Coffee farmers switch to drugs

Vietnam coffee production has been blamed for a world glut

Falling coffee prices are forcing farmers to grow coca - the leaf from which cocaine is produced.

The price of coffee remains at a 30-year low, despite the efforts of the major coffee-producing nations to reduce exports.

Coffee, the world's second biggest commodity after oil, is a vital crop to many of the poorest countries in the world.

However, Roberio Silva, secretary general of the producers' association, told the BBC's World Business Report that the current coffee crisis is encouraging farmers in some countries to return to producing illegal drugs.

"Colombia is facing a deep internal crisis related very much to the situation of drugs and coffee," he said.

"Colombia is having problems limiting its acreage of cocaine production."

He added that there was real evidence that Peru and Central America were facing similar problems.

Vietnamese cutbacks

Part of the reason for the glut in coffee was caused by an increase in Vietnamese production, after the World Bank funded farmers to switch from other crops to grow coffee.

Vietnam has experienced three years of huge growth, which has been blamed by many analysts for the current oversupply situation.

Vicofa, Vietnam's state-affiliated coffee and cocoa association, has now said many plantations would have to be cut down during the coming year.

The proposal, if implemented, will cause financial and social hardship for the farmers who borrowed money from banks to start their plantations.

World's leading coffee producers

Brazil

Vietnam

Colombia

Indonesia

Mexico

Commodity expert Andrea Thompson told the BBC's World Business Report that there was a surplus of coffee this year amounting to 10 million bags.

"Vietnam is proposing cutting back by five million bags, but other countries will have to follow suit," she said.

Production cuts are seen by many as the only way to resolve the current crisis, although coffee producers from Colombia, Mexico and central America have decided to destroy more than a million bags of low-grade coffee in a bid to raise ailing prices.

Buyer responsibility

There are calls for more co-ordination between producers and retailers in the industry to address the crisis.

Big buyers must help coffee farmers, Mr Silva says

Roberio Silva blames the big buyers for helping drive down the price on the commodity market, without thinking about the future.

Mr Silva believes that big coffee retailers are well positioned to help producers in the long term.

"Companies like Nestlé can finance farms to bring quality into the market," he said.

"The more prices drop, the more farmers don't look after their plants - so the quality goes down in a dramatic way," he added.

Public paying too much?

But while prices have dropped, consumers have seen little difference in the price of coffee in shops and cafes.

From source to supermarket, coffee beans can change hands as many as 150 times. A retailer's costs include transport, storage and handling costs - all of which have increased.

In a statement to the BBC's World Business Report, Nescafé said it depends on a good quality supply of coffee beans.

"That supply could be endangered if continued low prices were to discourage farmers from tending their plantations," the statement read.