Productivity Changing Coffee Farming

You wouldn’t know it from the price of a cafe latte at Starbucks, but wholesale coffee prices are so low that growers have to sell at a loss.

The situation is so dire that many of the world’s 25 million coffee growers — including millions of “smallholders” — are facing humanitarian crises.

At the heart of the issue is technology, which has increased productivity, leading to increased supplies of coffee. This in turn drives grower prices down. According to a McKinsey Quarterly study:

    “During the past ten years, the industry’s cost structure has shifted as a result of Brazil’s productivity-enhancing innovations (including the cultivation of less frost-prone areas, better mechanized harvesting, and increased irrigation) as well as competition from cost-efficient new entrants such as Vietnam. The increasing demand for coffee made from the cheaper robusta bean (a development driven by steam-cleaning technologies that can better mask its bitter taste) and rising consumption by price-sensitive consumers have also had an effect. Arabica beans, which roasters consider a better-quality product, are used in higher-end specialty coffees but have become a shrinking component of mass-market brands….”

Essentially, what the McKinsey study shows is that due to technology bringing productivity improvements, there is no longer a need for as many coffee farmers.

And just like in other industries experiencing improved productivity, coffee growers are going to have to change in order to survive. McKinsey recommends that some growers specialize in the high-end specialty coffee market. Others will have to diversify into areas such as tourism (ecotourism and agrotourism) and light manufacturing, or start growing other crops.

In essence, coffee farming is facing the same issues as manufacturing and many other industries. Technology has brought about fundamental changes and productivity improvements, replacing the need for labor. And like other industries, the coffee industry is going to have to evolve and renew itself. Groups like Technoserve, the non-profit that sponsored the study, provide technical and other assistance to ease the farmers’ transition as they move into other businesses or otherwise transform.

More in: 2 Comments ▼

Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.

2 Reactions
  1. Hi!

    Thank you for the information on Coffee Farming, “Productivity Changing Coffee Farming”. I am a regular 9 to 5 employee and have been dreaming of putting up my own business, but, still it remains as a dream… Coffee Farming is an option am looking at, but will have to consider your article once I make plans.

    Your website is very informative, and will be a regular visitor.

    Best regards.


  2. I’m thinking about purchasing a coffee bean grinder, but there’s so many different things to take into consideration, many of which I have never even heard of before, such as: How long does it take to grind the coffee beans? Can I grind a lot of beans at one time? Is the coffee grinder electric or manual? Is the grinder a space saver? How many coarness levels does the grinder have, ie; fine, ultrafine or coarse, medium coarseness. How was the cost of a grinder? What is difference in the most expensive grinder to the less expensive grinders? Can you use any flavor of coffee to grind? Does the coffee bean grinder come attached to a coffee maker? Does the coffee grinder have a any type of timer- along with a automatic turn off mechanism?