Uganda’s withdrawal from International Coffee Organization is now fully confirmed

Uganda’s withdrawal from International Coffee Organization is now fully confirmed

February 17 - 2022

Coffee Geography Magazine

Uganda, Africa’s top coffee exporter withdrew from International Coffee Organization after long unsuccessful negotiations without reaching mutual agreement. Emmanuel Iyamulemye, managing director of the Uganda Coffee Development Authority, said to the media that ICO has the obligation according to the 2007 agreement to offset the challenges faced by producers, including price volatility, climate change and import tariffs on value-added beans. He added, “We think the ICO needs reforms.” Uganda became a major coffee producer within the last few years due to the government’s initiative to boost the capacity of farmers by introducing new technology and opening the investment opportunities for foreign buyers who are interested in coffee farms. The country is now the top coffee supplier to Italy when the commodity is in shortfall in Latin America and Asia.

Dr. Emmanuel Iyamulemye

Emmanuel Iyamulemye, managing director of the Uganda Coffee Development Authority

The US under the Trump administration, had withdrawn from ICO membership in 2018 and Guatemala left in 2020. Nevertheless, The U.K. after leaving the EU, joined ICO in 2021 including Nigeria which is a small coffee producer from Africa. The International Coffee Organization (ICO) was set up in 1963 in London, under the auspices of the United Nations (UN) due to the economic importance of coffee. It administers the International Coffee Agreement (ICA), an important instrument for development cooperation. It was a result of the five-year International Coffee Agreement signed in 1962 at the UN in New York City and renegotiated in 1968, 1976, 1983, 1994 and 2007 at the ICO in London. The International Coffee Council is the highest authority of the Organization and is composed of representatives of each Member Government. It meets in March and September to discuss coffee matters, approve strategic documents and consider the recommendations of advisory bodies and committees.

uganda map

The ICO's headquarters is located in London and its current executive director is the Brazilian José Sette. The International Coffee Agreement (ICA) is an international commodity agreement between coffee producing countries and consuming countries. First signed in 1962, it is aimed at maintaining exporting countries' quotas and keeping coffee prices high and stable in the market, mainly using export quotas to steer the price. The International Coffee Organization, the controlling body of the agreement, represents all major coffee producing countries and most consuming countries. The current 2007 agreement has 42 exporting members and 7 importing (the European Union represents all its member states as one member). The precursor to the ICA was the Inter-American Coffee Agreement (IACA) established during the Second World War. The war had created the conditions for a Latin American coffee agreement: European markets were closed off, the price of coffee was in decline and the United States feared that the declining price could drive Latin American countries—especially Brazil—towards Nazi or Communist sympathies. In 1940, the United States agreed to restrict its imports to a quota of 15.9 million bags, and other Latin American countries agreed to restrict their production. The agreement had an immediate effect, the price almost doubled by the end of 1941.After the end of the war in 1945 the price of coffee rose continuously until 1955–57 when a degree of equilibrium was reached. Producers sought ways to maintain the price, this led to the first International Coffee Agreement. A target price was set, and export quotas allocated to each producer. When the indicator price set by the International Coffee Organization (ICO) fell below the target price, quotas were decreased; if it rose above it, quotas were increased. Although the system had its problems, it was successful in raising and stabilizing the price. In 1989, ICO failed to reach an agreement on new export quotas, causing the 1983 ICA to break down. The disagreement was triggered by consumers' change in taste towards milder and higher quality coffee. With the retained quotas from the 1983 agreement, the change increased the value of milder coffee at the expense of more traditional varieties such as robusta. Brazil in particular – the world's most powerful coffee producer – refused to reduce its quotas believing it would lower their market share.The consumers, led by the United States, demanded higher quality coffee and the end of selling coffee to non-members at reduced rates. The US criticized Brazil for not being willing to accept a reduction of the country's quotas despite falling share of the world market since 1980. Jorio Dauster, head of the state-controlled Brazilian Coffee Institute at the time described Brazil as an "extremely efficient producer" and believed it could survive without help from ICO. The 1983 ICA was set to expire on 1 October 1989, but realizing that it would be impossible to enter into a new agreement before the termination date, the Coffee Council (ICO's highest body) effectively decided to suspend the export quotas on 4 July 1989. Without an extended agreement producing countries lost most of their influence on the international market. ICO's average indicator price for the last five years previous the end of the regime fell from US$1.34 per pound, to US$0.77 per pound for the first five years after. The current 2007 ICA entered into force on 2 February 2011 when it was approved by two-thirds of the exporting and importing signatory governments.