International Coffee Agreement Research Articles

Mild Arabica coffee trade at a time of market regulation

ABSTRACT This paper explores the dynamics of mild coffee trade during the term of the International Coffee Agreement, focusing on Costa Rica as a case study. We aimed to verify the influence of the agreement on coffee exports and understand its impact on the exports of high-quality coffee. To compare the influence of the coffee agreement on the trade performance of high-quality coffee producers with that of producers specializing in coffee of similar – or lower – quality, we also included exports of Brazilian coffee (low quality) and Colombian coffee (high quality) in the sample. We focused on analysing commodity trade agreements in the second half of the twentieth century and, simultaneously, on the drivers of coffee exports based on a gravity equation consistent with international trade models. Our findings allowed us to conclude that the International Coffee Agreement gave rise to few benefits for ‘Other Milds’ countries such as Costa Rica and greater benefits for ‘Colombian Milds’ countries such as Colombia, at least in its early versions.

Costa Rica after Coffee: The Co-op Era in History and Memory

In 1986 the field of Costa Rican history underwent a dramatic shift thanks to Lowell Gudmundson's pathbreaking Costa Rica before Coffee. The title of Gudmundson's most recent publication highlights the connection the author makes between these two monographs. In Costa Rica after Coffee, Gudmundson examines the role coffee cooperatives played in creating conditions that supported the upward mobility of small-scale coffee farmers in the post–1948 Civil War era. Additionally, he considers the political, demographic, and geographical consequences of this triumph. This analysis builds on Gudmundson's work in Costa Rica before Coffee, where he demonstrated how coffee's introduction in the mid-nineteenth century transformed Costa Rica, by ushering in a period of widespread prosperity. Indeed, this crop provided both small and large landowners with the conditions for economic advancement.In just over one hundred pages Gudmundson ambitiously seeks to historically define three processes of considerable importance to contemporary Costa Rican society. First, he explores how small- and medium-scale coffee producers successfully organized cooperatives in the post-1948 period and the broad socioeconomic consequences of their efforts. Second, Gudmundson interrogates the causes and consequences of reduced coffee production in more recent decades. Last, he sets out to uncover what can account for the dramatic political shift from a Social Democratic to a Center-Right political platform on the part of the nation's once dominant National Liberation Party, or PLN.At first, the PLN's transformation may appear unrelated to the issues of cooperative development and declining coffee production, but Gudmundson skillfully makes use of census data, probate records, oral histories, participant observation, and a variety of secondary sources to convincingly argue that these processes are deeply intertwined.The book's introduction and first chapter provide readers with a basic overview of Costa Rica's post-1948 political history. Gudmundson examines the fundamental role small- and medium-scale coffee producers played in securing the PLN's political victories after 1948. The PLN courted farmers’ votes through populist ideals, anti-communist rhetoric, and policies that supported the formation of coffee cooperatives.In chapters 2 and 3, Gudmundson researches the first generation of cooperative farmers. These chapters underscore the social transformation that the cooperatives brought their members, who invested in the dream of a cooperative to process their crops. Gudmundson concludes this analysis by arguing that the coffee boom of the 1970s, which saw production rise alongside coffee prices, affirmed to many observers that the PLN's social democratic model of agrarian-centered, cooperative-based development had succeeded.In 1989, the system would implode with the collapse of the International Coffee Agreement, or ICA. Chapter 4 analyzes how farmers adapted to this dramatic event, which saw global coffee prices plummet. Post-ICA, the emergence of private microbeneficios that process small quantities of beans in situ allowed farmers to create new opportunities based on quality. These microprocessors participate in annual competitions for “best coffee” awards. The consequences of winning are real. Indeed, a 2017 winner was paid $8,000 for each fanega of coffee they sold, while the average producer earned just $140 per fanega. In 2015, microprocessors received over a third of the annual harvest. The microprocessors’ focus on quality and their ability to generate profits have clearly allowed them to chip away at the cooperatives’ once near monopoly on coffee processing.In chapter 5, Gudmundson explains how the first generation of cooperative farmers’ prosperity permitted their children to earn university degrees and contribute to the formation of a new economy ripe with opportunities for educated workers. An unintended consequence is that coffee farmers today are aging without heirs to replace them, leading many, especially in the Central Valley, to sell their farms to developers. Gudmundson argues that as coffee production has steadily declined, aging farmers and their professional children have increasingly come to see free trade, decreased social spending, and other neoliberal policies as favorable to their interests. In this context, the PLN's recent rightist turn might best be understood as a reflection of a broader shift in the economic and political outlook of this party's traditional base.Gudmundson deserves high praise for not only producing a smartly argued monograph but doing so in just over one hundred pages. The book, however, is dense, requiring sustained attentive reading despite the clarity of Gudmundson's prose. Ultimately, Costa Rica after Coffee affirms Gudmundson's prominent position in the field of Costa Rican studies and promises to become required reading for Costa Ricanists. This book additionally will appeal to Latin Americanists interested in the process of cooperative development.

