The International Coffee Organization was established in 1963 when the first International Coffee Agreement (ICA) entered into force in 1962 for a period of five years, and it has continued to operate under successive Agreements negotiated since then. These include the ICA 1968 (and its two extensions), the ICA 1976 (with one extension), 1983 (and its four extensions), the 1994 Agreement (with two extensions) and the 2001 Agreement, which entered into force provisionally on 1 October 2001 and definitively on 17 May 2005.

The 1962 Agreement was negotiated in New York at a Conference held under the auspices of the United Nations. The successor Agreements were negotiated at the headquarters of the ICO in London. The United Nations remains the depository authority.

Background

Coffee is a tree crop which became an important commodity in international trade during the nineteenth century.  Since then it has suffered from long periods of over supply and low prices followed by relatively brief periods of short supply and high prices.

 

In more recent times, during the period of severe economic depression in the 1930s and during the second World War from 1939 to 1945, supply increased, demand fell and prices were low.  In the immediate post‑war years, however, demand increased and supplies were inadequate to satisfy this rising demand. Between 1950 and 1953 stocks reached levels below the minimum needs for normal trading purposes, a situation which was exacerbated by the outbreak of the Korean War and a serious drought in Brazil, which was followed by a frost.  Prices rose to unprecedented heights in 1953.  This gave rise to a substantial increase in planting throughout the world and over‑production followed.  Stocks increased and, in the second half of the 1950s and early 1960s, prices fell drastically.  This led to an intergovernmental initiative to attempt to stabilize the market and to halt the fall in prices which had had serious economic and political consequences for a large number of coffee producing countries in Latin America and Africa.

INTERNATIONAL COFFEE AGREEMENTS 1962 AND 1968

Following a series of short-term Agreements between producing countries, a Coffee Study Group was formed to consider negotiating an Agreement to include both exporting and importing countries. The outcome of the work of the Study Group was the successful negotiation at the United Nations headquarters in New York of the International Coffee Agreement 1962.  This was followed by a second five-year Agreement in 1968. These two Agreements contained provisions for the application of a quota system whereby supplies of coffee in excess of consumer requirements were withheld from the market. Under other provisions, production and diversification policies were initiated to limit supplies of coffee and promotion activities instituted to increase consumption.

The operation of these Agreements helped prices to remain relatively stable throughout the years 1963 to 1972, and production and consumption became more evenly balanced. These first two Agreements contributed significantly to strengthening the economies of the coffee producing countries and the development of international trade and cooperation.

Changes in the pattern of supply and demand, resulting in an increase in prices, led to the collapse of the quota system in 1973, and the 1968 Agreement was extended with all economic provisions deleted. The Organization continued as a centre for collecting and disseminating information and as a forum for negotiating a new Agreement.

INTERNATIONAL COFFEE AGREEMENT 1976

The International Coffee Agreement 1976 was negotiated in 1975 against the background of a market situation radically different from that which had prevailed during the negotiation of the Agreements of 1962 and 1968 when the supply of coffee in excess of consumer requirements tended to depress prices. By 1975, mainly as a consequence of a serious frost in Brazil, the world's largest producer, doubts concerning the adequacy of supplies to meet demand in the immediate future were reflected in a sharp increase in prices. These considerations influenced Members when negotiating the 1976 Agreement to introduce a number of new provisions to strengthen and improve the functioning of the Organization in addition to retaining many of the provisions which had proved effective during the previous Agreements.

One of the principal new features of the 1976 Agreement was that it allowed for the suspension of quotas if prices were high and their reintroduction if prices became too low. Under this system, quotas were reintroduced in 1980. The experience gained in administering the 1976 Agreement provided a sound basis for negotiating the fourth Agreement, which entered into force in 1983.

INTERNATIONAL COFFEE AGREEMENT 1983

 

The principal economic features of the 1983 Agreement were the following:         

• a system of export quotas operated when necessary to secure price stability within ranges agreed annually by exporting and importing Members at meetings of the International Coffee Council;
• quotas were suspended if prices rose above certain levels and subsequently reintroduced if prices fell;
• the quota system operated in such a way that consideration was given, in setting individual quotas, to past export performance and to the stocks of coffee held in exporting Member countries;
• the export quota system was supported by an obligatory system of controls. Each export by a Member was covered by a Certificate of Origin.  Importing Members did not admit coffee from Members unless the Certificate was validated by coffee export stamps issued by the Organization.  When quotas were in effect importing Members were required to limit their imports from non‑members and exports to non‑members were closely monitored;
• carry‑over stocks of coffee in each exporting Member country were verified annually, involving the physical counting of stocks in many hundreds of warehouses scattered throughout the territories of producing countries.  The verification took place at the end of the crop year of each country;
• the Council was required to coordinate national production policies to achieve a reasonable balance between world supply and demand;  and
• there was a Fund for the promotion of consumption financed by exporting Members.  Promotion campaigns were conducted in the major importing countries in cooperation with the trade and the resources of the Fund were used to sponsor research and studies related to the consumption of coffee, especially in the United States of America and Europe.  The Promotion Fund financed coffee centres, scientific research and training programmes to help improve the quality of coffee and its general image.  In the 20 years during which promotion activities were financed by a Fund, exporting Members contributed some US$100 million.

