Friday, October 14, 2011

Food Security and the Coffee Farmer

This year Blog Action Day coincides with World Food Day. In honor of the two, we’re posting Development Director Peter Kettler’s perspective on food security in the coffee-farming context.

Food security. For many coffee consumers those words might conjure up images of inspectors in pristine white lab coats, clipboards in hand, picking over bunches of broccoli in search of a stray insect or some faint residue. For others it might mean stockpiles of soup and bottled water, stored in a corner of the cellar alongside a flashlight and transistor radio, ready for some possible catastrophe.

But in the world of coffee producers, food security means quite another thing. It means having access to enough food to adequately feed themselves and their families every day of every month of every year. Unfortunately, due to an almost perfect storm of population growth, climate change and a growing competition for natural resources, many coffee-farming families are facing widespread insecurity when it comes to meeting one of their most basic needs.

Although Coffee Kids programs are designed to address a wide variety of issues facing today’s coffee producers, there is perhaps none more important than food security. It is the very foundation upon which any discussion of quality of life is built. If there were a Constitution of Coffee, food security would be listed as the first item in its Bill of Rights.

That’s why Coffee Kids is pleased to announce our Food Security Campaign. This effort will, over the next year, help coffee-farming communities develop and implement a wide variety of sustainable, locally based solutions to address the mounting problem of food security.

Our goal is to raise $100,000. In an industry with estimated sales that will exceed $13 billion over the next year, this is small change indeed—small change that is desperately needed in order to make big changes in the lives of coffee farmers.

The specialty coffee industry has shown steady growth due to its commitment to quality. Please help us ensure that the coffee industry’s definition of quality includes a future that ensures a quality of life for its producers.

Rick Peyser of Green Mountain Coffee provides a valuable perspective on the issue of food security, its effect on farming communities and what it could potentially mean for the coffee industry as a whole. As he says, “We must pause and ask ourselves, ‘Who will grow the next generation of specialty coffee?’ For our sake and for those in the industry who will follow in our footsteps, we had better have a good answer.”

To find out more about the Food Security Campaign or to participate, please contact Development Director Peter Kettler at .

Wednesday, January 26, 2011

What’s behind the coffee trade (part 3): The market and the farmer continued

Coffee Kids regularly goes to origin and talks to the producers about their relationship with the coffee market. They tell us that low prices are nothing new for them. They have found ways to get by, even if it is only a temporary solution.

When prices rise, though, specialty coffee producers find themselves facing different challenges. Program Director José Luis Zárate recently interviewed Tomás Pacheco López, coffee producer and one of the leaders of the Miramar Cooperative in the Mixteca region of Oaxaca. He explained that coffee cooperatives such as his sign their contracts long before harvest. When the harvest does arrive, prices can be so high that it is very tempting for the farmer to sell his coffee to the coyote at a better price than what the cooperative can offer. This then creates conflict and divisive behavior within the organization. Members of the cooperative begin to feel suspicious of the leaders and their motives for not paying as high as the market dictates.

Tomás explains that is difficult to explain the international coffee market to the producers. And so the cooperative uses the money it has saved for community investment or borrows money to artificially raise the price of coffee and therefore meet the demands of the producers.

So coffee prices rise. Some say that the farmer is finally getting paid a fair price. But cooperatives are faced with only a few bleak options. They could refuse to comply with their contracts, given that the producers do not want to sell their coffee for less than what the coyotes offer. Or the cooperative spends its savings or accumulates debt trying to compensate for the disparity in prices. Or the cooperative may face disintegration when the leaders are unable to face the buyers, who demand that producers comply with their contracts, and the producers who demand a more just price. To further complicate things, local traders take advantage of the situation by speculating and buying coffee at one price from one group and at a lower price from another group, thereby creating the appearance of a threat rather than healthy competition.

There have been cases, although rare, of cooperatives that have developed strong relationships with their buyers. In these instances, the buyer understands the potentially serious consequences of not adjusting the price to better reflect the market. The buyer is more sensitive to the needs of the producer, and they are able to reach an agreement that makes for a long-lasting relationship.

One may be tempted to think that certification is the answer to a volatile market. Unfortunately, though, there are not adequate measures in place to support the producers when the market becomes unpredictable and governing bodies have been unable to respond with proper compensation or regulation.

