Opportunities for small coffee producers.
Besides the highly concentrated mainstream market dominated by international trade companies and multinational coffee roasters, another intersting market is emerging; the niche market of smaller trading companies dealing in specialty, high quality coffees or coffee from specific countries. Prospects in this market are very good, the demand for specialty coffee is expected to continue growing, not only in the US but also in Europe. Besides a good quality coffee a profesional service is requiered by the importers and roasters. Cooperatives of small coffee producers do have an comparative advantage regarding production cost and coffee quality. Small coffee farmers normally live in the mountainous areas of Latin America and Africa were in the lowlands large plantations dominate. Due to the high altitudes the climate conditions for coffee production are perfect, combined with selective coffee picking are good product can be offered. In order to obtain a better price for the quality produced, the coffee cooperatives do need to export the coffee themselves. Therefore direct market-linkage and the availability of working capital is a pre-condition.


A bit of history

Since the late 1980s and under pressure of the World Bank and International Monetary Fund most coffee producing countries have liberalised their markets. One consequence has been that subsidies for coffee production and agricultural services have been reduced and private exporters have become the main players in world trading. Although farmers do now receive a greater share of the export prices, they are much more exposed to sudden price fluctuations associated with free market forces. In recent years the world market price of coffee has fallen dramatically. In december 2000 international coffee prices hit a 30 year low with arabica selling at $ 0.64 per pound and Robusta at $ 0.33. In 2001 it further lowered till $ 0.47 per pound for arabica. 2.4 The trade chain of coffee
The dominant position of traders due to developments mentioned in the foregoing part, has resulted in a system whereby small coffee producers do not have direct access to the export market. The price of coffee is set in international coffee exchanges in New York (for arabica) and London (for robusta).

Concentration in coffee trade
Low and volatile coffee prices coupled with increased concentration at roaster level have forced the coffee trade to change its structure since the 1980s. As a result the structure has become much more concentrated, the largest trade company being Neumann Kaffee Grupe with a market share of 16%. Like the trade structure also the international roasting market is highly concentrated and controlled by a handful of large companies such as Nestlé (24%), Philip Morris (25%), Sarah Lee (7%), Proctor & Gamble (7%) and Tchibo who capture most of the value added linked with coffee processing and retailing. Farmers receive approximately 20% of the retail price while about 70% of the wealth generated by world sales is captured outside the producing countries. The share taken by international intermediar intermediaries in increasing and is reflected in the growing difference between consumer and producer prices in the last twenty years. Between 1975 and 1993 the intrenational coffee price declined by 18% but that paid by consumers increased by 240%.