GE202: Agriculture, Food& Nutrition

in the Developing World_202001

Agribusiness: its possibility and

challenge

Week 7
 Coffee
The world’s most valuable trading commodity after oil

- 125 million people rely on the coffee industry.

- 500 million people are directly or indirectly involved in coffee trade.
- In Italy, there are 110 thousand coffee shops and 300 thousand people are
working. They sell 70 million cups of espresso per day.
- In US, the coffee market produces 19 billion dollars per year and there are
161 million consumers, who receive coffee service from 1.5 million
workers.
- In Japan, 30 thousand people (4.5% of workforce) are directly or
indirectly engaging in coffee production.
Coffee
In Canada…Tim Hortons (Ice hockey player is Canada’s national
identity)

http://www.canada.com/victoriatimescolonist/story.html?id=a7240577-c2f7-4fd3-a3ab-5e5a62ed711c
Coffee
Producing counties and consuming countries (2016)

Producing Countries Consuming Countries

Brazil (A/R) 2595 USA 1230
Vietnam (R) 1650 Brazil 825
Colombia (A) 810 Germany 543
Indonesia (R/A) 660 Japan 409
Ethiopia (A) 384 Italy 330
Honduras (A) 348 France 326
India (A/R) 348
Uganda (A) 288
Mexico (A) 234 Canada 2.4kg/person (2002)
Guatemala (A/R) 204
(1000t)

PNG (A) 40 (2011) Fiji, Samoa, 0

Vanuatu 26 (was 300 in 1967) A: Arabica R:Robusta
Producing counties and consuming countries (2002)

Consuming Countries Producing Countries

India 68.1 India 84.7
China 51.1 China 76.5
Russia 16.5 Sri Lanka 31.0
Turkey 14.7 Kenya 28.7
Japan 13.5 Indonesia 16.5
UK 13.4 Turkey 15.0
Pakistan 9.7 Viet Nam 9.0
USA 8.7 Japan 8.4
Egypt 7.8 Argentina 6.3
Indonesia 6.5 Bangladesh 5.5
(t)
Coffee
The world’s most valuable trading commodity after oil

- Between years 2000 and 2002, in Central America, 600

thousand workers in coffee industry lost their job.
- In 1991, the world coffee industry made 30 billion dollars and
producing counties received 12 billion dollars (40%).
- In 2004, the industry made 55 billion dollars but the producing
counties received only 7 billion dollars (13%).
- The share of the coffee trade enjoyed by producers fell by two-
thirds in ten years.
- MNCs have reaped huge windfall profits from the low price that
they now need to pay for the commodity.
Coffee
The International Coffee Organization

- established by producing counties and consuming

countries.
- was monitoring and controlling price and oversupply.
- realized fair trade.
- US contributed to the ICO.
Coffee industry in the 1990s
- Investment to Vietnam through the World Bank in the
1990s.
- In 2000, Vietnam became the second largest coffee
producing country, next to Brazil.
- Coffee price drastically decreased and the structure of
the market changed.
- The change significantly impacted Latin American
coffee producing countries (Arabica).

Robusta in Vietnam
Arabica/Robusta
- Arabica
- Believed to be high quality, less caffeine, good flavour
- Plantation cannot be automated, intensive labour, high cost

- Robusta
- Low quality, much caffeine, poor flavour and taste, used for
instant coffee and food chain
- Automated plantation, use of chemicals, less labour, low
cost, tolerant to diseases
Coffee
1988-1990 1998-2000 1988-90 to
Average Average 1998-2000
Africa 1 139 961 -1.7
Cameroon 112 99 -1.2
Côte d'Ivoire 232 149 -4.3
Ethiopia 181 177 -0.2
Kenya 89 79 -1.2
Uganda 143 207 3.8

Asia 778 1 413 6.1

India 153 300 7
Indonesia 422 554 2.8
Philippines 70 43 -4.9
Viet Nam 69 459 20.9

Latin America 3 577 4 215 1.7

Brazil 1 496 2 103 3.5
Colombia 754 699 -0.8
Costa Rica 145 128 -1.2
El Salvador 135 112 -1.9
Guatemala 195 293 4.2
Mexico 315 276 -1.3
000tons percent per year
St. Helena Island, a
production site of one
of the most expensive
coffee in the world

And in Vietnam,
improved quality of
Robusta coffee is
expanding its market.

St. Helena●
High quality coffee in the world
Luwak Coffee in Indonesia
Production site on Jawa Island
High quality coffee in the world
Luwak Coffee in Indonesia
Production site on Jawa Island 50,000 IDR/cup
High quality coffee in the world
Luwak Coffee in Indonesia
Café in Grand Indonesia Mall in Jakarta 100,000 IDR/cup
In Singapore: 60 SGD
In Tokyo: 10,000 JPY
 Coffee industry in the South Pacific
PNG: Produces 1.1 million bags of fine Arabica coffee, have
gained recognition in the specialty market

New Caledonia: 5,000 bags

Vanuatu: 600 bags export, aiming to widely sell high quality
coffee (Tanna coffee)
Coffee industry in the South Pacific
• Fiji coffee: the coffee of choice in the tourism sector.
Approximately 50t of roasted Fiji coffee is exported
annually.

