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The ICO report said Covid-19 has revealed the ‘critical weaknesses’ of agricultural systems in some countries (photo: UNDP/Martine Perret)
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Coffee farmers in Africa are among those most badly affected by the pandemic, a situation which might continue for a long time after Covid. (photo: Neil Palmer, CIAT)
A flagship report from the International Coffee Organization (ICO) says supply and demand have both become more unstable as a result of the Covid-19 pandemic
Already under pressure from the longstanding price crisis, the global coffee value chain is even more fragile in the last 12 months as a result of Covid-19, representatives of the International Coffee Organization (ICO) and contributors to its newly published 2020 Coffee Development Report said in a February 2021 virtual meeting. Looking ahead, they said, public health crises “represent an underestimated risk to the global coffee sector” that needs greater attention in the future.
ICO executive director José Sette — who, at the time of the meeting was recovering from, as he put it, “going 12 rounds with Covid-19” — said the report, based on what he described as “sound empirical analysis,” showed that the coffee industry is “profoundly affected” by the pandemic. What is more, he said, the pandemic “added significantly to the adverse effects of the coffee price crisis.”
Sette said the future of coffee and its resilience and adaptation to change are “threatened.” He said the coffee value chain faces “an unprecedented situation” in which production, trade, retail, and consumption have all been negatively impacted.
“Supply and demand have become more unstable and uncertain, as a result of disruptions in the operation of coffee supply chains and significant alterations in the level and patterns of consumption,” Sette explained. “In this larger context, the cumulative effects of the coffee price crisis and the Covid-19 pandemic present a major hazard for millions of coffee farmers who already struggle to cover operating costs, let alone provide for their families.
“In addition, scarcity of resources generates a significant reduction of investment in the maintenance and modernization of plantations and farm operations, as well as in the adaptation to climate change, jeopardizing the sustainability and the very future of the coffee supply.”
As ICO head of statistics Rebecca Pandolph told the virtual event, the spread of the virus reduces the availability of labor along the value chain, not just in harvesting and processing, but also in logistics and in trucking, handling, storage, port operations, and customs processes, which also slowed down. She told delegates that reduced availability of shipping containers could also affect the shipment of coffee in coming months. Looking ahead, Pandolph said the effect on production will be greater in the current crop year, 2020-2021, than it was in 2019-2020. This will lead to lower yields and poorer quality, she said.
“After the initial surge and stockpiling, demand fell, particularly as out-of-home consumption fell,” Pandolph said. “Fortunately, much of the supply for coffee year [2019-2020] was unaffected by Covid-19, as harvesting in most countries had already concluded by the time the pandemic occurred. Unfortunately, with the outbreak of the second wave of the pandemic in the fall of 2020, additional impacts in the global coffee supply chain can be expected.”
Sette and Pandolph said that, although there was a surge in demand at the start of the pandemic — declared by the World Health Organization on March 11, 2020 — consumption in the remaining months of the coffee year was revised downwards due to ongoing pressure of the global economic downturn and limited recovery in out-of-home consumption due to social distancing measures.
In consuming countries, there has also been a profound effect on young people. “Many jobs across the coffee value chain — especially at the retail level, which often are held by young people — have recently been lost, extending the crisis to those with low incomes and who are most vulnerable,” Sette said.
Addressing the effects of the pandemic will require a “collective effort” if sustainable value chains will become a lasting feature of the coffee industry, he added. What concerns ICO most regarding the pandemic and its effects is the resilience — or lack thereof — in the global value chain, bearing in mind that the pandemic came at a time when farmers were only beginning to address issues such as climate change. Unless they weather its effects, Covid-19 may lead to further origin concentration.
“Supply chain disruptions have the potential to severely hamper exports of coffee, thereby affecting foreign exchange earnings and jobs in producing countries,” said the authors of the report, who include many leading organizations and individuals in the coffee sector and academia. “The Covid-19 outbreak has shown that the coffee global value chain can be fragile, not least because supply is easily affected in the short-term by reduced availability of labor and other disruptions and delays”. This issues has been exacerbated, said the report, because many coffee-producing countries have below-world average health infrastructure to respond to crises like Covid-19.
Coffee sectors in countries that mobilize an effective public health response and have a robust health system will likely to be affected less severely and for a shorter amount of time. But, in a chastening analysis of producing countries, the report notes that few producing countries score well on the global health security (GHS) index. In the 10 largest exporting countries, scores range from 27.6 (Honduras) to 59.7 (Brazil), only two countries out of the top-10, Brazil and Indonesia, report scores above the average of high-income countries of 51.9. Two countries, Guatemala and Honduras, are below the global average of 40.2. Countries with economies most dependent on coffee exports and have GHS scores below the global average are predominantly located in Africa and Central America and include Burundi, Central African Republic, Guatemala, Honduras, and Rwanda.
The authors of the report said Covid-19 revealed the critical weaknesses of agricultural systems in Africa, and particularly growing concerns regarding its coffee value chain, and ICO projects a loss of exports valued between US$100-200 million, potentially affecting 6.6 million jobs in the coffee sector, particularly in the East Africa region. Action is needed to build resilience that will protect African farmers.
Because African nations are among some of the coffee producing countries least able to tackle the effects of the Covid-19 pandemic, ICO joined forces with the Inter African Coffee Organization and CABI to design an emergency intervention program. The initiative, estimated to cost €14 million, aims to alleviate market disruptions and food, nutrition, and income security challenges facing millions of smallholder coffee farmers across 11 countries for an initial three-year period. The program proposal, which is supported by the African Union Commission, has been submitted to the European Commission for consideration. Endorsed by the International Coffee Council, it is now under negotiation for financing.
“The resilience of coffee production and exports against Covid-19 and future outbreaks will depend, among other factors, on the capacity of individual countries to detect the virus, contain its spread, and treat those who have fallen ill, in addition to the success of the scientific community to develop an effective cure and vaccination,” the report concludes.