Papua New Guinea

Since its inception, Papua New Guinea's coffee industry has been lightly regulated, operating on free enterprise principles. Rules are imposed in the form of annual registration for processors and exporters, procedures for the registration of sales contracts and mandatory quality standards. The Coffee Industry Act under which these rules are set out, is administered by the Coffee Industry Corp., which monitors exports and provides a factory inspection and quality assurance service. The corporation is not involved in trade, existing simply as a regulatory, research and farmer-advisory body.

Since its earliest days, the smallholder based sector of the industry has been highly competitive. Only certain regions which lack access roads do not attract many buyers. Here growers often just have to accept the price offered to them by a single buyer which is willing to operate out of such remote regions. In the major growing areas however the trade for hulled coffee is intense. Literally hundreds of small buyers operate during the harvest season, many usually from a base at the side of the road with a makeshift sign (announcing their presence and purpose) and a scale. Others, generally better organised and more experienced travel to various producing regions, using four wheel drive pick-up trucks, and bargain and buy coffee from farmers as they pass through. Many of the wealthier mobile buyers have, in recent years, begun to set up permanent town depots, generally at the main market or in some other central spot in one of the highland towns. In answer to this, many growers from outlying areas now actually prefer to bring their coffee to town to sell. This is usually achieved by flagging down a passing bus and piling several bags of coffee onto the roof. In town, where the depots cluster near the market, one can easily determine what the going price of coffee is and sell to the highest bidder. This is never so easy out in the villages or at the roadside where smooth talking buyers may swing the deal very much in their own favour.

All this translates into fierce competition for the farmer's product which enables them, if well organised , to obtain 80% or more of the ruling export or FOB price. In this situation, with much competition and small margins, the pressure is very much on the middle man rather than on the grower to make enough money to stay in business. The downside of this, since regulating roadside trade in any meaningful way is almost impossible, is that there is always a buyer for whatever quality and this creates a market where farmers may lose the incentive of producing a better product. Ultimately penalties for substandard quality will be applied at the door of the factory by its operator with no involvement from the regulator. 

Recognising the situation, the Coffee Industry Corporation has developed a comprehensive, proactive farmer training package within which there is an emphasis on quality control by means of selective harvesting and proper preparation methods of dry parchment coffee. Just as in any group of people, though, there are "adopters" and "non-adopters" among the farmers and although this package continues to see positive results, the change is very slow. The CIC also addressed the problem by developing a set of standards for classifying dry parchment coffee to be used by the processing and exporting sector. The same was done for cherry classification as these are also traded in some areas. Both the cherry and parchment classification standard are publicised using wall charts and leaflets in which the various classes of product are depicted in very accurate colour photographs. Every registered factory is obligated to display the wall charts at each of its buying points, and many tens of thousands of leaflets have been distributed in campaigns aimed at growers and roadside buyers. Since it is generally felt that any other means of price control or creation of a central marketing control body would be counterproductive in terms of financial result for the grower, the buyers and sellers are simply aided in classifying coffee all while being left to arrive at a fair price, voluntarily. The cherry and parchment standards do not have any real legal force except for the Minimum standard for Unprocessed Coffee which must be respected. It is forbidden by law to buy or sell coffee which is below this standard, and heavy penalties are foreseen in the CIC Act for either buyers or sellers dealing in these coffees. 

96% of all coffee produced in PNG is exported through the port city of Lae. Here all exported coffee shipments are checked individually by CIC's Quality Assurance Laboratory.