Market Assessment

Value Chain Analysis of the Global Coffee Sector, SOMO 2006

    The global coffee value chain analysis that is presented in this report is part of a larger project that further includes value chain analyses of rice, handicrafts, cotton and textiles. The overall aim of the project is to use value chain analysis to clarify the relative merits of Fair Trade relationships with coffee farmers compared with other ethical schemes. Most coffee producers engaged in Fair Trade are only able to sell a low percentage of their crop in the Fair Trade market. This research seeks to identify the special benefits that derive from this.

    The project aims to answer the following questions:
    - How can the economic and social situation of low-income producers engaged in Fair Trade be improved?
    - Which type of trading relationship brings most economic and social benefitsto coffee farmers?

    This report intends to answer these questions for the coffee sector. It focuses mainly on Fair Trade and compares the Fair Trade value chain to mainstream value chains. In the first section of the report, the international coffee market is analysed, as well as current trends and important regulations and standards in the coffee sector. The specific markets for organic, Fair Trade and other sorts of labelled coffees are also discussed. In the second section of the report, we take a closer look at the value chains of mainstream coffee and Fair Trade coffee, and we demonstrate how added value is distributed along these value chains. Finally, we try to point out some possibilities for the Fair Trade movement to improve market access and market development, especially to the benefit of small-scale producers. The report concludes with a set of recommendations on how the economic and social situation of low-income and small-scale coffee producers may be improved.