Sticks and Stones
The Politics of Purity
by Steven Krolak


What do rodent toenails, tire treads and fecal droppings have in common? They are all frequently found in green coffee, along with sticks, stones, fermented beans, and other non-coffee substances known in the industry as "triage" and catalogued as "defects."
   In a perfect world, triage would be filtered out of the supply chain at origin or in processing, and the final product would be a cup of coffee entirely free from any hint of adulteration.
   But this is not a perfect world. The withdrawal of the United States from the International Coffee Organization (ICO) in 1993 and the subsequent coffee crisis have led to the relaxation and even abandonment of meaningful standards limiting defects. The result is more triage in the cup. While influential free-marketeers resist standards they say constitute a restraint of trade, specialty coffee advocates have come to view coffee purity as an important key to the long-term viability of coffee as an industry and a way of life.

Triage in Coffee
Growers take a great deal of pride in producing coffee with few defects. As family businesses, most take quality personally. Great physical effort is involved in picking coffee cherries. Great financial expense is involved in destoning and depulping. Great care is taken in hand sorting.
   In theory, people at all stages of the supply chain have an interest in reducing triage. If beans are largely free of defects, growers get more money for their lot, roasters receive a better raw material, retailers don't have to worry about bitter coffee or broken burrs, and consumers enjoy a cup of coffee that does not compromise their health, sensibilities or conscience.
   But in practice, economic factors determine how "clean" the coffee gets.
   In 1963, the U.S. helped the ICO develop a system of export quotas called the International Coffee Agreement. This restricted the amount of coffee entering the market, and aimed to make the market less volatile, and the lives of growers more stable. But that regime collapsed in 1989. The U.S. turned its back on market regulation, and left the ICO in 1993, followed by Canada and Australia.
   Today, with prices for green coffee at historic lows, and the major players profiting from the overproduction in Brazil and Vietnam, the logic of the free market provides little incentive for growers in traditional coffee cultures to invest time and energy in removing defects from the harvest. On the contrary, the incentives are stacked in favor of lower quality. The Specialty Coffee Association of America (SCAA) now estimates that 15 percent of each coffee harvest consists of defects. And according to the White Paper on the Coffee Crisis prepared with the input of growers in Colombia, Mexico, Hawaii, and other origins, as well as the SCAA, "Cost-cutting has resulted in less defect removal."
   Many large-scale roasters are also helping to suppress quality. "Coffee mixtures that are largely made up of defects are now being sold to U.S. roasters and importers at very low prices," according to the White Paper. "The roasters are then adding the triage mixture to coffee blends to even further lower their own cost."
   The economics for this are, in free market terms, unassailable, especially at the volumes that major players deal with. Paying 70 cents for a pound of beans, and 15 cents for a pound of triage makes more sense than paying $2.80 for two pounds of fair-trade beans, for a product that can be sold for $3.50.
   At eight to ten million bags, triage is now an industry in itself. Ironically, this influx of bad coffee comes at a time when the technology for eliminating defects has never been better. Take a product line like that manufactured by Sortex, a complete system involving pre-cleaning, destoning, hulling, polishing, grading, separation, sorting, and bagging. Processing at a rate of six tons per hour, monochromatic color sorters use cameras that view coffee beans at different wavelengths, identifying defective beans by color, while blasts of compressed air blow the rejects out of the system. Bi-chromatic sorters go a step further, identifying color and intensity. According to Sortex, they are able to "separate yellow, grassy, red, dark, or broca defects and foreign material from high-quality arabica coffee."
   Specialty roasters are keen to use the best technology, and offer the best product. The Bean Alliance of Melbourne, Australia has been roasting for 22 years, using a complete system manufactured by Brambati S.p.A. of Italy, a leader in computerized production and quality control. Before being roasted, green beans undergo vibrating density separation to remove triage before ending up in the recently commissioned green bean cleaning room, which Angelo Augello, Bean Alliance managing director, describes as "state-of-the-art, quality sensitive and bloody beautiful."
   David Williamson, managing director of Glasgow, Scotland-based roaster Matthew Algie says that his company imposes its own quality standards, in excess of ICO norms. Destoners, rare earth magnets and varying sizes of sieves are used at Matthew Algie, but Williamson believes that real quality control transcends technology. "The first step is to buy from growers you trust," he told Fresh Cup, "then you must try to control the entire supply chain."

