Injustices in the Coffee Industry - Case Study Example

INJUSTICES IN THE COFFEE INDUSTRY by Student’s Name Course Code + Name Professor University City/State Date Injustices in the Coffee Industry Introduction Over the decades, the coffee industry has been one of the primary earners for different countries. Notably, nations such as Kenya, Ethiopia and Uganda generate a majority of their revenue from the production of coffee beans. Additionally, states like England and United States of America derive significant amount from manufacture and selling of coffee products. Coffee stakeholders face numerous injustices even though the industry is vital to the economic growth of various republics. Many producers receive low payments for their products and limited information on the production of high-quality coffee beans. Also, some lack access to credit facilities that are influential in funding production of coffee. Retailers and wholesalers exploit consumers through unnecessary overpricing of coffee products. Further, they exploit producers by acquiring their coffee beans cheaply. On the other hand, some producers sabotage the manufacturing process as they sell their farms abruptly; hence, the shortage of raw materials for production. The knowledge of the various injustices in the coffee industry on producers, retailers, manufacturers and sellers is necessary to persons that aim at venturing into the business. Injustices on Producers Farmers are the primary stakeholders in the coffee industry. Production and selling of coffee are vital to the livelihood of millions of them globally. Coffee markets in countries such as Kenya and Ethiopia in Africa are skewed. As a result, most brokers in such nations fail to pay agriculturalists in time due to growers` lack of knowledge of business terms and disparity to sell their coffee at a profit. For instance, McGhee (2011) argues that farmers in Kenya often experience late payments for their coffee berries. Most dealers sell these crops through auction and only compensate farmers six months later. A delay of funds pushes most coffee farmers in that country to acquire loans to support their farm activities and livelihood. Similarly, in Ethiopia the government sets relatively low prices for coffee farmers. Thus, most do not reap maximum benefits from their production activities. The trend of low and late payments hurts farmers since they hugely depend on the cash from the sale of coffee beans for surviving and funding farming activities. Additionally, most of them of them invest vast sums of money in leasing lands, cultivating, paying labourer and purchasing farm inputs; hence government and brokers should consider that before resorting to underpayments. Equally important, coffee farmers face numerous weather condition challenges that affect the production of pure and organic coffee for consumption. The climatic conditions range from extreme temperatures to lack of organic fertilisers. For example, Kenya farmers spend more money to grow extra trees to provide shades and protect their coffee from extreme temperatures. They use expensive artificial fertilisers to grow their coffee beans and often suffer during dry spells due to lack of knowledge on moisture conservation process. According to Karanja and Nyoro (2002), the government of Kenya does little to help the farmers, but expects farmers to produce high-quality coffee berries. According to McGhee (2011, Ethiopian coffee farmers are ill equipped and lack basic farm tools and fertilisers to grow their products. The two government are unfair to farmers as they heavily tax their products, but offer little help. Lack of government help affects the quality of coffee the two nations produce. As a result, it affects the revenue collections because low-quality beans fetch less revenue to a country as compared to high-quality ones. The governments should educate farmers on the best farming practices and provide subsidies on farm inputs such as fertilisers and seeds to facilitate production of high-quality beans. Further, coffee producers have poor access to credit facilities. Financial stability and access to loans enable farmers to fund most of their farm activities and maintain production of high-quality products. Coffee growers have difficulty in obtaining bank loan from individuals due to the high-interest rates they attach to their loans. May, Pots, and Mascarenhas (2004) states that most banks and persons assume that coffee growing is a risky business. Therefore, they charge high interest for their loans and credits. This action is unfair to coffee producers since they are like other citizens and banks need to afford them equal treatment in loan acquisition. Additionally, other credit facilities exploit the farmers’ desperation for cash and engage in unscrupulous business activities. For instance, some offer huge loans with short and strict timelines, but huge fines in case of default. Such practises stress coffee cultivators and prompt some to give up the business. Also, the strict guidelines in the acquisition of loans result in the lack of capital for producers. Consequently, most of them quit the business due to their inability to fund the pre-harvest costs. Countries suffer loss of revenue and reduced taxes in the event that farmers quit coffee growing. Injustices on Coffee and Agricultural Advisors Additionally, various governments overlook the function of coffee and agricultural advisors. These persons play a crucial role in the production of high standard coffee beans through advising producers on the perfect policies to use. They educate growers on important farming techniques, quantity and mode of fertiliser applications, and right timing for harvesting. Most of these consultants perform their duty and ensure farmers produce quality coffee. Nonetheless, some governments