Coffee’s Bitter Harvest

Ernesto Alonso has coffee in his blood.

He grew up on coffee farms. He planted the dark green bushes on steep and shady mountains. He helped workers harvest the bright red coffee berries. He spread the beans in the hot sun to dry.

And so now, when the 56-year-old looks around the ruins of his 100-acre coffee farm, despair crosses his face. He has laid off most of his workers. The bank wants to seize his farm. The coffee that has sustained his family for generations is nearly worthless.

“I don’t know what is going to happen,” Alonso said, sweeping his arm across rows of coffee bushes on a hillside overgrown with jungle.

From Africa to Latin America, coffee farmers like Alonso have been hit hard by a glut that has sent wholesale prices tumbling to their lowest levels in real terms in more than 100 years.

The 25 million families who depend on coffee for jobs face an economic and social crisis similar to America’s Dust Bowl in the 1930s. Thousands of families camp out by the side of the road. Violence and social unrest have soared. Hunger, misery and fear stalk entire towns.

In Colombia and Kenya, coffee growers have begun planting drug crops.

In Vietnam, which is largely responsible for the glut, farmers clearing forest land to grow more coffee have clashed with local ethnic minorities.

In Central America, more than 540,000 part-time and permanent jobs have been lost.

“Many people are emigrating because of coffee’s low price. We are living in poverty,” said Luis Toledo, a 28-year-old from Oaxaca, one of Mexico’s coffee-growing regions. “Many people have gone to the U.S., including almost all the young people. There are more jobs in the north than here.”

With coffee prices at record lows for the third year in a row, the fall harvest promises to be even more bitter.

The extent of the crisis has largely been masked by robust retail coffee sales. The big coffee companies have continued to report healthy profits. Coffee outlets such as Starbucks have maintained, and in some cases even increased, their prices for coffee.

But those profits aren’t trickling down.

Robert Kanyi, a 90-year-old Kenyan coffee farmer, grabbed his head in disbelief when a visitor told him that coffee drinkers in the United States pay up to $3 for an espresso made with Kenyan beans.

“We don’t see that kind of money here,” he said. “If we did, we wouldn’t be poor.”

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There’s a simple explanation for the fall in coffee prices: too much coffee.

This year, worldwide coffee consumption is expected to equal about 105 million 132-pound bags of coffee. But coffee producers are expected to harvest 10 million more bags than that. Worse, coffee-growing countries already have 40 million surplus bags stored up.

The problem began with the fall of the Berlin Wall. For years, a worldwide coffee agreement had kept prices artificially high to prevent the development of pockets of poverty that would be susceptible to Communist takeover. When the agreement collapsed, the markets opened up and prices began to vary widely. Countries such as Vietnam and Brazil sharply stepped up production. Vietnam’s output has soared from fewer than 2 million bags a year in the early 1990s to 14 million bags, making it the world’s second-largest coffee producer, behind Brazil.

The huge oversupply has allowed the coffee traders and big corporations to offer ever-lower prices to farmers for coffee, but the savings have not been passed on to the consumer.

The price paid to coffee farmers for a pound of coffee has dropped 75% since its most recent peak at $1.81 a pound in May 1997. During the same period, the retail price for a pound of coffee in U.S. supermarkets has only fallen 28%, according to the Bureau of Labor Statistics.

The difference has meant more profits for companies such as Procter & Gamble, Nestle, Sara Lee and Philip Morris, which together control about half the coffee market. (Despite Starbucks’ ubiquity, the amount the company buys accounts for only about 1% of coffee purchases.)

This has meant an increasingly smaller share of the profits for farmers. Ten years ago, coffee-producing countries got about a third of every dollar spent on coffee. Now, they get less than 8 cents.

Prices have dropped so much that, in most countries, it costs more to grow a pound of coffee than it’s worth on the open market.

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The resulting misery can be seen everywhere in Nicaragua’s northern mountains, the heart of this nation’s coffee zone.

Coffee dominates daily life here. Great yellow sheets of coffee beans dry by the roadsides. The mountainsides are covered in coffee bushes. Coffee exporters, producers or co-ops seem to occupy every other building.

But now that coffee has gone bust, so has the region. More than 100 coffee farms have been seized by banks. Tens of thousands of workers are jobless.

Those who suffered most were temporary workers. Many of them lived on the coffee plantations, in ramshackle cabins with small plots of land that they used to grow basic food such as corn and beans.

Now, turned away from the farms, thousands have gathered in makeshift shantytowns by the sides of roads, begging for food, help and jobs. Plastic tarps spread among trees are home. Huge black pots filled with corncobs provide stew.

Marilla Blandia, 17, held her 18-month-old son, Ronald, in her arms at a shantytown about 60 miles north of Managua, the capital. His head lolled to the side. He was suffering from diarrhea. Flies covered his face.

“We don’t have food. We don’t have work. We don’t have anything,” she said.

The Nicaraguan government has tried to respond, without much success. Natalia Barillas, the minister for family, recently received a shipment of about 6,000 pounds of food and aid from the Mormon Church. She had to ask a friend to use his truck to deliver it.

“We know the kids need food. We know that people need jobs. But what can we do?” she said. “We are a poor country.”

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About 8,500 miles away, small coffee farmers on the slopes of Mt. Kenya tell similar stories.

Only a few weeks ago, Kanyi uprooted half of the coffee plants on the three-acre plot that his family has farmed for the last half a century, replacing them with beans, maize and tea.

