell the coffee. “With so much in the news it is easy for everyone, even those of us seeing the impacts of climate change, to switch off. But we need to keep advocating for reduced emissions at home, at work, in society. We all rely on coffee to get us through the day, now coffee must rely on us,” Mr Verma added.