Land cover changes in coffee cultural landscapes of Pereira (Colombia) between 1997 and 2014

Understanding how and what land cover changes and transitions have occurred in a territory is crucial to planning and managing high-demand surfaces. At the landscape level, the challenge is determining the allocation and management of various land cover options. Therefore, for natural resources planning and management, a study characterizing and analysing the territory of interest should be included. This work aimed to analyse the changes and land cover patterns in the city of Pereira, Colombia, within the framework of the Colombian Coffee Cultural Landscape. The evaluated period was between 1997 and 2014, and a Geographic Information System, ENVI 4.8 programme and QGIS programme were used for multitemporal analysis. To describe the land cover transitions, two temporal moments were analysed with Landsat satellite images: one moment was for the year 1997, which was taken in August (Landsat 5), and the other moment was for the year 2014, which was taken in July (Landsat 8). At level 1 of CORINE (Coordination of information on the environment), the areas of land cover corresponding to agricultural areas, forests and semi-natural areas decreased most in the analysis period, while artificial surfaces increased. At level 3, the cover with the greatest decrease in territory was coffee crops, which showed a negative annual loss rate of -3.97%, followed by permanent crops (-2.67%). The continuous and discontinuous urban fabric showed the greatest growth with a positive annual rate of 4.14%. In conclusion, the land cover that lost the most territory was coffee crop, mainly due to political-economic factors, such as the dissolution of the International Coffee Agreement and the National Federation of Coffee Growers that discouraged coffee cultivation and permanent crops. Likewise, sociocultural factors, such as smallholder farmers have guided the changes in land cover and have stimulated productive styles to adapt and remain, increasing heterogeneous agricultural areas.

A tale of two coffees? Analysing interaction and futures market efficiency

PurposeThe purpose of this paper is to assess the informational efficiency of Arabica (other milds) and Robusta coffee futures markets in terms of predicting future coffee spot prices.Design/methodology/approachFutures market efficiency is associated with the existence of a long-run equilibrium relationship between spot and future prices such that coffee futures prices are unbiased predictors of future spot prices. This study applies unit root testing to daily data for futures-spot price differentials. A range of maturities for futures contracts are considered, and the study also uses a recursive approach to consider time variation in futures market efficiency.FindingsThe other milds and Robusta futures prices tend to be unbiased predictors for their own respective spot prices. The paper further finds that other milds and Robusta futures prices are unbiased predictors of the respective Robusta and other milds spot prices. Recursive estimation suggests that the futures market efficiency associated with these cross cases has increased, though with no clear link to the implementation of the 2007 International Coffee Agreement.Originality/valueThe paper draws new insights into futures market efficiency by examining the two key types of coffee and analyses the potential interactions between them. Hitherto, no attention has been paid to futures contracts of the Robusta variety. The employment of unit root testing of spot futures coffee price differentials can be viewed as more stringent than an approach based on non-cointegration testing.