underpay and overwork them. Also, some advisers are ill equipped; hence, demotivated to continue performing their task. The injustices committed these individuals have led to production of low-quality coffee by some nations since most of them have abandoned their work. Also, planters suffer and experience low production due to lack of knowledge on farming methods, fertiliser applications and modes of harvesting coffee. Injustices on Coffee Dealers What is more, coffee dealers face numerous injustices in the industry. The problem of terminal market manipulation affects most coffee sellers especially in London and New York. Selling of coffee beans is just like any other career where there are particular market players. The problem of terminal market manipulations allows any individual to sell or buy coffee without any restrictions. The new trend is affecting market returns for traders as their role is slowly diminishing. Currently, the number of coffee dealers in New York and London terminal markets are twenty-five percent of the whole population whereas a majority of persons are wealthy bankers. The presence of banks has resulted in fluctuations of prices with coffee growers earning large amounts for their produce. The new development is unfair to sellers since it undermines their role in the markets and reduces their returns on investment. According to Linton (2005), the problem of urbanisation affects coffee dealers in the industry. Most rural areas are developing into established towns due to the expansion of infrastructure, farming and agricultural activities. Urbanisation is affecting the role of coffee sellers since some farmers are selling their farms to wealthy individuals. For example, farmers coffee growing areas in Kenya and Cost Rica have sold their farms at higher prices than the accumulated profits they would earn forever. The coffee sellers in such areas have seen their activities disrupted due to inadequate coffee beans to sell. Although the decisions are wise on producers’ point of view, they are unwise in the coffee industry because the lands they sell for settlement are more suited for farming activities. Equally, coffee dealers face the problem of stagnated prices in the industry. Most people work hard daily to improve their worth and gain maximum returns for their activities or business. According to May, Pots, and Mascarenhas, G. (2004), persons cannot say that of coffee sellers because of the stagnated prices in the industry since the early 1970s. Over the years, the prices of green bean have been fluctuating, but buyers have maintained the same prices. As a result, sellers have had to compromise on their profits from sales to ensure they clear out their stock. The action of buyers is unfair since they increase the price to consumers when green beans prices rise, but still purchase coffee from sellers at the same price. Consequently, they make huge profits and revenue at the expense of dealers. Injustices on Consumers Additionally, coffee consumers face injustices from retailers and wholesalers. Customers are often happy and satisfied when they buy their products at regular prices. The rise in consumer good prices raises alarm and question marks over the reputation of retailers. In the coffee industry, sometimes vendors raise prices without substantial reasons such as a shortage of coffee berries or unreliable weather conditions. In most occasions, coffee retailers raise prices of their products to acquire the extra money that goes to producers. Most traders do this to compensate them for their hard work and low payments from dealers. The raising of prices is unfair to consumers since they are not part of production and processing chain. These actions portrays vendors as selfish because they are not willing to compromise on their profits instead they pass the burden to consumers. Also, some retailers raise prices as a result of their knowledge that coffee is addictive, and most users cannot survive without it. The unfair treatment of clients prompts some to quit taking coffee; hence, reduced customer base for retailers. Even more, the adoption of the free market system affects the growth of the coffee industry. Free markets facilitate easy entry of a person in the business. This trend allows the supply of cheap labour and raw materials to coffee manufacturers. Previously, International Coffee Agreement regulated the prices and activities in the coffee markets. Major coffee companies such as Nestle influenced the liberalisation of the coffee market to enjoy cheap supplies direct from producers. This action is unfair to coffee sellers whose role has been eliminated. Also, most farmers suffer due to their inability to negotiate for better prices for their products. For instance, Baffes (2006) state that Ugandan farmers receive only 2.5 percent of the retail price for their coffee as the other 97.5 percent goes to wholesalers and retailers. Additionally, consumers are not spared either as they still buy coffee at higher prices despite the cheap cost of acquisition of raw materials by producers. Manufacturers, wholesalers and retailers exploit other stakeholders as they make huge profits at their expense. What is more, overproduction of coffee by farmers has affected the coffee industry. Excess production of goods or services leads to surplus supply that result in reduced demands; hence, reduction in prices of commodities. The selfishness of producers prompts many of them to produce large tonnes of coffee to maximise their returns and make huge profits. The irrational act of coffee farmers has affected the industry with most stakeholders crying foul over the reduction in prices of coffee. The action of the farmers hurts the industry since most persons do not realise returns for their investments, but instead some make loses. Overproduction