This has lead to an overall disappointment in the certification process, whether it be organic, fair trade or both. Many cooperatives believed that the seal would protect them from the negative effects of the market. Many have come to the conclusion, though, that the protection is insufficient when prices are low and a disadvantage when prices are high.

The group of people in the coffee chain that should receive the most protection and support turns out to be the group that is most vulnerable to the market and its volatility.

What’s behind the coffee trade (part 2): The market and the farmer

Here’s another term to put under your belt: commodity dependency. Somewhere between 20 and 25 million families worldwide produce and sell coffee. That is, it is their livelihood. They depend on it. This is a commodity dependency, which leads us to what is referred to as the coffee paradox.

The coffee paradox refers to the disparity between the poverty of coffee producers and the rising profits of retailers. It is estimated that 90 percent of coffee production occurs in developing nations, while the majority of specialty coffee is consumed in the developed world.

It is also estimated that the coffee producer will reap less than 10 percent of the retail price of specialty coffee. Small-scale coffee farmers, often looking to make ends meet any way possible, are especially vulnerable to an extremely volatile market and those local traders, exporters and representatives of large companies who are looking to buy at the lowest price possible.

The ever-changing coffee market makes it very difficult for farmers to be able to take into account the projected income of any given harvest. Without knowing what the international price of coffee will be, they cannot plan production accordingly. This volatility also makes it difficult for governments to respond effectively to estimated revenue with social spending and debt servicing.

Now if we zoom in a bit more, we can see that there are a number of factors at a local level that contribute to a farmer’s income. For instance, a farmer’s access to technical assistance, lines of credit and transportation all make a big difference in a family’s ability to get by.

Coffee Kids regularly goes to origin and talks to the producers about their relationship with the coffee market. They tell us that low prices are nothing new for them. They have found ways to get by, even if it is only a temporary solution.

To be continued…

What’s behind the coffee trade (part 1)

Lately it seems that coffee prices are steadily climbing. To really understand what’s happening, we have to understand the market, how prices are decided upon and how this affects those involved, especially those who are often overlooked—the coffee farmers.

Coffee trading 101

In order to get the big picture, we first need to take a look at how trading works. For those of us who are neophytes in the rules of the trade, we’ll start with the basics.

Coffee prices, and therefore coffee farmers’ income, are affected by a number of factors, such as world market prices, climatic issues, supply and demand, speculation, political unrest, transportation costs and a host of other often unpredictable variables.

Coffee is most often traded in the form of futures contracts through the Intercontinental Exchange (ICE)—previously called the New York Board of Trade—and the London International Financial Futures and Options Exchange (LIFFE). These are the institutions that determine the price of coffee on a minute-by-minute basis.

A futures contract is an agreement to buy or sell an item on a specified date in the future at an agreed upon price. Each futures contract covers 37,500 pounds of green coffee. Note that roasted coffee or ready-to-drink beverages are different products requiring different contracts.

Futures contracts allow both buyers and sellers to manage their risk in a market that can often be volatile. That being said, most coffee farmers do not have the financial resources to take a position in the futures market and often lack the skills to manage that position.

One of the more recent and influential factors in the coffee market is speculation. Before the deregulation of the 1990s, speculation had a place in the commodities market. It was reigned in because classic laws of supply and demand still controlled market prices.

Then, as a result of the tireless efforts of banks, hedge funds and politicians, regulations were systematically discarded, leaving us with an all but imaginary market in food speculation, controlled by people who have little to do with agriculture.

John Vidal’s article in The Guardian succinctly explains the effect of speculation. It is estimated that between 70 and 80 percent of the food market is now speculation. This means that when we get word that Brazil is experiencing heavy rains and mudslides, the price of coffee would normally go up about $1 per bushel, according to Mike Masters of Masters Capital Management, as quoted in Vidal’s article. But, thanks to a speculative market, that price jumps up to $2 to $3 per bushel.

Recently, a wave of investors has had a disproportionate influence on prices within many of the commodity trading markets. These speculators, who often have no commercial interest in the industries in which they invest, are able to infuse large amounts of capital into the market in the hope of making a large, short-term profit. Because they never intend to take physical possession of any of the products in which they invest, they are able to turn a profit on market movements in either direction. This takes markets outside of the realm of simple supply and demand and makes them much more unpredictable.