The Role of the ICA in Promoting Coffee Consumption in Order to Boost Exports Markets for Producer Countries: The Case of Small-Scale Farmers in Manicaland, Zimbabwe

The International Coffee Agreement (ICA) aimed at strengtheningthe globalcoffee sector through the promotion of its sustainable expansioninamarket- based environment for the bettermentofall participants in the sector. This goal was meant to be achieved through five strategies, namely, (1) promoting international cooperation on coffee matters, (2) encouraging consumption that balances demand and supply, (3) providing market development, (4) facilitating fair-trade and (5) enhancing coffee financing for small scale farmers in developing countries. An exploratory aiming at assessing to what extent the ICA has succeeded in encouraging consumption of coffee in order to boost export market for small-scale producers in Manicaland, Zimbabwe showed that theICAis failing to promote distinctive coffeeconsumption. 90% of the responses stated that the ICA is promoting coffee consumption to a lower extent, an average of 7.5% agree that it is to a moderate extent while 2.5% agreed that ICA is promoting the consumption of coffee to a greater extent. This study recommends that the ICO should provide assistanceinvalueadditionofground coffee produced by smallscalefarmers in order to create competitive advantage to the sefarmersandbein position to with stand price volatility which are current saffecting coffee production and exports.

The Contribution of the International Coffee Agreement (ICA) to the Development of Export Markets for Small Scale Coffee Farmers in Manicaland, Zimbabwe

<p>The International Coffee Agreement (ICA) aimed at strengthening the global coffee sector through the promotion of its sustainable expansion in a market-based environment for the betterment of all participants in the sector. This goal was meant to be achieved through five strategies, namely, (1) promoting international cooperation on coffee matters, (2) encouraging consumption that balances demand and supply, (3) providing market development, (4) facilitating fair-trade and (5) enhancing coffee financing for small scale farmers in developing countries. An exploratory study aiming at assessing to what extent the ICA has contributed to the development of export markets for small scale coffee growers in Manicaland, Zimbabwe showed that the ICA is failing to promote international market development. 99% of the respondents agree that it is doing it to a lower extent. This study recommends that the ICA should put in place a platform to incorporate the small scale farmers so that they increase their market spectrum in order to increase its export volumes and sustain the sector.</p>

Oligopoly in International Commodity Markets: The Case of Coffee Beans

This paper studies the impact of market power on international commodity prices. I use a standard oligopoly model and exploit historical variations in the structure of the international bean market to assess the impact of a cartel treaty on prices and its global welfare consequences. The results suggest the International Coffee Agreement (ICA, 1965-89) raised its price by 75% above the Cournot-competitive level, annually transferring approximately $12 billion from consumers to exporting countries, and its lapse in 1989 explains four-fifths of the subsequent price decline, that is, the coffee crisis.

Market Power in International Commodity Trade: The Case of Coffee

This paper studies the impact of market power on international commodity prices. I use a standard oligopoly model and exploit historical variations in the structure of the international coffee bean market to assess the impact of a cartel treaty on coffee prices and its global welfare consequences. The results suggest that the International Coffee Agreement (ICA, 1965–89) raised its price by 75% above the Cournot‐competitive level, annually transferring approximately $12 billion from consumers to exporting countries, and its lapse in 1989 explains four‐fifths of the subsequent price decline, that is, the ‘coffee crisis.’

The Price of Liberalization: Smallholder Coffee Producers in the Era of Globalization

Coffee is the second most traded commodity in the world, and it is one of the leading exports for eighteen sub-Saharan African countries. Seventy percent of coffee is grown by smallholder farmers. As global trade of coffee has grown, have smallholder coffee farmers benefited from increased internationalization of their economies? Liberal economic theory suggests that pressures caused by the internationalization of an economy widely affect preferences, institutions, and policies. This essay examines whether smallholder coffee farmers have wanted or been able to benefit from free trade and whether they support institutions that support greater free trade. Liberal economic theory emphasizes that producers and consumers change preferences as a result of internationalization of economies, so the response of smallholder farmers should be similar in all coffee-exporting countries. This essay finds that the theoretical model requires modifications for fully understanding coffee producers' preferences. Increases in retail prices were not reflected at the farm gate level. Moreover, the theory does not account for variables such as the International Coffee Agreement, international financial institutions, and fair trade, which influence price signals and opportunity costs.

