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Global Coffee Trade - Coggle Diagram
Global Coffee Trade
Trade dominated by TNCs
only 7-10% of the price of coffee is bought in supermarkets goes to farmers - farmers sell unprocessed bean, which is low value
TNCs buy unprocessed beans & roast them, increasing their value - they receive majority of profits
TNCs are mainly from developed countries so profits go to developed nations instead of being reinvested into less developed nations (leakage)
small-scale farmers have little land & depend on selling coffee so have little power to dictate the prices
TNCs have lots of control over the market - only 4 companies (ECOM, Louis Dreyfus, Neumann, VOLCAFE) control 40% of exports
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'Race to the bottom' - coffee producers compete to cut wages, labour regulations, environmental protection to attract TNCs
Fairtrade
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Aims:
- setting the Fairtrade Minimum Price (that a buyer must pay producer organisations to cover all the farmer's costs)
- prevents farmers going out of business/ into poverty
works with farmers to maintain environmental standards, prohibit forced labour and child labour
Growth: number of Fairtrade producer organisations grew from 175 in 2002 to 329 in 2011, while global sales of Fairtrade coffee grew from 15,000 to 80,000 tonnes/year
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Fairtrade Premium: pays additional money into a communal fund to help local communities develop
- farming communities in Peru could invest in computers, farm machinery and schools due to extra money/ economic security
Growth of coffee beans
grows in hot, wet areas close to the equator (Brazil, Vietnam, Columbia, Indonesia, Ethiopia)
2 types: arabica & robusta - arabica grown in S. America & eastern Africa, robusta grown in western Africa & Asia
Arabica is higher quality but more expensive, 70% of global coffee production is arabica
coffee plants grown in nurseries, moved to farms after 6-12 months to grow beans
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Global trade
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Largest coffee producer: Brazil
- exported 20% of world's coffee in 2015
- 300,000 coffee farms
- produces 2.5 million tonnes a year
Largest coffee importer: USA
- imported 20% of world's coffee in 2015
- Japan, Canada, Russia also large importers
If the price is high, people will produce more coffee to make more money - causing the price to fall. If the price is low, people may buy more coffee - so price rises
Price fluctuations affects farmers:
- coffee from Vietnam steadily increased since 1987
- In 1999 Vietnam exported over 450 million kg a year
- caused price to fall dramatically from $1.19/kg in Jan to $0.68/kg by March 2001
- S. American coffee growers went out of business & couldn't afford to keep producing at such a low price
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