CAMPINAS, Brazil (Reuters) - Colombia proposed on Wednesday that coffee producing nations form an association to have a stronger influence in the coffee market, as producers from around the world meet in Brazil to discuss the economic sustainability of coffee production.
"We need action, because the problem is clear: there are 25 million coffee producers that can barely cover their production costs," said Eugenio Velez, a director at Colombia's coffee federation in the opening ceremony of the 2nd Global Coffee Producers Forum.
Velez suggested that countries at the forum, which include representatives from Central and South America, Asia and Africa, join forces to try to impose some sort of supply limitations as a way to boost prices that farmers consider inadequate.
Coffee prices reached the lowest levels in 12 years in May. They recovered somewhat, but are at levels considered historically low and below production costs.
Farmers in the forum criticized roasters, saying they continue to sell processed coffee at high prices, paying less to producers each year.
Economist Jeffrey Sachs of Columbia University in the United States presented a study on the situation of coffee farmers globally, suggesting the creation of a global fund to finance improvements both in production and social conditions.
Sachs suggested that governments in producing nations, international donors and large coffee processors in developed countries such as Nestle, JDE, Lavazza and Starbucks (NASDAQ:SBUX) help finance the fund.
"Coffee is clearly a very profitable business for roasters, but it is not working to produce sustainable development, so there is a puzzle," Sachs said.
He said the fund could improve agricultural yields, as a way to reduce production costs, and at the same time improve living standards in producing countries.
Organizers of the forum said they will take the proposal to presidents of producing countries to start up a movement toward creating the fund.
The Colombian proposal on the association of producing countries, however, is less likely to advance.
Brazil, for example, which is the world's largest producer, is not a supporter.
"We had that in the past, and it didn't work," said José Marcos Magalhaes, one of the forum organizers, referring to the International Coffee Agreement that fell apart in the 1980's.
Magalhaes believes producers need to have better knowledge of how the market works, to be able to make better deals when prices spike.