of coffee in the past three years has driven the prices down by approximately fifty percent thereby ruining up to twenty-five millions of farmers worldwide. Also, the industry is on the verge of collapsing due to low returns that cannot support production activities of most stakeholders. In summation, there are numerous injustices in the coffee industry that affects the production and selling negatively. Most governments do not support the coffee industry, but heavily tax farmers and coffee products for exports. These authorities expect production of high-quality coffee even though they limit valuable information on production and harvesting of the product. Additionally, coffee sellers exploit farmers by paying lowly for their goods and services. The stagnated market prices affect brokers as they sell coffee beans at the same rates despite the ever-fluctuating prices in the industry. Also, manufacturers exploit both farmers and dealers through the free market system that facilitates the cheap acquisition of raw materials. They acquire fresh beans cheaply, but still sells their final products extensively; thus, making insane profits at the expense of both the producers and consumers. Besides, producers sabotage the production process through the selling of their farms that leads to shortage of raw materials for industries. The presence numerous injustices in the coffee industry has threatened the growth and long-term existence of the business. As a result, various stakeholders should evaluate the crimes and device appropriate means to stabilise and grow the industry. Coffee industry supports many livelihoods worldwide; thus, should be protected and developed. References Baffes, J. 2006. Restructuring Uganda's coffee industry: why going back to basics matters. Development Policy Review, 24(4), pp. 413-436. Karanja, A. and Nyoro, J. 2002. Coffee prices and regulation and their impact on livelihoods of rural community in Kenya. Available at: http://fsg.afre.msu.edu/kenya/o_papers/coffee_study_sc.pdf (Accessed: 10 October 2015) Linton, A. 2005. Partnering for sustainability: business–NGO alliances in the coffee industry. Development in Practice, 15(3-4), pp. 600-614. May, P., Pots, J. and Mascarenhas, G. 2004. Sustainable coffee trade. Available at: http://www.iisd.org/pdf/2004/sci_coffee_contracts.pdf (Accessed: 10 October 2015). McGhee, W. 2011. East African Coffee Farmer Face Multiple Challenges. Available at: http://www.blackgoldfoundation.org/east-african-coffee-farmers-face-multiple-challenges/ (Accessed: 10 October 2015). SOLUTIONS TO INJUSTICES IN THE COFFEE INDUSTRY by Student’s Name Course Code + Name Professor University City/State Date Solutions to Injustices in the Coffee Industry Currently, coffee stakeholders industry faces challenges that threaten to cripple the industry. Shareholders such as consumers experience delayed and underpayments, limited access to credit facilities and expensive farm inputs. Equally, sellers face a shortage of coffee beans, fluctuating prices and manipulation of terminal markets in nations like the United States of America. Consumers are not spared either as retailers over charge and sell them substandard coffee products. The collapse of the industry will have dire consequences on the global economy. As a result, nations and stakeholders should devise viable solutions. States should protect farmers from exploiters, provide subsidies on farm inputs and train more coffee and agricultural advisors to facilitate mass production of quality coffee beans. Equally, stakeholders such as consumers, producers and manufacturers should form unions to represent their interest and fight for their rights. Adoption of solutions to the challenges and injustices that face the industry will result in protection of humans’ rights, increased production, reduced the cost of operation, and maximize revenue. Farmers in the coffee industry have faced numerous injustices such as underpayment of growers by other stakeholders like dealers and retailers. Other vendors offer late payments that come after six months. The problem of delayed or underpayment affects the industry negatively. As a result, various nations should liaise with major stakeholders in the industry to solve these injustices. According to Biswas-Tortajada and Biswas (2015), coffee farmers should form trade unions with vocal leaders to fight for their rights. Trade unions will represent their interest to brokers and fight for timely payment for their product. Additionally, they will demand fair compensation for coffee growers since it is their right to receive better pay and treatment from other stakeholders. Formation of trade unions helps to protect farmers’ right to fair pay. Further, nations through the ministry of agriculture can formulate policies that encourage respect for farmers’ rights. For instance, they should form rules based on the theory of relativism that prohibits dealers from exploiting farmers and set huge fines for those found guilty of the offence. Besides, states should resort to purchasing coffee berries from farmers at the rightful prices and offering timely payments. This act will liberate coffee farmers from oppressors such as dealers and other manufacturers. Also, governments should lease lands to coffee farmers at fair rates to save them the agony of spending large amounts of their profits in farm acquisition. Alternatively, they can use their returns to improve their living standards through acquiring basic need as demand by the bill of rights. Equally important, coffee farmers face adverse climatic conditions that affect production of quality and pure coffee beans. Authorities can help resolve weather conditions such as extreme hotness through the construction of greenhouse that enables growers to control temperatures. Equally, greenhouses