Summary Report on the First Consultative Forum on Coffee Sector Finance

The first meeting of the Forum took place on 27 September 2011 in London, United Kingdom, during the 107th Session of the International Coffee Council. The objective of the Forum was to discuss mechanisms, tools, or strategies that exist or could be developed to help small- and medium-sized producers manage the risk of green coffee price volatility. The Forum was chaired by Mr. Michael Wheeler of Papua New Guinea, and four leading experts made presentations on important aspects of managing risk to mitigate coffee price volatility. Oscar Schaps, Managing Director of Global Soft Commodities at INTL Hencorp Futures LLC, highlighted the lack of accessible financial instruments for managing price risk in the coffee market, particularly for smaller producers. He proposed the development of a reliable and trustworthy settlement instrument for coffee, similar to the natural gas futures market on the New York Mercantile Exchange (NYMEX). Edgar Cordero, Executive Vice President of the Colombian Coffee Federation, Inc., discussed the challenges faced by small-scale coffee growers in Colombia, where 89% of growers have farms smaller than three hectares. He emphasized the need for a competitive and sustainable coffee sector and proposed the establishment of a Global Coffee Fund, financed by a global coffee tariff, to intervene in markets and establish price floors and ceilings. David Browning, Director of TechnoServe, a non-governmental organization that works with smallholder coffee farmers, presented data on the global coffee market, highlighting the imbalance between supply and demand, which creates volatility in coffee markets. He attributed the volatility to increased trading from outside the coffee industry and the attractiveness of coffee as an investment for speculators. The Forum aimed to explore potential strategies or tools that could enable small- and medium-scale growers to overcome barriers to accessing market-based risk management tools. The discussions centered on the need to inform stakeholders about available instruments, facilitate access to these instruments, and encourage greater participation by hedgers in the futures and options markets. The Forum also considered the possibility of establishing a Global Coffee Fund to intervene in markets and establish price floors and ceilings.