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Coffee Futures – Investor Behavior Overwhelms Market Fundamentals

by | Oct 23, 2018

Key Insight

Those “large coffee companies and many traders” are not the problem; more importantly, they need to be part of the solution, not targeted as ‘the bad guys.’  They are not willfully or unintentionally “doing quite well” at the expense of farmers, and we should seek a market in which they can still do quite well at the same time farmers are doing well.

Note: This post is an interview with Andrew Sargent, the Director of the CRS Coffeelands Program. Andrew and I have had an intense online discussion over the past month on my series of posts on the “Scandal of the C-Price”. We’ve re-constructed this exchange as a Q&A. It’s a long post, but worth reading to the end, as I feel Andrew has raised the bar on this discussion. 

Paul Hicks (PH):

Andrew, since my series of posts on the “Scandal of the C-Price” you and I have had a lively exchange about coffee prices. In some respects, we diverge on the analysis of the problem, and I’ve learned a lot from this exchange.  Can you explain your concerns about my posts?


Indeed, the discussion has been lively.  This is because this is a very critical problem that elicits a lot of emotion.  I’ve also learned quite a bit, and I think the blog readership has as well…

For me your posts have made a very important contribution to coffee sector dialogue because of where they come from: the field.  It is very evident in your tone of consternation and outrage that this is a critical, urgent problem that is having immediate and severe effects on the well-being of poor and vulnerable people.  The fact that it comes about without warning, without clear justification, and without remedy is even more maddening, and that is evident in your language.  This is exceedingly important for us to hear in the consuming countries because, honestly, in the midst of a severe price crisis life goes on as it always has, with reporting focusing on the tragedy of our domestic political environment and the natural disaster of the moment.  It’s quite easy to forget that there is a devastating economic shock resonating throughout the coffee world – and your posts address that quite powerfully.

Now, the value of your expressive language aside, I worry that the tone that occasionally intersperses the posts may not lead us to inclusive and constructive dialogue but may instead cause some sector stakeholders to disengage and dismiss the very important content as mere ranting from development people that have worked with farmers their entire careers and don’t understand the coffee business.  Asserting that a “small group” is “[exploiting the coffee market” and “concentrating wealth;” chastising “the worlds’ largest coffee companies and shrewd traders” for “[generating] massive profits;” etc. – these are all very strong, loaded statements, that lean towards an ‘us versus them’ perspective.  I worry that such statements will alienate (have already alienated?) those who may feel targeted as part of the ‘oppressor’ group, and will channel the intense emotion and consternation among the ‘oppressed’ group into vitriolic bashing of an imaginary ‘coffee sector elite.’  And I don’t think that leads us to solutions.

You have said repeatedly that this is a misinterpretation, that this was not your intent, that you do not believe there is a ‘deep coffee state’ intentionally manipulating the futures markets to impoverish farmers and farmworkers.  Can you elaborate further?