“It was very painful,” he recalled outside his two-room mud hut facing snowcapped Mt. Kenya. “Cutting down the [coffee bushes] was like sacrificing something or someone close to you. But we have no alternative. At least we’ll have something to eat.”

Low wholesale prices have devastated thousands of farmers like Kanyi in the coffee-growing countries of East and Central Africa--Kenya, Uganda, Tanzania, Ethiopia, Burundi and Rwanda.

In the Kenyan town of Nyeri, where Kanyi lives, farmers don’t need laborers to tend abandoned fields, so unemployment has topped 50%, according to some government officials.

“Wife-beating is up, alcoholism is rampant, and families are falling apart every day--all because of the problems in the coffee business,” said J.K. Mwangi, a Kenyan official who monitors coffee trading in the central highlands.

In the nearby town of Meru, dozens of coffee farmers have uprooted their coffee plants to grow khat, a stimulant popular in Somalia, Yemen and Ethiopia.

Stanley Mungathia, 55, said the khat grown on his three-acre plot brings in about $6,000 a year--more than five times the amount he earned from coffee.

“This is a cash business,” said Mungathia, who now exports khat to Somalian communities in London and Amsterdam. “I don’t have to wait for some cooperative to pay me money that will never come.”

The crisis has also affected education. Thousands of students have dropped out or been kicked out of school because their coffee-farming parents could no longer afford to pay their school fees or buy their books and uniforms.

Kanyi’s 19-year-old granddaughter, Virginia Wanjugi, plucked weeds from the vegetable garden that recently replaced the coffee plants. Wanjugi was supposed to have graduated from school this summer, but her teachers withheld her final grades until her family pays $225 in outstanding fees.

“Coffee money used to pay for my education,” she said. “But coffee has no money anymore. Where do they expect me to get it?”

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The crisis has become a test of globalization, of the idea that open markets can lead to increasing wealth. If poor countries with cheap labor can’t make money from a work-intensive crop such as coffee, then what can they look to as a source of export income?

“When you have countries like those in Central America or Colombia or those in Africa that are very dependent on coffee, it’s very difficult to just say, ‘Wait and see,’ ” said Nestor Osorio, the head of the International Coffee Organization. “While you’re waiting, you’re going to see social unrest, more drugs being grown and more people dead.”

Solutions are difficult to come by.

Nearly everyone in the industry--from small growers to big buyers--acknowledges that there is no chance of a return to the age of price quotas.

The big coffee companies have placed most of their hopes in persuading coffee drinkers to drink more of the beverage, thereby eliminating the surplus of beans on the market.

Tonia Hyatt, a Procter & Gamble spokeswoman, said the company recently introduced new types of flavored coffees to induce consumers to buy more.

She also insisted that P&G; had passed on the savings to consumers, noting that the retail price of a can of Folgers had dropped 50% in recent years.

Analysts explained that one reason retail coffee prices have remained high is that coffee companies build in profits to avoid market fluctuations. As for outlets, the price of coffee makes up only a small part of the final price of a cup of java.

“We have a commitment to promoting demand,” Hyatt said. “That’s in the best interests of the consumer, our shareholders and the industry.”

Others place their faith in the Fair Trade movement, which certifies that coffee farmers receive at least $1.26 a pound for their coffee--enough to ensure that bills are paid with enough left over for education and health care. But less than 0.2% of the coffee consumed in the U.S. and only 0.9% of the coffee in European Union nations is Fair Trade coffee.

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Another, related solution lies in following the path blazed by California wine: improving the quality of coffee, raising consumer awareness and creating niche markets for specialty coffee such as organic and shade-grown varieties.

The idea is that consumers will pay more for better coffee. And since many specialty producers sell directly to coffee producers, avoiding middlemen, more of the profits return to the farmer.

“For too long, we have simply sold coffee. It didn’t matter where it came from. That has to change,” said Pedro Haslam, the leader of a Nicaraguan cooperative of farmers dedicated to producing quality coffee.

The problem is that many coffee-producing countries are trying the same solution, leading to fears that the high-quality coffee market also will soon be flooded.

Vietnam has not been involved in the high end of coffee production. The country entered the coffee market in force in the 1990s when lowland Vietnamese farmers from the majority Kinh ethnic group moved in on lands occupied by hill tribes that have long opposed the Communist government.

The newly arrived settlers planted hundreds of thousands of acres of lower-quality Robusta coffee beans, clearing out forest land and clashing with hill tribe members. On one occasion, a demonstration turned violent when local minority groups burned five acres of coffee plantations.

Now, with Vietnamese farmers also suffering the effects of the lower prices, the government has begun encouraging coffee farmers to shift from low-yield Robusta coffee to Arabica coffee or other industrial crops.

“Vietnamese coffee growers ... have to lower cost and improve quality to better compete in the world markets,” said Doan Trieu Nhan, president of the Vietnam Coffee Assn.

That sort of news worries those trying to promote high-quality coffee. Alfonso, the Nicaraguan coffee farmer, simply shakes his head when asked about possible solutions.

“In this chaotic situation, everybody has to sit down together,” he said. “We have to figure out what we are going to do. This is a potential time bomb.”

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Miller reported from Nicaragua and Colombia, and Maharaj from Nyeri, Kenya. Times staff writer Richard C. Paddock in Jakarta, Indonesia, and special correspondents Froylan Enciso in Mexico City, Auriana Koutnik in San Jose, Costa Rica, and Tran Van Minh in Hanoi, Vietnam, contributed to this report.