Members of the International Coffee Organization (ICO) are meeting in London this week to convene the first-ever Consultative Forum on Coffee Sector Finance.
The forum was developed to address challenges faced by small and medium-sized farmers and traders in their efforts to manage risk and access credit specifically related to coffee trade. It primarily focuses on risk-management tools for green coffee price volatility and how they can be improved to better serve the needs of small and medium-sized producers.
About 25 million coffee farmers, many small and medium-sized growers, depend on coffee for their livelihood. The United States, for example, imported nearly $7 billion worth of coffee in the last 12 months, supporting a $38 billion industry according to the Office of the U.S. Trade Representative.
“The progress made through this Forum will help maintain a stable supply of high quality coffee needed to ensure a vibrant U.S. coffee industry and support hundreds of thousands of Americans who earn their livelihood in this industry," said U.S. Trade Representative Ron Kirk in a statement.
Green coffee prices can fluctuate dramatically, making it difficult for growers and traders to plan. Although market-based tools such as hedging instruments are available to mitigate this risk, there are often significant barriers, such as lack of knowledge, regulatory and institutional obstacles and financing, that make these tools largely inaccessible to small- and medium-sized coffee growers, USTR said.
The forum explored a range of potential risk management tools for small and medium-sized growers. “Among them were direct and longer-term contracts between coffee producers and roasters, the use of producer cooperatives and associations as a way to pool risk, and making market-based tools such as hedging instruments more accessible to small and medium-sized producers,” USTR said.
In addition to the United States, the forum included government and industry representatives more than 38 countries and the European Union.
The world’s leading coffee producing countries include Brazil, Colombia, and Vietnam.