As under all previous Agreements, the Organization collected and disseminated data on all matters related to coffee to facilitate a rapid implementation of the economic Articles of the Agreement and redress any imbalances which might arise.  It acted as a centre for studies and economic research on the production, distribution and consumption of coffee.  Statistical information obtained from Members and through the operation of the Controls System was computerised for rapid access and analysis.  A public database service, COFFEELINE, was established to provide a wide range of information on coffee.

Quotas and controls remained in effect for most of the subsequent yearsunder the 1983 Agreement until February 1986 when market prices exceeded the trigger point for their suspension.  Under the provisions of the Agreement, the Organization continued to operate its full range of activities in a non‑quota period (other than quotas and controls).  Market prices fell below the trigger point for the reintroduction of quotas and controls in December 1986. After lengthy negotiations, quotas and controls were reintroduced on 6 October 1987 and remained in effect until 4 July 1989.  On that date the Council recognized that it would not be able to negotiate a new Agreement in time for it to enter into force on 1 October 1989 when the 1983 Agreement was due to terminate.  It decided, therefore, to recommend to Governments the extension of the 1983 Agreement for a period of two years from 1 October 1989 to 30 September 1991, with its quota and controls provisions suspended.  The verification of stocks was also discontinued, as were the provisions relating to production policies; in addition a decision was taken to wind up  the activities of the Promotion Fund.

 

Members accepted the recommendation of the Council and the 1983 Agreement was duly extended.  The extension was designed to allow time for the negotiation of a new Agreement.  Throughout the first year of the extension of the Agreement Members continued to develop ideas on finding solutions to the problems encountered during the operation of the 1983 Agreement.  Negotiations for a new Agreement were initiated but, despite the stated political will and constructive spirit of Members, the negotiations were inconclusive.  In these circumstances the Agreement was extended for an additional year until 30 September 1992, in order to allow additional time for the continuation of consultations among Members to identify the framework for a new International Coffee Agreement.

 

The process of negotiating a new Agreement gained new impetus with the fall of prices to record lows during coffee years 1990/91 and 1991/92, and the Council agreed to a further extension of the Agreement until 30 September 1993.  At the same time it decided to establish a Working Group to carry out a wide-ranging review of all proposals and ideas on future cooperation on coffee matters.  This duly led to the formation of a Negotiating Group which was given a mandate to negotiate a new Agreement based on a universal export quota system.  However, in spite of extensive negotiations, it proved impossible to reach a satisfactory conclusion by the required deadline of 31 March 1993.  The Council therefore resolved in June 1993 to extend the Agreement until 30 September 1994 in order to maintain the Organization as a forum for international cooperation on coffee matters and to allow time to negotiate a new Agreement.  This time, Members concentrated on negotiating an Agreement which did not set out to regulate coffee prices.  This process concluded successfully with the negotiation of the International Coffee Agreement 1994, which entered into force on 1 October 1994.

INTERNATIONAL COFFEE AGREEMENT 1994

Under the provisions of the 1994 Agreement the work of the Organization focussed on areas such as:

• providing a forum for discussion at the highest level of matters affecting the world coffee economy;
• contributing towards market transparency by compiling and disseminating objective information on the world coffee market; 
• fulfilling the role of a designated International Commodity Body (ICB) for coffee with respect to submitting and monitoring coffee development projects which may receive concessionary financing from the Common Fund for Commodities (CFC);
• establishing a programme of studies on matters relevant to the well-being of the global coffee industry such as marketing systems and encouragement of consumption;
• promoting actions and exchanges to encourage the sustainable management of coffee resources and processing;
• holding seminars on matters of topical concern for coffee; and
• promoting exchanges of views and information between Member Governments and representatives of the private sector through regular meetings of groups of experts on matters such as issues affecting coffee markets and research on coffee and health.

Six major projects valued at over US$50 million were approved between 1995 and 2000.  Funding was mainly secured from the CFC, but significant co-funding from other bodies such as the European Union and bilateral donors was achieved.  Areas covered included  quality improvement, pest control and improvement of marketing structures.  Studies were carried out in areas such as coffee price determination and volatility, organic coffee, and the formation of a global research network on coffee.  Seminars were held on coffee and its environmental impact and a new body, the Coffee Industry and Trade Associations Forum (CITAF) was formed to provide a voice for the private sector, allowing representatives of industry associations in producing and consuming countries to come together to address matters of common concern.

