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Low coffee prices leave German coffee roasters unhappy.

Germany has virtually turned into a "coffee buyer's market", as a Hamburg based coffee roaster observes in an interview with this writer. Consumers have had a wonderful time as coffee prices have plumetted on the world markets but, surprisingly now, there have been expressions of "concern" among the consumers over the poor producing countries of the third world. A hitherto phenomenon is now making the waves in many German food chain stores such as Rewe, Edeka, Co-op and Asko: roasted coffee is now being sold at a surcharge, the proceeds for which will be earmarked for small growers in the coffee producing countries of the third world.

The phenomenon which was until now a unique characteristic of Germany's so-called "third-world shops" -- outlets which sold, mainly, products from third world countries and ensured that a part of the proceeds was earmarked for the developing countries -- is being accepted by the buying masses. Coffee is sold at a price that is almost 2 DM higher than the regular price of a pound of coffee. An organization which calls itself "Transfair" espouses the cause of promoting fair trade practices with the third world. This apex organization has been formed by 22 organizations active in development aid and Church sponsored charity. "The small growers have always been the losers. Even when prices were much higher, they have been getting less money from the middlemen," Dieter Overath, the organization's general secretary, has been saying.

According to Overath, "Transfair" ensures that the producers, who have allied themselves in cooperatives of small growers, get the pre-financing of the crop. The organization pays a minimum price of 126 cents for a British pound (0.450 kg) of coffee. This would be two and a half times more than the price prevalent at the world markets last summer; however, by today's comparison, the price would still he 70% higher.

In the Netherlands, where this model has been operating since two and a half years under the aegis of the "Max-Havelaar-Foundation," the market share of the more expensive coffee amounts to some 2.5%. But Overath's forecast is that this coffee would account for about 1% of the total consumption of coffee in Germany by the end of this year. This volume, according to Overath, would correspond to some 10 million packets of coffee and generate an extra earning of some 10 million DM for the poor producing countries.

But this "Transfair" model has also provoked criticism from the big roasters and suppliers. A spokesman of Jacobs Suchard commented that his company would not introduce such a type of coffee in the market because it would keep the price artificially high and thus encourage surplus production. A price oriented to the supply-and demand realities of the market was a much more stable and effective means of helping the producing countries. Other big names of the German coffee trade have also been voicing similar views. But Tchibo's Hasso Kaempfe has not taken a rejectionist view of the campaign which he describes as a "flanking measure." However, Kaempfe was not sure who were going to be the real beneficiaries of the money thus earned. In his view, it was all the more important to intensify efforts to achieve a new International Coffee Agreement.

The last coffee agreement collapsed in July 1989 because of sharp altercations over the firm export quotas, price distortions and quality. This had, in turn, precipitated a fall in coffee prices. On an average, the German consumer pays less than 7 DM for a pound of coffee. This price poses a sharp contrast to the price of 12 DM in 1989. However, transportation, processing, and taxes account for the largest share. The share of raw coffee is only between 1.50 and 1.80 DM. The money received by the planters after these overheads, is less: depending on the structures of the producing country, they are 40 to 80% of the world market price.

The Hamburg based Association of German Coffee Processors has been pleading for raising the entire price level for coffee. The Association has been closely monitoring efforts to restart the negotiations in London for a new agreement with the participation of 50 exporting and 20 importing countries. If the talks end on a successful note, the Association says, earnings for the producing countries could double again from the present six to seven billion dollars which was prevalent at the time of the agreement.

German consumers are, anyway, not sensitive to the fluctuating coffee prices. Annual coffee consumption has been around 184 liters per person in West Germany. The German coffee trade has been calling for a "more stable market" with higher prices. If the growers received too little money, they would neglect the cultivation of the coffee plantations, which, in effect, would mean that the quality would suffer, Kaempfe argues. There was also the fear that they would, as a matter of fact, completely discontinue cultivation.
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Author:Mehta, Manik
Publication:Tea & Coffee Trade Journal
Date:Mar 1, 1993
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