Tough, hard realities have to be addressed in coffee producing countries to retain origin diversity. Coffee growers must make money to ensure the diversification of supply. To increase coffee prices alone may not be enough in many countries.
My experience in most producing countries, marketing coffee processing machinery to growers and traders of all sizes, cooperatives and governments, has given me good insights into what happen to coffee from seed to harbour. My work with the Global Coffee Platform has deepened these insights.
What strikes me the most is low productivity and the small percentage of the FOB export price that reaches growers. The small average farm size is another reality in most producing countries outside Brazil. To increase productivity alone may be a double-edged sword because it may lead to over-supply and even lower prices. Therefore, we also have to bring together the FOB export prices and farm gate prices to transfer more income to growers. It is striking how much of the export price does not reach growers in many producing countries.
In order to increase both productivity and the price that reaches growers, producing countries have to improve what is called the enabling environment, i.e.: extension and training services, supply chain for inputs, equipment and coffee itself, financing, legislation, logistics, etc. This shows that the real solution does not lie within farm gate alone but also beyond it, in the business environment between farm gate and harbour.
Government actions play a critical role and can make a large impact on the enabling environment that helps farmers’ income to grow. An effective way to leverage government and private actions to improve the enabling environment may be precompetitive platforms involving government itself, the supply chain from seed to cup, donors and civil society.
Another structural factor that prevents many coffee growers from having a larger income is the small average size of the coffee holding. In round figures, out of US$ 200 billion that consumers pay for coffee, US$ 20 billion reach the producing countries and only US$ 14 billion effectively reach the 12.5 million coffee farms around the globe. Estimating an average of a family of 4 people, the 50 million people who depend on coffee for their living receive an average of US$ 280 each per year or less than US$ 25 per month!
It is too many people for too little land, for too little coffee. The average size of the coffee farm around the world, between 1 and 2 hectares, is not big enough to guarantee a decent living income for coffee growers. There will have to be fewer people growing coffee and living from it or their income will have to be increased by diversification. One possibility for growers to make more money is by planting other products, including intercropping, but the best option may be to diversify income, with many growers and their family members seeking jobs outside the farm, not necessarily in farming but especially urban jobs. Those who remain on the farms will have to treat coffee growing as a business.
This indicates that whereas we may be seeking solutions for the crisis within the coffee business alone, solutions also belong to the field of regional and national development. The challenge of increasing the very low income of coffee growers has to be addressed with the support of regional economic development policies that are beyond the coffee sector and include employment generation outside coffee farms in the forefront. The challenge will have to be addressed jointly by the coffee sector and governments with precompetitive initiatives like the Global Coffee Platform has been proposing and implementing.
Recent data collected by Enveritas shows that in countries like Costa Rica, Vietnam, Brazil and Colombia, where, I add, there are more opportunities outside farms, more coffee farmers’ children are willing to leave the coffee farms because, I add again, they have better alternatives elsewhere. The large majority of children wants to stay on coffee farms in countries where, I understand, job alternatives are fewer outside.
Last but not least, another strategy to be considered by coffee producing countries is the development of local consumption. The case of Brazil shows that local coffee consumption is a unique safety net for growers at times of low prices not to say all the time. In countries where coffee consumption increases, coffee growers can sell their product to local roasters, a captive market, not to say become small roasters themselves or to open coffee shops. A sure way to ensure that a good number of origins survive is to develop domestic coffee consumption in these countries.
*This article was written by Carlos Brando based on his talk at Kamba Coffee (26/09/2019) and the presentation for the panel “Back to the Future: The Value of Origin Diversity” at SCTA’s Forum (www.sc-ta.ch).