Research Papers 3

INTRODUCTION

This year has seen how governments and individuals can respond with immense energy and generosity to relieve the suffering of people caught up in natural disasters. The man-made crisis affecting the markets of tropical commodities is every bit as devastating as any of these disasters, yet not only is there very little being done to address the problem but very few people are even aware of it.

This paper is concerned with the relationship between the conditions under which three beverage crops, coffee, cocoa and tea, are produced and traded, and the welfare of the men and women who produce these commodities. An examination of this topic, however, reveals several important misconceptions in current development thinking that extend beyond the limits of the beverage crop industry. Such an examination may also offer some guidance on what kind of measures need to be taken to significantly strengthen the economic prospects of the hundreds of millions of people who make their living from the land in developing countries

The central features of the markets of these three beverage commodities have been the very significant fall in their market price over the last twenty-five years and the fact that the producers of these products, smallholders and plantation workers, are receiving a smaller and smaller share of their eventual retail price.

In the case of coffee and cocoa, the world market price has fallen to less than one quarter of its value in 1980 and the price of tea has more than halved during that period. The World Bank’s monthly index of beverage crop prices (which averages prices for coffee, cocoa and tea) declined by 71% between 1997 and 2001. Although prices, in dollar terms, have increased a little since then, the value of the dollar itself has decreased by a third against other major currencies since that time.

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