Global Trade - Coffee trade and its impacts on development

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  • Coffee is one of the world's most traded commodities and can be referred to as 'black gold' due to the money that can be made from this product
  • Other than oil it is one of the raw materials that earn developing countries the most money - in some countries 80% of their foreign earning may be exporting the raw coffee beans (green coffee).
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Production of Coffee

Coffee has to be produced within a tropical/subtropical climate and so Latin America, Asia and Central Africa are common in the top coffee producing countries

Brazil exports 30% of the world's coffee beans making it very important in this global trade.

Uganda used to also be a top producer (2% of global production) but it has since dropped out the top 10

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Consumption of Coffee

Most of the world's coffee is exported to high-income countries

Brazilisthe 2nd largest consumer of coffee but it obviously doesn't need to import it (hence why it's not on coffee-imports maps)

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The Coffee Industry

1. Producers in  developing countries work on large coffee plantations/estates. Most have direct agreements with Coffee TNCs e.g. Starbucks, Nescafe, Nestle

2. Exporters then come and buy the cofee beans at a very low price to keep a high profit margin and sell it on to various importers around the world. The importers have a big impacton the amount of coffee within the supply train

3. Roasters are usually found within MDCs and have the biggest  profit margin in the coffee chain. These are usually TNCs like Maxwell House and Nescafe who then sell the finished profuct to sjuper markets and cafes in order  to sell to consumers

4. Therefore the producers, exporters and transporters receive 10% of the coffee profit and the roasters and retailers receive 90%. UNFAIR TRADE.

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Impacts of this unfair trade of coffee

Due to these unfair terms of trade, it makes it really difficult for small farmers to negotiate better terms of trade and so they remain trapped and continuously forced to sell their coffee at a low price

Coffee prices fluctuate a lot too and so some year's farmers will make a surplus and others they will make a defecit. Farmers are already vulnerable due to their reliance on the weather and climate that they need to grow the coffee beans.

Countries such as Cameroon, Colombia, El Salvador, Nicarague and Vietnam are countries all feeling the impacts of this trade

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Social Impacts

  • Rural - urban migration as farmers unable to make money from producing and selling coffee  beans (regional disparity)
  • Emigration from country?
  • Country mahy make less money from exports of green coffee therefore there is less money to be spent on healthcare and education
  • More households will be living below the povertyline as their incomes fall
  • Increased malnutrition as incomes fall and therefore unable to feed their families
  • Country and individuals remain in debt - often to the richer countries who import  the coffee anyway!
  • Illicit crop production e.g. growing and selling drugs like cannabis and heroine to increase their profits
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Economic Impacts

  • Farms in rural areas are abandoned as many migreate to urban areas instead
  • Insecure land ownership in many countries asthey cannot afford to pay rent and their land may be taken away from them
  • loss of jobs for knock onindustries e.g. exporters etc as well as the farmers
  • reduced income for individuals and countries
  • reduced earnings through exports - thereforenot partof the global trade process
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Environmental Impacts

  • Abandoned farms etc mean land will be left degraded and unused - potential impacts for ecosystems and habitats
  • Coffee requires shady growing conditions e.g. trees
  • Deforestation may take place because the country may choose to sell timber instead of coffee?
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What are subsidies?

  • financial support given by the government by businesses/industry to help them continue to make a profit even if 'times get tough'
  • they can be direct e.g. money given or indirect e.g. tax breaks, loans
  • The US government give cotton farmers in the USA subsidies to encourage them to continue to grow cotton (which isn't as profitable as other crops) and ensures that farmers will always make a good income
  • as a result farmers in the US can sell their cotton slightly cheaper as they have already made a profit before they have even sold the good. This makes them competative and those selling it in LDCs are extremely hard hit.
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