Coffee Statecraft: Rethinking the Global Coffee Crisis, 1998–2002

This paper offers a rethinking of the global coffee crisis from 1998 to 2002. In seeking to account for the crisis, most official international institutions and non-governmental organisations have focused on the dynamics of the coffee market, its volatility and unpredictability, in the wake of the decline of the International Coffee Agreements in 1989. The result has been a dominant consensus around the ‘market’ as the cause of underdevelopment and its potential solution, with the ‘state’ receding ever further into the background. As an alternative to this consensus, this paper argues that the state and the market are inseparable and, more specifically, that coffee statecraft, both good and bad, has been and continues to be central to the everyday operations of the coffee industry. Drawing specifically on the role of the Vietnamese state, it argues that coffee statecraft played a key role in the crisis – typically portrayed as primarily market-driven – and proposes greater attention be paid to the geopolitical actions of southern states, the role of the state during times when it seems most benign or invisible, and the centrality of coffee statecraft in steering development outcomes.

The welfare implications of Brazil's coffee export price subsidies during the ICA

AbstractTo increase coffee export revenues during the International Coffee Agreement, Brazil provided selected purchasers with export rebates that could be used to pay for future coffee purchases. This subsidy mutated and grew over time, encouraged by rent seeking. The subsidy had huge cost to the Brazilian Treasury, $9.8 billion in constant 1982 US dollars, or about 13% of coffee export revenues. As exports were usually quota‐constrained, the subsidy increased Brazil's international coffee price, particularly during 1980–1986, absolutely and relative to its competitors’ prices. The unexpected variation in Brazil's price also caused the New York Coffee, Sugar, and Cocoa Exchange to terminate trading in Brazilian coffee futures, making it more costly to hedge Brazilian coffee until today. The econometric evidence is mixed, but it seems likely the subsidy reduced Brazil's net economic welfare and redistributed income from the Treasury to foreign roasters, domestic exporters, and government bureaucrats.

The Emergence, Persistence, and Current Challenges of Coffee Forest Gardens: A Case Study From Candelaria Loxicha, Oaxaca, Mexico

In many parts of Latin America coffee is produced in forest garden systems, which fulfill a variety of household needs, enhance food security, and conserve biodiversity. We investigate drivers in the emergence, persistence, and decline of coffee forest gardens, using a case study in southern Mexico and combining historical, socioeconomic, and institutional analysis. Social, cultural, and political benefits linked to forest gardens are important drivers of change. The analysis supports the hypothesis that forest gardens emerge in places where they complement broader land use systems, land tenure is relatively secure, and the local economy is a combination of cash- and subsistence-based activities. The article further illustrates how the international coffee agreement and social-welfare programs supported the emergence of forest gardens. Low coffee prices, changes in land tenure, and reduced availability of labor could result in the eventual abandonment of coffee forest gardens.

Global Markets, Local Conflict

After the breakdown of the International Coffee Agreement, armed conflict intensified in the Colombian coffee region. The decline of international coffee prices after the agreement was abandoned increased local poverty and made it difficult for the National Coffee Federation to compensate for the state’s failure to provide economic stability and social services. Poverty and a weakened Federation in turn opened windows of opportunity for illegal armed actors, cultivators of illegal crops, and drug traffickers. The link between change in international coffee markets and local violence is shaped by domestic processes of resource extraction such as land distribution, joint crop techniques, the periodic employment of a temporary workforce, and the nature of institutional regulation. Study of this link exposes the vulnerability of underdeveloped economies to economic and political decision-making processes beyond national borders.