What we have then, are groups of farmers working to produce coffee for an extremely volatile market that is even more so today due to the intervention of speculators that may or may not have anything to do with the coffee trade. It becomes clear who benefits from the system and who is often left behind.

Friday, December 03, 2010

Tragedy in Guatemala reflects the plight of coffee pickers everywhere

On November 28 a terrible accident occurred near Quetzaltenango, Guatemala. Eighty-three farm workers were being transported to a coffee plantation in, as the Movimiento sindical, indígena y campesino guatemalteco (MSICG) puts it, unsafe and subhuman conditions. Nineteen workers died—four children, three women and twelve men. Everyone else was injured.

The plantation to which they were headed had promised to pay workers 40 quetzales, about 5 USD, for every 100 kilos of cut coffee. Note that minimum wage in Guatemala is 56 quetzales, or about 7 USD, for a full day’s work. It is also important to note that one person cannot cut 100 kilos of coffee in an eight-hour day.

This tragedy reflects an expansive problem that affects coffee-growing communities throughout Latin America. Extremely low wages, unsafe traveling conditions and accidents without any kind of accountability are an everyday reality for coffee growers everywhere.

There are no easy answers. Poverty is a very complex issue. We can, though, try and work toward alleviating that poverty through development projects and supplemental income, and therefore lessen the dependency many coffee-growing communities have on the coffee crop. While it is not an instant solution to an admittedly bleak landscape, it is a way to begin to bring about change in a meaningful and measurable way.

Monday, May 03, 2010

$12 Cup of Coffee? Not That Far Off

The New York Post had an article today titled, “$12 cup isn’t your average joe,” talking about coffee retailer Cafe Grumpy introducing a $12 cup of coffee. People reacted with awe at the sky high price and a number of folks posted negative comments on the audacity of the shop to charge a price that high for a simple coffee.

But few understand how we’ve come to enjoy such a low price for this integral part of our daily life.

If the price of coffee truly considered all of the costs to the farmers producing the beans, we might actually see a $12 cup of coffee as a bargain. Even with Fair Trade, organic premiums and other price supports, most farmers are losing money on the crop. But given the poverty prevalent throughout coffee-farming communities, few farmers them have a chance to pursue other alternatives or get an education to improve their options. And they can’t afford to let their children attend school and the cycle continues.

Coffee-farming families need viable alternatives to coffee in addition to a more equitable price to ensure a sustainable lifestyle.

Friday, March 26, 2010

Free Markets, Food Aid and the Effect on the Poor

A couple recent articles prompted me to look at the topic of how food aid and free markets impact the poor. On Fast Company, a video was posted called “How the Global Food Market Starves the Poor.” The video is a simplified study in how food aid and free markets can actually undercut local production of food and increase dependence on foreign aid and trade. Then today, I saw an article on the earthquake aftermath in Haiti titled, “Food Dependency Is Poverty Trap For Quake – Hit Haiti.”

One of the quotes that stood out for me was, “Experts now acknowledge that the influx over the past two decades of subsidized cheaper farm imports, ushered in by World Bank and International Monetary Fund free-trade policies that obliged Haiti to open its markets, delivered a virtual death blow to Haitian agriculture from which it has never recovered.” According to the article, Haiti spends 80% of revenues on food imports.

Both the video and the article reaffirm the importance of Coffee Kids’ work. By supporting locally managed projects that communities create and implement themselves, Coffee Kids ensures that local needs are being met and directly addressed. Many of our partners are working to create more sustainable local food systems and educating families on the importance of nutrition. Food sovereignty projects help families look beyond the price to learn where their food comes from and how that impacts their community. Armed with this knowledge, they can make informed choices for their families.

An article on food sovereignty will come out soon in “WorldView Magazine” on the work of our partner Self-Managed Development (AUGE). If you get a chance, check it out. You can also read about Yolanda Vázquez, a participant in AUGE’s food sovereignty and microcredit projects in our blog.

Friday, February 12, 2010

And Another Fair Trade Article

Another article appeared on Fair Trade coffee and whether it really helps coffee farmers. The article, “Does Fair Trade Coffee Lift Growers Out of Poverty or Simply Ease Our Guilty Conscience?,” showed up on Alternet.org.