• Fiji’s production amount: nearly 0

• About 5% grown on the Island of Taveuni in the 1990s.

• Arabica green beans imported from PNG, roasted and

packaged in Fiji and labeled as Bula coffee.
Coffee industry in the South Pacific
Samoan coffee: a blend of locally grown robusta (< 5%) and
imported PNG arabica coffee (imported as green beans
and roasted in Samoa)
Successfully competes with imported instant coffee

Both in Fiji and Samoa,

- Source of profit: a large margin between green bean prices
(PNG product) and the retail price for roasted coffee
- Targeting domestic market (import substitution)

The green been price does not attract local growers.

Coffee industry in the South Pacific
Solomon Islands
Aiming to export a specialty differentiated coffee, like
Jamaican Blue mountain (11.3t in 2011)
Varivao Holdings Limited, the EU-funded Increasing
Agricultural Commodity Trade (IACT) project.
- improved quality
2t in 2011
4.7t in 2012
5.5t in 2013
10t in 2015?
http://www.spc.int/en/component/content/article/1382-coffee-producer-reaches-new-heights-.html
 Coffee industry in the South Pacific
Varivao Holdings Limited:
a leading coffee buyer and processor in the country, with its own coffee farms, also buys green coffee beans
from coffee suppliers in the Guadalcanal, Isabel, South Malaita and Choiseul provinces. 
However, there was no recent update.

Challenges?

Possible strategies?
- Secure market, do not have to compete with giant companies
- Orientalistic ads (“exotic coffee of paradise”)
- Fair-trade movement

The majority of coffee producing countries:

Tropical highland
 Agribusiness
• Agricultural business, also known as agribusiness, is the
industry or business of production, processing and
distribution of agricultural commodities, such as livestock
and crops.
– locals locate and secure markets abroad
– agricultural trade relation forged among groups of different
geographical areas e.g WTO & PACER Plus
– involves the ‘vertical and horizontal’ integration of
the various stages of the agricultural food system.
 Chile: Agricultural Globalization
(Chilean case study: Warwick Murray)

• Blueberries
• Avacado
• Grapes

Vineyard

https://quentinsadler.wordpress.com/tag/errazuriz/
 Chile: Agricultural Globalization:
A success
• Among developing nations, Chile is relatively successful –
WHY?
• Agricultural globalization through export oriented
reform
– opened up market
– attract foreign investment
• Agricultural exports increased substantially
– fruit exports
– bid foreign companies to set up orchards ; export to Europe,
Japan
& US for winter markets
• Led to macroeconomic
success
- diversified economic base
 Globalization: Costs
• Social implications
– promote inequality
– exploitation of women workers (cheap labour)

• Economic implications
– seasonal unemployment
– vulnerability of monoculture

• Environmental implications
– high use of fertilizers (environmental impacts are high)
– irrigation (soil leaching)
 Commodity chain of Fiji Kava
(Reading by W. Murray, 2000)

Differentiated kava markets

(i) beverage in region & Pacific Rim

(ii) pharmaceutical to European market
(iii) nutraceutical to N&S America
(iv) herbal medicines to Asian markets
 Kava Export Growth
• Kava export sector developed in 1998
• 1990s pharmaceutical demands shift from
synthetic drugs to organic products
• Export value grew ($3.3 m in 1997 to
$34.7m in
1998)
• Kava replaced copra as main cash crop in
Lomaiviti, Kadavu & Taveuni
Local response – Taveuni Island
 Local response – Taveuni Island
• make up ~10% of country’s kava farmers
• sell to local and overseas markets
• middle-men direct export to Sydney for locals there
• higher demand by overseas markets in late 1990s
 Taveuni Island - Outcomes
• Growers and middle-men’s income increased
– purchase of white goods
– electricity generators for homes
– satellite dishes in Somosomo
– cars & four wheel drives
• Dietary change
– tinned food and processed food sale increase (this trend has
also been observed in Kadavu Island, after Cyclone Winston
2016)
 Taveuni Island - Outcomes
• Higher incidence of crime reported
– kava theft widespread
– fights & injuries
– saw dust mixed with pounded kava
• More use of fertilizers & pesticides
• Prosperity short-lived
– premature harvesting spoil quality
– By 1999 demand dropped
– income dropped for small holder farmers
 Taveuni - Conclusion
• benefits to specific groups only
– large scale growers & middle-men able to invest
surplus
– regressive social impact
• small farmers gained little in the long run
 Potential of agribusiness in PICs
• Add value
• Attract consumers beyond the region
• People’s mentality?
• How to deal with negative side effect?
 Assignment 2: Research essay
• Potential of agribusiness
• Pick one particular agricultural product that has business potential
in your country.
• Discuss:
• Reasons why you think the product has business potential in
your country, marketing plan, challenges, what value is added
and how, etc.
• Find a similar case from outside of the Pacific region and
compare – what can you learn from that case?
 Assignment 2: Research essay
• Steps
• Find a topic and make a research essay proposal in week 8
during tutorial hours (your topic must be approved)
• Requirement explained in week 8 in tutorial
• Your proposal will be returned with feedback
• Conduct library/online research and write an essay.