October 10, 2002

Price of Coffee Hits 100-Year Lows

Zimbabwe’s coffee output is expected to fall by more than 25 percent this year because of depressed world market prices and disruptions in the agricultural sector caused by the government's chaotic land reforms, the Coffee Growers Association (CGA) said October 10.

The CGA, which groups Zimbabwe's 130 mostly white coffee growers, said the US$0.50 per pound - the lowest price coffee farmers have been paid in a 100 years - the crop was fetching on world markets would discourage new investment and expansion in the coffee producing industry. In addition, the eviction of some coffee growers from their farms, which the government is seizing for redistribution to landless blacks, has only helped worsen the situation for the country's coffee industry. "Prices on the world market are the lowest in real terms for a hundred years for producers, but this has not manifested itself in the price paid by consumers for the coffee," a CGA spokeswoman told the Financial Gazette. "To produce this (high quality coffee) requires high inputs at a high cost to the producer. At present, in many cases prices do not even cover cost of production."

While the CGA maintained Zimbabwean coffee growers had kept production high at a greater cost given the country's harsh economic environment, the association could not immediately provide details on how much it costs to produce a hectare of coffee. The International Coffee Organisation (ICO), which represents the interests of coffee producers worldwide, says it now costs growers around the world US$0.80 to produce a pound (454 grams) of coffee, which is far below what farmers are being paid for a pound of coffee on international markets.

The CGA said the current instability caused by the government's land reforms had dashed hopes of fresh investment in or expansion of Zimbabwe's coffee industry. Coffee growers have not been spared from the eviction of farmers by the government, which has so far arrested more than 300 white farmers for defying orders that they leave their properties. But the CGA could not give the exact number of coffee farmers who have been forced off their land or arrested for refusing to leave.

The government says it is acquiring the land for redistribution to millions of landless black peasant farmers but critics say most of the confiscated farmland has ended up in the hands of ruling ZANU PF party supporters and President Robert Mugabe's lieutenants. Farmers, who started picking their coffee in April this year, will finish harvesting this month while exports of the commodity to international markets began two months ago. Zimbabwe, which exports 97 percent of its coffee, earned $7 billion last year from 7 700 tonnes of coffee exported last year. The country sells coffee mainly to Europe, the United States of America and Japan. ICO figures show that the southern African country had exported 4 000 (60-kilogramme) bags of coffee in August 2002 alone. Zimbabwe exported 87 579 bags of coffee between September last year and August this year compared to 91 056 exported between September 2000 and August 2001. About 130 mostly white commercial farmers produce 90 percent of Zimbabwe's Arabica coffee while more than 2 000 small-scale growers account for the remainder. The bulk of the country's coffee is grown in Zimbabwe's Eastern Highlands region where weather conditions are optimum for the crop. (FINANCIAL GAZETTE)

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