Why Does The I.C.O. Matter To Your Cup Of Coffee?

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Another international organization of dubious use. Who needs or wants another, especially when it has to do with coffee? Are you beginning to get overwhelmed with all the coffee “propaganda” hitting the news on a regular basis? There was a time when not much good was being said and coffee’s name was somewhat “muddy.” My how things have changed. Why is that?

Enter the International Coffee Organization, founded back in 1963 with the assistance of the United Nations, brought the coffee producing countries into agreement pertaining to export quotas. Why quotas? The help maintain a stable and less volatile  price in the commodities market.

During the WWII Brazil and all Latin producing countries were cut off from the European market. It was feared that Brazil might side with Germany if they could not find an outlet for their massive production. Because of this an agreement was reached which established quotas for all of the producers in Latin America. This mollified Brazil and some order was established in the coffee market.

Fast forward to 1962, years after the war, and these same quotas were no longer valid as the European Market was now open. At this point an International Coffee Agreement was created, which then led to the creation of the International Coffee Organization, responsible for overseeing the ICA rules and regulations.

The Untied States, being the largest consumer and importer of the worlds coffee was obviously a part of this, with a great deal of influence in the goings on of the two organizations. A five year contract was established, and from 1963 to 1989 it was continuously renewed.

However, in 1989 Brazil felt their production and exports could do better than the quotas assigned to them, and in the subsequent meetings was unwilling to agree on current limits. As such, a new contract was not established and coffee prices felt this almost immediately.

The U.S., now confident that Brazil was no threat in terms of siding with Russia, pulled out of the ICO in 1993. Since this was the one largest importers of coffee the effect was felt immediately, and coffee prices went sliding downward.

The roasters, suppliers, importers, buyers, were not the ones who felt this compared to the farmers. By 2001 coffee prices were at their lowest of more than 30 years. Many reasons are speculated, but the most probable has to do with Vietnam becoming the second largest producer and exporter of Robusta.

Added to this is the abundant supply with a sluggish demand, so in simple terms there is no export or productions quotas anymore. These were difficult to enforce and police in the past, and the present is no exception.

This would be similar to what goes on in any retail market, where the more businesses that enter into a geographical area continue splitting up the proverbial “pie” until it becomes non-profitable. As long as there is no agreement on production and export quotas the plight for coffee farmers continues.

What’s worse, the very real possibility that this will begin to have a negative effect on producers who will change to other cash crops that will provide a living already has an inroad. Producers cannot continue to invest in a loosing proposition.

The major roasters will not pay a fair wage, and yet charge exorbitant prices at the retail level. Green coffee they pay $.67 a lb. for is commonly sold for $12-15. Anyone can do the math. Starbucks may be the greatest abuser as they have retail locations around the world, allowing them to bypass so many of the “middlemen” in the coffee industry.

You can bet they will make a convincing sounding case for their abuse, and show how they benefit producers in Ethiopia by creating a ready market for their production. However, if the buying prices are below production prices, where’s the advantage? Starbucks nicely sidesteps answering such questions, blaming the inefficiencies on poor management among others.

So, how does this affect you, the ultimate coffee consumer? There’s a better than even chance that you already think coffee is expensive. Consider it has absolutely nothing to do with supply, but the ability of roasters to control the retail market.

The ICO still exists, but it begs the question as to why? It doesn’t seem to offer any control as in the past, leaving the price of coffee up to the commodity brokers and the market. Does the market want to see prices increase? Since they are the ones controlling it, so that would seem to be a “no!”

So enjoy your cup of coffee, yet keep in mind what a farmer living in a 3rd world country, cultivating maybe 20 acres of land with coffee, who has a family and knows no other way of life, depends on a once a year income and lacks enough to even send all his children to school.

The impact is felt at all levels, since there is no income there is no spending, so even the schools lack the revenue to provide supplies. Countries like Ethiopia based 80% of the GNP on coffee, and it employs some 15 million people along the chain.

Consumers make the difference, or at least they can. Will they? Will you? I can’t tell you want to do, or how effective it will be. The fact remains that consumers changed the marketplace for organics simply by their purchases. Looking for coffee with the International Fair Trade or (FLO) logo at least is a start. This is not to be confused with Fair Trade USA. Follow those links to learn more.

This organization (FLO) works with farmers to help them create a fund that is available when harvests are bad and/or prices are low. The farmers subsidize themselves and are not dependent on governments or international handouts. So buying these coffees and other products is one of the ways you help.

So why does the ICO matter to your cup of coffee? After reading this article you should be able to come to your own conclusion. As for this writer, I’m looking for International Fair Trade Certification for starters.

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Alan Written by:

Alan is retired and resides in Quito, Ecuador. Writing is a passion which has resulted in two eBooks thus far, with more in the works. Married 47 years with four sons and 13 grandchildren, provides potential grist for the mill! Alan is a charter "Boomer", a Viet Nam veteran, committed to roasting his own coffee and writes about whatever pops into his mind. He loves to build and ride recumbent bikes, play racquetball, writes almost daily, travels Ecuador, and talks to anything that does not move fast enough! The twinkle in his eye is a combination of the sun, and an active sense of humor. His desire to encourage others to write is being answered through his articles on the Internet.