State of Things
Purity is really about politics, not technology. Competing standards, and the lack of standards, reflect competing business philosophies.
   Danny O'Neill is typical of specialty roasters who live and die by the quality associated with their names. O'Neill's Kansas City, Mo.-based operation, The Roasterie has voluntarily adopted a house policy of zero defects.
   For its part, the SCAA allows five defects per 300mg sample. The International Coffee Organisation (ICO), under its Resolution 407, has established a voluntary standard of 86 defects. The United States Food and Drug Administration (FDA) has a voluntary guideline of 810 defects per 375-gram sample (610 per 300 grams), though the FDA hasn't actually physically inspected a single lot of imported coffee since 1989. Even this guideline--which permits coffee containing 30 percent triage to be sold as "pure" coffee--is too draconian for the National Coffee Association (NCA), which represents the "Big Four" purveyors of soluble coffee, accounting for 70 percent of the coffee consumed: Sara Lee Corp., Procter & Gamble, Nestlé, and Kraft Foods Inc. The NCA believes that quality standards are an unnecessary restraint of trade.
   These differing views clashed in July 2002, when the Colombian Coffee Federation, the Mexican Coffee Council, the SCAA, and diverse Central American producers sought to have a bill introduced in the U.S. Congress adopting the ICO standard for arabica. Hearings on the proposed "USA Coffee Purity Act of 2002" were held before the Subcommittee on the Western Hemisphere of the Committee on International Relations in the House of Representatives. SCAA Executive Director Ted Lingle testified in favor of the legislation, stating, "More defects mean more coffee. More coffee means lower prices. Bad coffee is driving good coffee from the market."
   Robert Nelson, President of the NCA, took the view that the proposed legislation would do nothing to ease the crisis, but would in fact make it worse by raising consumer prices and thus further suppressing demand. Nelson raised the suspicion that the bill was designed primarily to benefit the Central American growers at the expense of Vietnamese and Brazilian robusta farmers, and as such represented a discriminatory trade barrier.    What's wrong with a little difference of opinion? In this case, plenty. The NCA members represent 90 percent of all coffee consumed in the U.S., the world's largest market. The big players determine the nature of the demand, and their preferences influence the attitudes and orientation of suppliers.

The Bottom Line
Most date the coffee crisis from 1999, when Vietnam's production made itself felt and wholesale prices took their most recent nose-dive. But if one dates the current situation from the collapse of export quotas in 1989, we are now in the 15th year of instability. Nonprofits and governments alike are actively working to cope with its effects on a variety of levels. Coffee Kids, the Coffee Quality Institute, Utz Kapeh, and many more are invested in helping farmers stay on the land, develop alternative incomes and meet their basic needs.
   But often it seems as if the best news the industry receives are the reports of blights and storms that, for a season, promise to reduce the global supply and inch wholesale prices up a penny or two. Rather than watching the commodities exchange, coffee specialists are now glued to the Weather Channel.
   The lack of substantial progress is dismaying for many people. One of these is Colleen Crosby, owner of Santa Cruz Coffee Roasting Co. in Santa Cruz, Calif., who also testified before Congress in 2002. Crosby had traveled through coffee-growing regions of Central America, and shared her impressions of "one-room mud houses, all with dirt floors and aluminum outhouses," of "children living in cardboard huts in parks and sniffing glue to diminish hunger pains," of a woman turning to prostitution to buy antibiotics for her baby. "With the price of coffee as low as it is, coffee farmers barely eat," she told Congress.
   "Plummeting prices mean producer countries cannot sustain spending on health and education or pay international debt," says Oxfam.
   But the outlook has never looked rosier for major coffee processors. For them, the oversupply represents a windfall. During the period 1975-1993, prices paid to farmers fell by 18 percent. Yet U.S. consumers paid 240 percent more for the finished product. In 2002, The Wall Street Journal reported that wholesale prices had fallen by 80 percent since 1997, but the retail prices for ground roasted coffee in U.S. cities had only fallen by 17 percent. Oxfam reported in 2002 that Ugandan farmers were receiving only 2.5 percent of the retail price of their coffee, while Nestlé's "operating margin" was nearly 30 percent.
   For many, even in the higher echelons, this situation leaves a sour taste.
   Walter Zwald, chairman of the Swiss Coffee Trade Association stirred emotions and debate in 2001 when he told a meeting of the ICO: "I am ashamed to be part of the coffee industry as it is today because the way we run it is unjust and exploits the poor. We have made more profits than we should." He proposed a tariff of one dollar per 50-kilo bag to fund relief efforts.
   This proposal, like so many others, dissipated in a miasma of free-trade rhetoric. But over the next few years, there was movement. The major players have stepped up to the plate, investing millions in charitable projects to improve the lives of many of the 25 million people who grow coffee.
   But none of this touches triage or the downward pressure it exerts on prices. Lingle of the SCAA notes, "There is no way that private or government aid can replace what producers give up in terms of low prices." Then there are social factors. "Entire cultures are being lost along with coffee," notes Crosby. "They have a history of knowing how to produce quality. When they are gone, so is the memory of quality."
   It is widely acknowledged that export quotas functioned as quality supports. They were also pillars of political stability. In 1962, when the International Coffee Agreement was instituted, the reason was to insulate the coffee industry from periodic busts, which were perceived to feed poverty and provide a fertile recruiting ground for Communist activists. Many of today's distressed coffee farmers, inspired by the triumph of capitalism, are simply turning to an even more lucrative crop, one with rewards and enforcement mechanisms for quality: cocaine.

