Trouble Brewing.(coffee industry)

To protest how little their coffee is worth, farmers recently assembled in Acapulco, Mexico, to crush an 8 million-pound hill of coffee beans into fertilizer. With new growers flooding the global market, the official price of a pound of coffee crashed from a high of $6 in 1977 to a 100-year low of 42 cents last year. Many of the world's 25 million coffee growers aren't making enough to stay alive. Half a million have abandoned their farms in Latin America in a crisis that the World Bank is calling the "silent Mitch," after the 1998 hurricane that ripped up Central America. The first public act of coffee destruction was a mass bean-burning in Costa Rica earlier this year. More such spectacles are expected in coming months, orchestrated by a seemingly unlikely source: the International Coffee Organization, founded by the United Nations to help bring stability to Latin America.

The coffee crisis is in part a result of the decline of the ICO, which acts as "the United Nations of Coffee." Founded in 1962, the year of the Cuban missile crisis, it was one of many cold-war efforts to create a global coffee cartel. Calling coffee "a life and death" issue, late U.S. senator Hubert Humphrey warned that "Castroism will spread like a plague through Latin America" unless something was done to stabilize coffee prices. To fight communism, the United States became a firm supporter of the ICO, which had the power to set production quotas right up until the Berlin wall fell. "Before the fall of communism, the U.S. had an ideological reason to care" about coffee prices, says Ian Breminer, former chairman of the Committee of the European Coffee Associations. In late 1989 the United States left the ICO, which effectively lost the clout to enforce quotas, and stopped trying.

Today the ICO's London headquarters has shrunk from two buildings to one, and no longer receives high-level delegations from the great coffee powers. Membership has dwindled from 60 nations to 50. Full-time staff has fallen by half to 30, most of whom gather statistics. Without ICO production quotas, the global supply of coffee is now outrunning demand by about 1.2 billion pounds--despite a sharp increase in global consumption. Harvard professor Robert Bates, author of "Open-Economy Politics: The Political Economy of the World Coffee Trade" describes the ICO as an "important talking shop": "It is sort of the United Nations General Assembly of coffee--without a Security Council."

Bean-burning is a sign of how desperate coffee growers are to regain pricing power. The ICO had virtually disappeared from view before a suave Colombian diplomat, Nestor Osorio, became executive director early this year and launched a clever new campaign to control production--targeting falling quality rather than price. The four roasters that dominate international coffee purchases--Sara Lee, Procter & Gamble, Kraft and Nestle--have devised ways to improve the taste of blends ground from robusta beans, the inferior of the two main types, even when the beans are partly rotten. In addition, flavored coffee is increasingly popular, and flavors like hazelnut or vanilla hide the gritty taste of robusta. So the big roasters have been buying more cheap robusta from big growers, particularly Vietnam, and less of the superior Arabica beans from traditional growers in Latin America. Osorio's aim is to persuade all growers to destroy the worst 5 percent of their crops--which would ...