BUSINESS COMMENTARY: Our coffee producers are paid less than they deserve

The writer argues that producers are paid $3/kg yet the price of a 100g tin, goes for as much as $3. Coffee was Rwanda’s main earner for decades until recently and still ranks among our main exports. Our coffee board recently announced a good year for profits and is aiming at $100 million this year. Rwanda still lags behind its regional partners who have much larger coffee industries than our own but the market is big enough for all with 500 billion cups drank a year. Coffee employs over 25 million people worldwide mostly as farmers in the developing world; its zone of habitat is mostly in equatorial and mountainous areas and Rwanda is lucky to fall into this climate zone. The market for coffee is in the developed world and hence lies the problem; we do not consume our own products and as such struggle to produce the necessary quality, this quality is thus dictated to us by outsiders. There is a huge disparity between the price paid to farmers and the price of the finished or manufactured coffee because they are seen as two separate items. Green coffee which is what we mostly export is counted only as an input for manufacturing coffee and not the actual product itself. Indeed the low price we receive for our coffee is predicated by the convoluted chain it has to go through in order to arrive at the table of a western client. That is the reason why producers are paid $3/kg when and it costs $3 for a tin of 100g of coffee; there is a 10-fold mark-up on what we are paid for and this is a fact that we have to live with. The composite price of coffee has been on a roller-coaster ride in the last ten years, from the high in 1998 when the price per 25kg bag was $108, then it declined for 4 years crashing at a low of $45 in 2001. It stabilised in 2001-2003 then went on a continuous rise peaking in 2008 with $124 in January to the current price of $103. This trend in pricing generally reflected the economic trends of the time; this mini-recession of 1999 lowered the price of coffee and the price recovered in tune with the economy. This does not bode well for Rwanda considering the global slowdown but it will turn us towards the specialty coffee market. Brazil is the world’s biggest coffee producer with a massive 17,000 tonnes annual production. Rwanda will never be able to match that so we must produce unique and specialised coffee. The main problem is going to be reducing the number of players in the supply-chain or put simply - to cut out the middlemen. Organic coffee is a lucrative business but coffee requires more pesticides than other crops as well as more know how to produce it. Fair-trade is another option, it is a system aimed at giving farmers a fair-price for their produce, it guarantees farmers $2.70 per kilo but the market price recently exceeded what fair-trade usually offers, besides that the fair trade market in coffee is limited to under $1 billion globally. So developing brands of coffee is the only way we can bridge the gap between our expectations and reality. Nations like Costa Rica are somewhat exempt from the ups and downs of the global coffee market because of their unique brand of coffee but this only came after decades of dedication. The specialty coffee is worth $9 billion a year and rising as nations move away from generic coffee to unique brands; coffee marketing boards are essential in this but market forces should drive the changes in the industry. In the past boards artificially deflated prices to boast their own pockets or subsidised prices to gain electoral favour. Market forces should dictate the direction of the coffee sector in implementing reforms to liberalise the market; failure to do so will cost us dearly. ramaisibo@hotmail.com