Financialization and Changes in the Social Relations along Commodity Chains: The Case of Coffee

This article examines distributional implications of the restructuring of international coffee markets that has occurred since the collapse of the International Coffee Agreement in 1989 and market liberalization in coffee producing countries under structural adjustment programs. It is argued that increased financial investment on international commodity exchanges, together with market liberalization, have given rise to opportunities and challenges for actors in the coffee industry. Given the heterogeneity of market actors, these tend to exacerbate inequalities already present in the structure of production and marketing of coffee. JEL classification: L11, O13, G19

APPLICATION OF A DYNAMIC PANEL DATA ESTIMATOR TO CROSS-COUNTRY COFFEE DEMAND: A TALE OF TWO ERAS

We estimate price and income elasticities of demand for green coffee beans in panels of up to 40 countries, both during and after the operation of export quotas under International Coffee Agreements. The dynamic panel estimator proposed in Han and Phillips (2007) is used because it is a consistent estimator, for any length of panel, regardless of the presence of unit roots. Dynamic panel data models, of any type, do not seem to have been previously applied to coffee demand. We find evidence of a concave relationship between income and coffee consumption for countries which are members of the International Coffee Organization, but no evidence of such a relationship for other countries. A further conclusion is that measures which increase the price of coffee beans can be expected to have little effect on coffee sales.

Confronting the Coffee Crisis: Fair Trade, Sustainable Livelihoods, and Ecosystems in Mexico and Central America (review)

Reviewed by: Confronting the Coffee Crisis: Fair Trade, Sustainable Livelihoods, and Ecosystems in Mexico and Central America James Wiley Confronting the Coffee Crisis: Fair Trade, Sustainable Livelihoods, and Ecosystems in Mexico and Central America. Christopher Bacon, V. Ernesto Méndez, Stephen Gliessman, David Goodman, and Jonathan Fox, (eds). Cambridge, MA: MIT Press, 2008. Pp. xii and 400, 15 illustrations, notes, and index. $27.00 paper (ISBN 978-0-262-52480-3). As the lengthy title indicates, this is a very ambitious volume in its analysis of a variety of Mesoamerican responses to the crisis in the global coffee industry precipitated by the collapse in 1989 of the International Coffee Agreement (ICA) and the subsequent decline in prices paid to farmers for their product. This interdisciplinary effort goes far beyond the ramifications of that on-going crisis to study various coffee production systems utilized by the region's small-scale producers who are the primary focus of the study. In doing so, it also considers a variety of social and environmental factors as well as introducing the many external actors involved in the region's industry, including NGOs and several organizations that work with alternative trade systems, organic labeling, and fair trade certification. It is important to note, however, that this is not intended to provide an overview of Mesoamerica's coffee industry; the dominant corporate sector is not analyzed beyond its recent flirtations with several forms of alternative trade. The multi-dimensionality of the subject material is matched by the diversity of the editors and individual chapter authors. The book, comprised of 14 chapters, has five editors and an additional 12 contributing authors. They represent a mix of disciplines including agro-ecology, social anthropology, plant and soil science, geography, Latin American studies, and environmental studies. Several are/were practitioners with development or government agencies; many of them work in the region. The academic core of the group resides at the University of California at Santa Cruz. Together, they have assembled a book based on an impressive volume of field work, which is one of its greatest strengths. Most of that, however, occurred prior to 2001 leaving the reader to ponder what has transpired since in the several study areas described in individual chapters. One of the book's weaknesses is a direct result of the diversity of its authors. The editing is uneven, with some chapters, particularly the first few case studies, more difficult to follow. With five editors, this is not altogether surprising, but the book would have benefited from a more careful final edit by the MIT Press. Otherwise, though, the volume is logically organized. The first three chapters provide the framework underlying the issues researched. Using the ICA collapse as a starting point, Chapter 1 analyzes how that event enabled the greater penetration of globalization processes into the industry in ways that led to a smaller share of the rents going to producers and greater shares to industry operatives in consuming countries. It goes on to chronicle the rise of the alternative trade sector as one means of attempting to counter that trend. The second chapter introduces readers to agro-ecology, a unifying theme of the book, and its application to the analysis of the traditional production and cultural systems that characterize many of the region's small-scale farmers. Chapter 3 provides a more detailed look at the roots of the crisis, the market glut induced by the rise of Vietnam as a major exporter and the [End Page 210] expansion of Brazilian exports, and the difficulties encountered by small-scale producers as they try to compete with the giants of the industry. The second section includes six chapters devoted to case studies from selected locales in Mexico, Nicaragua, and El Salvador. Collectively, they serve to reinforce the agro-ecology perspective regarding the environmental and cultural benefits of traditional systems. Specifically, shade-grown coffee production systems offer greater conservation benefits as well as the potential for enhancing food supply and opportunities to locally market other farm goods and wood. The case studies also illustrate the contributions of such systems to the maintenance of rural cultures while recognizing their limitations in improving rural incomes. There is much...

