Internationally traded coffee still accounts for more than 70% of coffee produced worldwide, however, domestic consumption is on the rise in many producing countries and therefore contributes to upgrading opportunities at origin. While the value creation from domestic consumption is not explicitly quantified in this report, the analysis considers the potential of leveraging existing processing capacity in countries to supply export markets as in the higher income producing countries. The report is structured into five main sections divided into three parts. Part I provides an overview of the entire report. Part II is the topical part comprising Sections A, B, C and D. This part focuses on the evolution, determinants, and impact of the C-GVC and the ensuing policy recommendations for sustainable, inclusive, and resilient growth of the GVC. Part III consists of Section E and complements the topical GVC analysis with market information on prices and regional developments in coffee year 2019/20. In particular, Section A shows trends in international coffee trade at both the global and the regional levels. It paints a detailed picture of the evolution of the C-GVC over the past three decades and identifies drivers of coffee GVC integration at the country level. In view of covid-19, Section B places specific emphasis on the aspect of resilience of value chains against a variety of shocks and stressors. Section C provides evidence on the economic, social and environmental impact of the C-GVC and the link with the SDGs, focusing on coffee-producing countries. The empirical evidence discussed contributes to a better understanding of the impact of GVC expansion on the upstream segment, specifically coffee cultivation and postharvest processing. By putting coffee farmers at the centre of the analysis, the report explores how the integration of the most vulnerable link into the GVC can be ensured and whether this integration can contribute to the inclusive and sustainable transformation of the coffee sector. Section D extends recommendations towards an inclusive and sustainable expansion of the C-GVC. The discussion includes market-based and regulatory approaches. It highlights the role of multi-stakeholder initiatives and the development of value chain governance models that realize economic, social, and environmental benefits of the C-GVC for value chain actors and consumers. Section E presents the state of the coffee market in 2019/20 and major events and policies which took place in the last coffee year in order to provide the reader with a comprehensive picture of the state of the coffee sector. This section is an innovation in relation to last year’s edition of the Coffee Development Report and will remain a standard feature of future reports.
With the dismantling of the ICO quota system in 1989 and increased globalization of processing and consumption the distinction between ‘exporting/producing’ and ‘importing/consuming’ countries has become blurred.
O.2. How to value coffee? International trade is widely recognized as a key driver of economic growth, poverty reduction, and socioeconomic development. The United Nations thus considers international trade as an important instrument for individual countries, regions, and the world as a whole to achieve the 2030 Sustainable Development Goals (SDGs). However, lower income countries still lag behind in terms of integration in the global trade system. Since the 1990s, international trade has seen a gradual liberalization. Trade negotiations under GATT and the World Trade Organization (WTO), which was established in 1995, significantly reduced barriers to trade. At the same time, advances in information and communication technology as well as logistics and transport dramatically lowered costs for firms to produce or procure resources and intermediate goods abroad and to access export markets and sell their products globally. The rise of global value chains (GVCs) over the past 30 years has resulted in more complex and geographically fragmented supply chains for a vast variety of goods, ranging from smartphones to agricultural products. Whether ‘spiderlike’, with internationally sourced parts and components assembled at a factory, or ‘snakelike’, with value created step by step along the supply chain, GVCs today account for up to half of global trade (World Bank, 2019). According to the Organisation for Economic Cooperation and Development (OECD), 70% of international trade today involves GVCs as services, raw materials, parts, and components cross borders one way or another.2 GVCs are characterized by hyper-specialization (disaggregation of production processes in individual tasks carried out in different countries), high-efficiency operations, and closer and durable firm-to-firm relationships that allow for knowledge and technology transfer across borders (World Bank, 2019). Coffee is no exception in the era of GVCs and has seen production, value addition, and international trade change dramatically, with economic dividends in the form of higher productivity, employment and economic growth. On the other hand, as the whole C-GVC has become interlinked, it has generated an increased exposure to shocks, as demonstrated by the effect of climate change or more dramatically by the covid-19 pandemic (ICO, 2020a, 2020b, 2020c).
https://www.oecd.org/trade/topics/global-value-chains-and-trade.
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COFFEE DEVELOPMENT REPORT 2020
