However, I recognize that more is needed if we aim at tackling some of the root causes of market distortions and imbalances. This is why I have made market efficiency a priority issue from the outset of my tenure as Executive Director. Today, I have chosen four specific key areas of work at the ICO that highlight the work that we do in that field:
In the first place, we are developing a joint partnership with the World Bank a study on Risk and finance in the coffee sector.
This study will identify risks and constraints at different stages of the value chain; determine their impact on the availability and cost of finance; and propose, to the extent possible, potential remedial measures that could mitigate these risks.
This is expected to improve the availability of finance and to reduce the cost thereof, because even though there is a direct link between risk and access to finance, often neither the potential borrower, nor the lender really understands the risks that attach to different stages of the coffee value chain.
The study will be directed primarily at three different audiences: coffee producers, coffee trading enterprises and policy‐makers. Finally, we hope that the study will improve the identification of major risks, and the means for managing such risks, across all the stages of the supply chain, and hence improving their attractiveness to lenders.
Similarly, enabling lenders to better understand the risks facing the coffee sector, will allow them to better assess the credit worthiness of their clientele. An initial report of the study was presented at the Council Meetings last September, and a final version is expected by summer 2014.
This important study stems from the work carried out by the ICO’s Consultative Forum on Coffee Sector Finance, now in its 3rd year, since it was created to facilitate consultations on topics related to finance and risk management in the coffee sector, with a particular emphasis on the needs of small and medium‐scale producers and local communities in coffee producing areas.
At its latest meeting, the Forum worked on the topic of aggregation and how farmer organisations can build capacity and enhance their access to finance.
With the support of 22 experts from five continents and a wide variety of institutions, from co‐ops to donors, and from both the public and private sector, we explored strategies and barriers to farmer aggregation, and how best to support producer organisations in the world coffee market.
We are confident that once finalised, the full report on aggregation will become a practical tool to help build the kind of producer associations that can better withstand the impact of the market.
Thirdly, as a result of the ICO’s renewed commitment to establish itself as the statistical benchmark for the industry, we have begun an informal coffee round table on statistics with a selected group of leading analysts from industry and market research institutions, to discuss and compare our results in a spirit of collaboration.
This is an on‐going activity that will bear its fruit in the mid and long term, in as much as we see the ICO operating as a sort of clearing house where conclusive information on the consolidated figures on production, consumption, exports and stocks is released.
Fourth is: Climate Change: The ICO has aimed at establishing itself as a focal point of dissemination of relevant information on the challenges faced by the world coffee sector in the face of environmental concerns. In particular, we are paying special attention to the effects of climate change and its consequences on present and future supply.
Whereas climatic effects have always been the main factor responsible for fluctuations of coffee yields in the world, climate change, as a result of global warming, is expected to result in actual shifts on where and how coffee may be produced in future. Several adaptation and mitigation strategies for coffee producers have been put forward in response to the challenges facing the sector.
Short‐term adaptation strategies include improved farming practices and better post‐harvest processing. Longer‐term strategies, include, capacity‐building, improved monitoring of climate data, enhancing soil fertility, introducing or preserving different production models, and developing drought and disease‐resistant varieties.
In more extreme cases, the solution may be to shift production to more suitable areas. Mitigation strategies include: calculating and reducing greenhouse gas emissions on the farm, and facilitating the creation of carbon sinks.