provide maximum shade that benefits growth and development of coffee beans. Production of quality coffee helps countries and agriculturalists as it generates revenue. Further, nations can provide organic and inorganic fertilizers to coffee growers at subsidised fees. It will not only contribute to improving the quality of coffee farmers produce but also motivates growers to engage in farming activities since the operational cost will be low. Authorities should provide coffee farmers with relevant tools and machines for productions. For instance, they can buy automated harvesters and hire it to various planters at a fee. The adoption of mechanization is the best practise based on the theory of utilitarianism since farmers and authorities can derive maximum profits from its use. These machines help farmers in harvesting; thus, they reap coffee in the right way. Also, they save producers operational cost as they do not need to employ expensive labourers. For example, Stauffer (2014) states that mechanization among coffee farmers in Brazil has saved each of them up to 200 reais per hectare during harvesting. Additionally, states can provide better irrigation methods to help farmers save water and survive during drought periods. This practice facilitates the production of coffee beans throughout the year that results in extra revenue for government and farmers. Adoption of these results in instant results as growers benefits immediately. Equally, growers experience difficulty in loan acquisition because banks charge exaggerated interest. Inability to acquire loans affects farming activities; hence, production of low-quality coffee. Nations can save the future of the coffee industry through offering cheap loans to farmers. Cheap loans ensure financial stability that enables growers to purchase farm inputs such as seedling and fertilizers. Also, it allows them to acquire labourers for the production process. Cheap loans facilitate the acquisition of machines required for the production of high standard coffee. For example, Stauffer (2014) argues that Bruno Regum, A Brazilian, used a loan to purchase a combined coffee harvester. The machine enhanced his production and reduced his operational cost as he does not require coffee pickers. Equally important, coffee farmers through various cooperatives should enlighten banks and individuals on how the industries operate and the exact returns. Banks and persons can learn that the industry is just like other sectors; thus, they should offer credits at reasonable interest rates. Law enforcers should track down banks or individual who mistreat or exploit coffee farmers. This move ensures that banks respect the bill of rights and do not discriminate against producers. Adoption of these policies profits nations as they generate massive revenue from the industry. Also, farmers benefits as will become financially stable and avoid mental torture due to oppression from banks and greedy persons. Additionally, coffee advisors suffer in the hands of some governments. Some nations overlook the activities of coffee and agricultural advisers even though they play a crucial role in the production of high-quality coffee. Contrariwise, authorities should take the work of advisors seriously. They should appreciate their role in the industry through fair financial compensation. Further, they should allow advisors to work for eight hours only as the bill of rights demands and pay them if they grind for extra hours. Nations should equip advisors with necessary equipment and fund their transportation cost to different farms as this motivates most of them to work hard and enlighten farmers. Besides, Giovannucci and Koekoek (2003) believe that states should invest in training of coffee and agricultural advisors. The increase in some advisors benefits farmers as they acquire vital knowledge in production and harvesting of coffee. Consequently, they produce high-quality coffee. What is more, coffee dealers face injustice in the markets. Currently, most sellers face the problem of terminal market manipulation that affects their role and returns on investment. The problem mainly affects merchants in United States of America and United Kingdom. Coffee sellers can solve this issue through the formation of a legal union. Retailers can notify the authorities of their concern through union leaders. The government can formulate policies based on utilitarianism theory to control terminal markets and put strict measures to curb manipulation. Control of terminal markets would result in huge profits as opposed to when they are free to all. Equally, the union can formulate rule and regulations to guide the behaviours of sellers and take legal actions against intruders in the coffee market. Further, the law mandates legal unions to come up with strict rules that restrict entry of foreigners into the markets. The recommendations protect the roles of sellers in the industry and ensure most of them realize maximum returns on their investment. Further, the use of land should be controlled in most countries to protect the environment. Today, most nations are experiencing urbanizations that rob them of valuable agricultural farms as wealthy people settle on them. The same problem is affecting the coffee industry as growers prefer selling their farms at a profit to settlers to cultivating berries. Nations can save the coffee industry through the adoption of policies on agricultural land use. States should provide specific areas for settlers to protect fertile places with perfect conditions for coffee farming. Besides, they should prohibit coffee agriculturalists from selling their lands to settlers but instead do so to growers. Influential leaders should authorize local authorities to adopt an agricultural zoning ordinance to facilitate protection of coffee