The hidden costs of coffee production in the Eastern African value chains – Background paper for The State of Food and Agriculture 2024

There is growing recognition that significant costs associated with food systems remain unaccounted for in market prices. Coffee is the second most traded commodity in the world and the most traded agricultural commodity. More than 30 million smallholder households rely directly on coffee income. This background paper includes a study that attempts to quantify the environmental and social externalities of coffee value chains in three countries in Eastern Africa: Ethiopia, Uganda and the United Republic of Tanzania. Using a refined and simplified methodologies to quantify social and environmental externalities associated with climate, water, child labour, gender inequality and the living income gap, the paper applies the marginal damage cost approach to monetize the hidden costs. Both social and environmental externalities contribute significantly to the hidden costs of Eastern African coffee value chains, with Robusta coffee boasting considerably higher social hidden costs from the living income gap than Arabica due to its lower farm gate prices and profit margins. Hidden costs associated with the living income gap constitute the largest share, particularly in Ethiopia. Large variations in hidden costs in different production systems and regions are identified. The paper provides four important recommendations for policymakers in producing and importing countries.