Solutions
Two years after Congress weighed the USA Purity Act, we are still without meaningful quality standards for coffee. Congressman Sam Farr (D-Calif.), who spent two years as a Peace Corps volunteer in Costa Rica in the 1960s, authored legislation that called upon the U.S. State Department to develop a strategy for addressing the coffee crisis. Since then, his efforts have focused on getting the U.S. to rejoin the ICO.
   "I recognize that quality standards can be beneficial for consumers and will help curb the oversupply of coffee on the market," Farr told Fresh Cup. "However, my priority at the moment is simply getting the U.S. back into the room. First we need to be a member of the ICO, then we can take part in and expand the global discussion about a variety of coffee issues."
   This may be nearer to reality than it has been in 11 years. In March, responding to suggestions of the NCA and a letter from Central American heads of state, Secretary of State Colin Powell discussed rejoining the ICO with Colombian President Alvaro Uribe. If the U.S. does rejoin the ICO, nobody doubts that it will be on terms more in line with free-market ideology. According to Farr, "The State Department has problems with the ICO Resolution 407. They are insisting on a change to this resolution because they believe that it's market distortion."
   If the U.S. does rejoin the ICO, is Resolution 407 at risk?
   "I know it is," says Lingle flatly. "The good news is that the standards will probably remain in place. The bad news is, the reporting provisions will disappear or become voluntary, so that the ICO will lose the ability to make the supply chain transparent."
   And transparency is essential to solving the triage issue, and the coffee crisis. In a true market-based system, the quality issue would be solved by consumers armed with all the information they need to make an intelligent choice. Bad coffee would suffer from comparison with good coffee. Yet in contrast to other comestibles, coffee is not labeled for quality. Fair-trade, shade-grown and Bird-Friendly® labels abound, but there is no label on a can of ground coffee that states "This product contains 100-percent coffee."
   O'Neill of The Roasterie, for one, thinks this is intolerable. "If consumers found out what was going into their coffee, they would raise hell. It's like hot dogs: how many people would still want them if they contained goat lips and pig's ears, like in the old days? Now the label says, 'all-beef.' Why can't coffee do the same?"
   Lingle concurs. "The hallmark of a free market is transparency," he says. "Other agricultural products such as eggs and milk offer information on different grades. This not only gives consumers a real choice, but sends an important message to growers about consumer tastes. By eliminating transparency from the market, you give an unfair economic advantage to sellers."
   In the long-term, the numbers favor quality standards. High quality generally induces high demand, and vice-versa. In the U.S., 50 percent of the population now drinks coffee, compared to 70 percent just a generation ago. This slide coincides with the abandonment of export quotas and the non-enforcement of import standards. In Norway, where high standards were never abandoned, coffee consumption increased during the same period, according to Lingle.

Faith Before Facts
Commercial and specialty are two different worlds. But they impact one another at the crossroads of quality. As the bull market in triage helps drive the price of coffee ever downward, growers find it increasingly impossible to stay in business, even at fair-trade prices. Those that remain do so only by pandering to the lowest common denominator.
   Many believe that there will always be a specialty industry. But this may be more faith than fact. Several growers at the recent SCAA Annual Conference in Atlanta were surprised at the unprecedented efforts of importers to pin them down to multi-year contracts. The reason for the pressure was said to be informed speculation that within two to three years, quality coffee will be hard to find.
   For Lingle, the issue of quality standards is central to the survival of the industry. "If high-quality coffee is driven from the market, the U.S. specialty coffee industry will cease to exist."

Steven Krolak is the editor of Fresh Cup. He can be reached at steven@freshcup.com.