 

The Organization also made use of remaining resources in the Promotion Fund established under the 1976 and 1983 Agreements to embark on a promotional programme in new markets, specifically China and Russia, which had been identified as showing important potential for increased consumption.  ICO generic promotion was only one of several factors that influenced consumption, but was widely perceived in both countries to have been beneficial.  Activities included a high profile Vanessa Mae concert, dissemination of educational materials, including a new “Coffee Story” booklet, developing annual Coffee Festivals, and a programme of media briefings to educate journalists about the benefits of coffee.  

 

In July 1999 the International Coffee Council adopted Resolution 384 providing for the extension for two years from 1 October 1999 of the ICA 1994. In addition a Negotiating Group, chaired by Mr. Arnoldo Lopez Echandi of Costa Rica, was established to draft the text of a new Agreement by 30 September 2000.

INTERNATIONAL COFFEE AGREEMENT 2001

The text of the 2001 Agreement was formally adopted on 27 September 2000 by the Council through Resolution 393.  It opened for signature at the United Nations in November 2000 and entered into force provisionally on 1 October 2001 and definitively on 17 May 2005.   At its 98th Session in September 2007, the Council adopted Resolution 432 extending the 2001 Agreement until 30 September 2008.  The 2001 Agreement included a number of new objectives:

• Encouraging Members to develop a sustainable coffee economy
• Promoting coffee consumption
• Promoting quality of coffee
• Providing a forum for the private sector
• Promoting training and information programmes designed to assist the transfer of technology relevant to Member countries
• Analysing and advising on the preparation of projects to the benefit of the world coffee economy.

A new Article on standards of living and working conditions encouraged Members to give consideration to improving the standard of living and working conditions of populations engaged in the coffee sector.   Another new Article on Promotion established a Promotion Committee composed of all Members of the Organization and provision for contributions pledged by Members and other interested parties. Two other new Articles formalised the involvement of the private coffee sector in the work of the Organization through the Private Sector Consultative Board and the holding of regular World Coffee Conferences, bringing high-level government and private sector representatives to discuss matters of common concern. 

INTERNATIONAL COFFEE AGREEMENT 2007

 

The text of the seventh International Coffee Agreement, the 2007 Agreement, was agreed  by the 77 Members of the International Coffee Council, meeting in London on 28 September 2007.  It was formally adopted by the Council through Resolution 431.  The Agreement will strengthen the ICO’s role as a forum for intergovernmental consultations, facilitate international trade through increased transparency and access to relevant information, and promote a sustainable coffee economy for the benefit of all stakeholders and particularly of small-scale farmers in coffee producing countries.  

 

The overall objective of the Agreement is to strengthen the global coffee sector and promote its sustainable expansion in a market-based environment for the betterment of all participants in the sector.  Other new objectives include:

 

• Encouraging Members to develop appropriate food safety procedures in the coffee sector;
• Encouraging Members to develop strategies to help local communities and small-scale farmers to benefit from coffee production; and
• Facilitating the availability of information on financial tools and services

The Agreement recognizes the contribution of a sustainable coffee sector to the achievement of internationally agreed development goals, including the Millennium Development Goals (MDGs), particularly with respect to poverty eradication.  New provisions include:

 

• a Consultative Forum on Coffee Sector Finance to facilitate consultations on finance and risk management issues, with particular emphasis on the needs of small and medium-scale producers;
• A new Article on the development and funding of projects;
• A new Article on promotion and market development with activities to include information campaigns, research, capacity building and studies related to coffee production and consumption;
• Strengthening statistical activities to include market structures, niche markets and emerging trends as well as quantities and prices of coffees relating to factors such as different geographic areas and quality.
• Expanding the scope of studies to include sustainability, coffee and health and opportunities for the expansion of coffee markets for traditional and new uses;
• Provision for all decisions and recommendations to be taken by consensus;
• If consensus cannot be reached, there is provision for a simplified voting procedure of a distributed majority vote requiring 70% of the votes of each category of Members;
• The EC is a single Member of the Organization, representing the interests of its member states.

In place of the Executive Board, which has been eliminated, three new Committees (a Projects Committee, a Promotion and Market Development Committee and a Finance and Administration Committee) will assist the Council in its work.  

 

The 2007 Agreement will have a duration of ten years, with the possibility of extending it for up to a further eight years. On 25 January 2008, the Council approved Resolution 436 designating the International Coffee Organization as the Depositary for the ICA 2007.