It treads familiar ground about the limits of Fair Trade and looks into the issues surrounding the price farmers receive, whether it really reaches them, and if it is all just more about marketing than actually making a concrete difference of the lives of coffee farmers. The article provides good information on how the price breaks down and makes good points about how it all isn’t quite so simple as a monetary transaction between a roaster and a farmer. But is Fair Trade effective?

The fact of the matter is that purchasing Fair Trade helps. Purchasing organic certified helps too. Purchasing Shade-Grown coffee makes a difference. No matter what, paying farmers a higher, more stable price for their coffee will always help. But in many coffee communities, price is just one part of a complex picture.

In most communities, families have been dependent on coffee for generations. They depend on coffee, not because it’s necessarily a dream job, but because they lack the mobility and resources to explore alternatives.

It’s a given that farmers and their families and employees should be receiving a fair price for their product and labor. But equal emphasis needs to be placed on promoting independent development in coffee communities. Working with them to create educational opportunities, improved health care and economic diversification efforts that will spur vibrant communities with greater sovereignty.

Paying a more equitable price is great, but it’s just not enough. Supporting efforts, like those of Coffee Kids’ partners, extends the reach of Fair Trade and makes a true difference. Learn more about our program partners here. And if you would like to support development in coffee-farming communities, please contribute.

Tuesday, January 05, 2010

Latin American Farmers Leaving Organic Coffee

Latin American countries account for 75% of the world’s organic coffee production. But even as demand for organic coffee has increased, coffee farmers are being forced to return to conventional cultivation using chemical fertilizers and pesticides. In the article, “Organic coffee: Why Latin America’s farmers are abandoning it,” reporter Ezra Feiser talks with coffee farmers and researchers to uncover what’s happening.

The Center for Tropical Agricultural Research and Higher Education in Costa Rica (CATIE) estimates that at least 10% of organic coffee farmers have gone back to conventional production. The article goes on to state that the high prices that had been associated with organic coffee are diminishing and many farmers are being forced to sell their organic beans in the conventional market.

In Chiapas, Mexico, farmers associated with our partner ICSUR experienced this firsthand when a buyer canceled two large contracts and farmers were forced to sell their coffee in local markets. Many families sustained a heavy loss (Read more here).

According to the article, farmers using chemical fertilizers and pesticides harvest about 485 pounds of coffee out of one acre, versus 285 pounds per acre on an organic farm. If they cannot justify the cost, they are forced to return to conventional methods.

The impact is heavy in many communities. Given a lack of education on proper usage, local water sources are frequently contaminated with chemicals, much of the land is rendered sterile from overuse, and families are frequently exposed to toxic chemicals.

Families working with our partner ICSUR have incorporated edible mushroom production and chicken-raising efforts to diversify their income and lessen their dependence on income from coffee. With economic diversity, many of these families can continue their organic farming and weather the finicky markets.

Monday, December 14, 2009

Guatemala High on Climate Change List

With the United Nations Climate Change Talks going on in Copenhagen this week, the news has been saturated with articles and programs about climate change and its potential impacts. A recent article in The Prensa Libre, Guatemala’s national daily, blared “Guatemala está en riesgo por cambio climático,” or “Guatemala at Risk for Climate Change” (link in Spanish).

According to the United Nations, Guatemala is among the top ten countries that could be affected most by extreme weather caused by climate change. Afghanistan, Macedonia, Armenia, Belize, Cambodia, The Dominican Republic, El Salvador and Comoros along with Guatemala are the countries most threatened by hurricanes, droughts, floods and elevated temperatures.

Articles from the Minnesota Post and Guardian, cite that coffee farmers are already being forced to higher altitudes to find the temperatures necessary for cultivating coffee. (Please read “Climate change causing havoc to coffee and tea farmers, says Cafédirect” The Guardian and “Will coffee prices climb with climate change?” The Minnesota Post)

Around the world there will be millions of families affected by increasingly extreme weather patterns and the discussion of sustainability will likely change from simply providing a fair price to how to ensure that families have a way to survive. Coffee Kids is working to provide alternatives that provide for more consistent year round income. The programs we support don’t change the weather, but will help families confront to potential effects of climate change.

We currently support four organizations in Guatemala. The projects range from pre- and post-natal care for women, to permaculture and biodiesel, to microcredit and small business projects. Read more about our efforts in Guatemala here.