As the price of coffee hits a new low, of about one eighth of the rate it was in 1994, a new report has revealed that coffee beans sometimes exchange hands up to 150 times before they reach Western supermarket shelves.

Coffee is in fact the world's second most traded commodity after crude oil, but unlike oil, it is no longer a valuable foreign-exchange earner.

According to the Fairtrade Foundation's report, Spilling the Beans, small independent coffee farmers in places such as Tanzania and Uganda are in a chronically weak position when it comes to selling to local dealers.

With only one major harvest a year, farmers are so desperate for cash that by the time their crop arrives they are forced to sell at rates often completely uneconomic for them.

The International Coffee Organisation (ICO) recently released figures showing that the world coffee economy has risen by $20 billion since 1991, when it was worth $30 billion, but in that time the producers' share has fallen from $12 billion to $8 billion.

Now the vast coffee chains such as Starbucks spend very little of their actual costs on coffee itself. Far more expensive to them, is the price of property and marketing for their shops.

Prices on the world market are now their lowest in 36 years - this month saw robusta selling for as little as $464 a tonne - and the situation is not expected to improve in the foreseeable future. Yet only seven years ago, in 1994, coffee was selling as high as $4,091 per tonne.

According to the London-based ICO "the effect on producers (of the collapse in price) has been very serious." It fears that the chronic level of prices will wipe out a considerable number of small farmers in Africa.

The vast majority of coffee farmers in Africa are small producers with yields of around 225kg per hectare.

At its meeting this month, ICO will look at the possibility of cutting out the poor quality coffee surplus from the world market in a bid to push up prices. But robusta producers in Africa are said to be strongly opposed to the scheme.

Cutting production or supplies onto the world market will not be an easy task. Efforts to halt the slide in the price of coffee through various retention schemes and cartel agreements since the early 1990s have all come to nothing through either consuming-country opposition or internal differences among producers.

The big coffee roasters can afford to pay basic rates for coffee because of a huge oversupply on the world market.

The global coffee mountain is now said to stand at more than 59 million bags, amounting to over 3 million tonnes of coffee beans.

This year alone, production is set to be around 113 million bags, the highest level since 1965, and unless a major crop fails, prices will remain at rock bottom levels.

Moreover, each year, around 10 million more bags of coffee are produced than consumed, which is only adding to the problem of oversupply.

The fundamental reason why prices are so low is because coffee exports have gone up by 15 per cent since 1990 that of new plantings by established producers and the arrival of newcomers such as Vietnam to the market.

For Uganda and Tanzania in particular, the decline in the price of robusta to less than US 50 cents per kg has been disastrous.

Coffee is still Uganda's biggest foreign-exchange earner and it is one of the three biggest producers in Africa along with Ethiopia and Cote d'Ivoire.

However, Africa's combined total of around 18 million bags still represents only around 16 per cent of world production, with the big three producers, Brazil, Columbia and Vietnam, accounting for nearly 50 per cent of total world production.

The World Bank has predicted that coffee prices will not return to their 1997/98 levels until at least the year 2010.

The development agency Oxfam has proposed torching nearly a million tonnes of surplus coffee to be funded by a windfall tax on the big coffee companies like Nestle, Kraft and Sara Lee. It says that 15 million bags of low grade coffee needs to be burned to get the market price of coffee back to above $1 per kg.

Other coffee experts say that export marketing boards of developing countries need to be strengthened to prevent poor quality beans getting onto the market. However, in many countries, in Africa in particular, coffee marketing boards have all but collapsed.

The ICO still pins much of its hopes on an increase in consumption but recent statistics show that although demand is rising, by around 1.5 per cent per annum, supply is increasing by more than double this rate, 3.5 per cent.

Moreover, and more critically, despite the emergence of the new coffee shops in Europe and the UK, consumption per capita has fallen in Western Europe and North America.

In East Africa, the collapse in price of coffee has had dramatic effects, leading to bitter internal battles in Kenya.

In Uganda, which still depends on coffee for around half of its export earnings, the price slump has cost it an estimated $190 million - the equivalent of half the amount of debt relief it has received from the West. Tanzania has also been badly affected by the price fall.