When the coffee crisis hits home.

Coffee is not native to Mexico, yet since it arrived on Mexican shores in 1796, it has evolved into a central aspect of social, economic, and cultural life. Today 320,000 growers produce coffee in twelve states of the republic. From bush to brew, the coffee industry employs over three million people. Nearly 6% of the economically active population of Mexico depends on the crop for their livelihoods, and in the countryside the figure rises to a quarter of the population.

The current crisis in international coffee prices has hit rural Mexico hardest where people are poorest and living conditions most precarious. Of Mexico's coffee-growing townships, 84% register high or very high levels of poverty. In contrast to the large plantation farming common in other parts of the world, in Mexico most coffee growers are smallholders and 65% are indigenous.

Prices to Mexican producers have plummeted over the past few years and hit historic lows in 2002. Mexican coffee growers cannot break even in today's market, but the lack of other options keeps them trapped in a downward spiral. Failure to solve the current crisis could not only destroy the livelihoods of thousands of growers, but also lead to massive out-migration, cultural disruption, and serious environmental threats to some of the nation's most valuable and vulnerable regions.

The current price to the producer ranges between 28 cents/lb to unorganised growers and 41 cents/lb for members of growers' cooperatives. Costs of production vary but average around $1.00/lb.

At the same time, the crisis in producer prices has created a buyers market that offers spectacular profits to large intermediaries, particularly transnational roasters and branders. Transnational corporations have expanded their presence in the Mexican market as buyers, processors and retailers. Since Mexico exports 85% of its coffee, the sector is highly dependent on the vagaries of the international market and the interests of transnational actors.

Several factors have converged to distort the market: oversupply, a lack of product differentiation on the global trading level, defective and low quality coffee in the market and high concentration among roasting and branding companies.

The crisis in international prices has also affected the Mexican crop and its perspectives for future production. In the past two seasons, many small growers could not afford to harvest their coffee beans. The National Coalition of Coffee Organizations (CNOC) reports that an estimated 20% of last season's crop was left to rot in the fields last year.

Producers have few defences in the present global context. Since 1989 when the government dismantled the national production-processing-marketing board (Mexican Coffee Institute-Inmecafe), they have had to struggle to take over former state functions. Faced with huge deficits in all areas of basic infrastructure--transportation, processing facilities, financing, and market information-most growers must still sell their unprocessed coffee at below cost to any intermediary who has a vehicle and offers ready cash.

But some have been able to build up strong grassroots growers' cooperatives that can collectively negotiate higher prices, develop new markets and directly export their product. The cycle of crises since 1989 has compelled small growers to seek alternatives and opened the way to the creation of independent peasant cooperatives and small-producers groups. Under adverse conditions, many of these have consolidated their organizations over the years and taken on the difficult tasks of collectively processing and direct-marketing their members" coffee. Their efforts result in producer prices often 20% above the going market price.

These organizations have made important inroads in solidarity and fair trade markets by establishing direct links between consumers and producers. They have increased the quality of their coffees to access gourmet and specialty markets worldwide. Mexico leads the world in the production of organic coffee. The grassroots growers" organizations pioneered organic production in the country and continue to convert to organic to save money on costly chemical inputs, avoid short and long-term environmental damage and take advantage of the premium paid for these coffees.

By combining coffee cultivation with basic foods production and protection of some of the earth's richest biodiversity areas, peasant growers' organizations have marked a path toward socially and environmentally sustainable coffee production in Mexico. Their experiences offer elements for modifying the global model based on principles of equitable trade relations and conservation of cultural and biological diversity.

By Laura Carlsen, Americas Program Director I February 2004

Laura Carlsen is director of the Americas Program (online at www.americaspolicy.org) of the Interhemispheric Resource Center (IRC).