Can good coffee prices increase smallholder revenue?

The global coffee market is currently plagued by 2 paradoxes, a coffee boom in consuming countries, and a coffee crisis in producing countries (over supply of low quality coffee and shortage of high quality coffee) which is actually driving the coffee market (Daviron and Ponte, 2005). After the termination of the International Coffee Agreement between producing and consuming countries in 1989, the coffee market has been in a flux, with market forces and over supply bringing down the coffee pr...

EFFICIENCY AND SURVIVAL: THE IMPACT OF THE INTERNATIONAL COFFEE AGREEMENT'S DEMISE ON COSTA RICA'S COOPERATIVE COFFEE PROCESSING, 1988–2005

ABSTRACT**: This paper uses a profit per member (or dividend) frontier model to analyze the impact of the 1989 demise of the International Coffee Agreement on a group of Costa Rican coffee processing cooperatives. Firm‐level data on costs span the period from 1988/89 to 1992/93 and information on cooperative survival covers 1988/89 to 2004/05. The more efficient member‐owned enterprises survived the crisis. An increasing cost of servicing the smallest farmers may constitute an incentive to restrict membership, however. Dividends fall as investor‐owned firms compete to buy farmers' raw coffee. Still, member loyalty does enable cooperative processors to maintain scale economies and market share. Despite several bankruptcies, cooperative firms in Costa Rica processed 40 percent of the national crop in 2004/05, the same proportion as in 1988/89.

Responding to the coffee crisis: What can we learn from price dynamics?

An econometric model of coffee price dynamics is specified and estimated to capture the evolution of coffee prices at the farm, wholesale and retail levels. It investigates the historical influence of the International Coffee Agreement (ICA) through its effects on yield and planting decisions. In the short run, the ICA caused Brazilian farm prices to become disconnected from international prices. The ICA helped coffee producers to better incorporate current world price information into planting decisions. This created a price cycle that did not exist in non-ICA periods. The low coffee prices experienced since the disintegration of the ICA are consistent with low supply response to price information. Asymmetric price transmission at the retail level helped roasters and retailers benefit from upstream price interventions. Our results urge caution when considering future coffee price interventions.

Responding to the coffee crisis: a pilot study of farmers’ adaptations in Mexico, Guatemala and Honduras

This article explores the impacts of market shocks and institutional change on smallholder livelihoods, and the challenge of adaptation in Mexico, Guatemala and Honduras. The rapid decline in coffee prices since the dissolution of the International Coffee Agreement in 1989 has had widespread and profound impacts across coffee‐producing regions. The data collected in the three case studies of this project confirm the severity of the impact, particularly in the Mexican and Guatemalan communities. They also illustrate the importance of the historical relationship between farmers and public institutions in defining farmers’ perception of risk, their awareness of the nature of the changes they face, and thus the flexibility of their responses to present and future uncertainty. The project's findings indicate that the existence and development of local networks among farmers, service providers and information sources may be critical for facilitating adaptation, particularly in the context of economic liberalization and globalized agriculture.