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The Coffee Industry Considers Its Own OPEC: CEO Daily

July 10, 2019, 10:44 AM UTC
Coffee beans in Indonesia
This picture taken on March 11, 2018 shows coffee beans on a farmer's hands during the harvest in Gayo highland, Takengon district, Aceh province. At the end of 2017 until early 2018 coffee exports decreased due to weather factors, deputy for Distribution and Service Statistics of the Indonesian Central Bureau of Statistics, Yunita Rusanti said. / AFP PHOTO / CHAIDEER MAHYUDDIN (Photo credit should read CHAIDEER MAHYUDDIN/AFP/Getty Images)

Good morning.

Do we need an OPEC for coffee growers? Cartels, of course, distort the market and hurt consumers. In its heyday, OPEC diverted massive amounts of money away from everyone who drove cars to the few lucky nations sitting on oil reserves. But in the case of coffee, the money would flow downhill—to people working on coffee farms and suffering from the lowest prices in decades.

It’s not an easy thing to organize. Some 30 countries sell coffee beans, and for a cartel to be effective, most would have to agree to act in unison. Any agreement by coffee buyers, like giants Nestle and Starbucks, to pay higher prices could induce more production. But coffee growers are suffering a world of hurt. If companies have a responsibility to buy from suppliers that pay a living wage, shouldn’t they also be responsible for sourcing commodities at a price that doesn’t induce starvation?

Coffee growers are encouraged by the fact that cocoa growers from Ghana and Côte d’Ivoire got buyers to agree to pay more for the key ingredient in chocolate. “If they can reach an agreement, why can’t we?” said Vanu­sia Nogueira, ex­ec­u­tive di­rec­tor of the Brazil Spe­cialty Cof­fee As­so­ci­a­tion.  

The World Cof­fee Pro­duc­ers Fo­rum will meet in Brazil next week to wrestle with the issue. You can read more here.  And make sure to take a minute to browse Fortune‘s 40 Under 40 List, which is online this morning. Other news below.

Alan Murray

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This edition of CEO Daily was edited by Katherine Dunn. Find previous editions here, and sign up for other Fortune newsletters here.