farms. Additionally, producers should notify manufacturers and sellers of their intention to sell their lands or seize growing coffee to them time to look for alternatives for raw materials. These policies aim at protecting the coffee industry and ensuring a constant supply of fresh and quality beans to manufacturers. Equally, most dealers experience the problem of stagnated prices. Coffee prices have stagnated since the 1970s despite the economic changes. Buyers insist on paying for the same prices even though they overcharge consumers. Sellers should join hands and work as a unit to curb this problem. Linton, A. (2005) argues that sellers should have a team to negotiate with buyers and agree on prices that are fair to all. Further, they should devise a way to deal with the fluctuating price of green coffee from producers. For instance, sellers and buyers should agree that if the charges of green coffee rise by twenty percent sellers will increase their prices by twenty-five percent. Adoption of such a formula will save dealers from exploitation by buyers and ensure they derive maximum returns on their investment. Additionally, consumers face injustices from stakeholders such as wholesalers and retailers. Some sellers exaggerate prices of coffee products to compensate producers for low prices. Exploiting consumers is unethical, and sellers should desist from it. Conversely, sellers should compromise on their profits and compensate producers. Equally important, Linton (2005) believes thatsellers should advocate enough pay to consumers through formations of coffee stakeholder union. All stakeholders should join this union and formulate policies and set rights prices for producers. Also, they should set prices for retailers to protect consumers from exploitations. Further, consumers should formulate a body to fight for their rights. The body should advocate for fair treatment of clients through the correct pricing of coffee products. As well, they should demand that growers and manufacturers to produce high-quality coffee that meet expectations. Even more, the liberation of the coffee markets affects sellers and producers negatively. Free entry into international coffee markets enables mass entry of wealthy businesspeople who disrupt the profitable coffee industry. They use their wealth to acquire raw coffee berries cheaply. The reinstatement of International Coffee Agreement (ICA) can save the sector from selfish organizations and manufacturers. ICA can prevent free entry of a person in the industry through strict and demanding policies. The body can ensure the acquisition of raw coffee beans at the right value through regulation of prices. Further, ICA can negotiate prices for either sellers or manufacturers to ensure each party is treated fairly during transactions. The activities of ICA will save the role of dealers since will no longer be allowed to see directly to manufacturers at cheap prices. Not only will ICA protect sellers, but also consumers who experience price exploitation. The reinstatement of ICA will ensure each stakeholder makes right profits that reflect their participation in the coffee industry. Besides, overproduction of coffee berries affects the pricing. Greedy farmers resort to mass production of coffee beans to maximize revenue and profits. Excessive production hurt their returns and leads to losses. Affected stakeholders such as sellers can eradicate this problem through the enlightenment of farmers. Other interested parties should educate growers on the theory of demand and supply. They should notify farmers that overproduction leads to surplus supply that leads to reduced demand; hence, low prices for coffee beans. Cheap selling of coffee beans translates losses that have a grave impact on producers. Equally, stakeholders should inform excessive loss renders most of the producers jobless. Educating producers on disadvantages of overproduction can save the industry from collapsing. In conclusion, adoption of solutions to the challenges and injustices in the coffee industry promises massive growth and development. The formulation of policies that guides markets will protect the industry from selfish intruders whose aim is to make money and cripple the industry. Equally, nations can improve the production of high-quality coffee through offering affordable loans to producers. They can protect growers from oppressors through the formulation of strict policies. Besides, states can protect the production of raw material through the formulation of strict land policies that will prohibit the unnecessary selling of farms to settlers. Further, stakeholder such as consumers, producers or manufacturers can form unions to fight for their rights. Such unions play a role in price regulation and facilitate production and sale of high-quality coffee beans. Stakeholders such as manufacturers and dealers can agree on relevant policies to resolve the issue of fluctuating prices in the industry to ensure all parties gain. Evidently, these solutions aim at bringing order in the coffee industry and facilitating maximum benefits for all stakeholders. References Biswas-Tortajada, A., and Biswas, A. K. 2015. Sustainability in Coffee Production: Creating Shared Value Chains in Colombia. London, England: Routledge. Giovannucci, D., and Koekoek, F. J. 2003. The state of sustainable coffee: A study of twelve major markets. The State Of Sustainable Coffee: A Study Of Twelve Major Markets, IISD, UNCTAD, ICO. Stauffer, C. 2014. Brazil’s Coffee Farmers Are Yielding To The Machines. Available at: http://www.businessinsider.com/r-brazils-drought-hit-coffee-belt-turns-to-machines-to-lower-costs-2014-8 (Accessed: 11 October 2015). Linton, A. 2005. Partnering for sustainability: business–NGO alliances in the coffee industry. Development in Practice, 15(3-4), pp. 600-614. Read More