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Editor’s note: This article is written by Marcelo Pereira Magnere. In his own words: “I am a coffee lover, quality specialist and private consultant. I have focused my career on improving smallholder coffee farmer’s revenue and competitiveness, by relying on their advantages rather than on the volumes they produce. I have had the privilege and fortune to work for several years at different international developing projects in coordination with private companies and NGOs that include, Coffee Quality Institute (CQI), ACDI/VOCA, Technoserve, Winrock International and USAID in different countries in East Africa, Asia and Central/South America.”

In November 2014, I had the privilege to be invited by the Uganda Coffee Development Authority (UCDA) to be part of the 2nd African Coffee Symposium. During the event I interacted with several coffee professionals from around the world, but only one of those conversations I remember to this day.

I was talking to one of the Brazilian professionals invited to the event about the role of smallholder coffee farmers in the industry and after she got comfortable, she left aside formalities and told me, “If you want to make money in coffee business, make sure to stay as far as possible from the tree,” alluding to the dramatic imbalance existing between the two opposite ends of the supply chain, that even for large and technically advanced farmers, it is sometimes challenging to preserve their revenue.

Then I asked her, “What should we do about small holder coffee farmers?”

She said “We should do nothing. Smallholder farmers are not profitable and they will never be. They should move on.”

After working for several years trying to find economic opportunities for smallholder farmers myself, I couldn’t help but to feel insulted.  Nevertheless I stayed quiet, because at least from the financial perspective, she was right.

Nowadays, I believe it is different; climate change is upon us, and profitability is not enough to achieve long-term sustainability. Although this is not the end for Brazilian and commodity coffees, we must try to find better alternatives without the implied ecological and social costs.

Brazil dictates the commodity price

Brazil is the largest coffee producer in the world by far, accounting for more than a third of all coffee traded globally, hardly challenged in terms of yield, scale, and price.

Additionally, production often hits record highs nationwide, leading to even larger coffee volumes dumped into global markets each year. By contrast, global consumption grows at a slower rate, and the difference remains in the market as a surplus, perpetuating low market coffee prices. [6]

At the time of writing this, arabica trading price on the ICE (Intercontinental Exchange) is on the rise, although the tendency for several years now has been the opposite.

Despite 2020 being a high coffee production year for Brazilian coffee farmers, just below 2018 record [1], we are experiencing a shortage in supply and higher prices as a consequence of the interruption and production plunge during 2021 caused by the COVID-19 pandemic. However, in the near future, we shouldn’t be surprised if prices drop once more. [2][6]

How does Brazil keep coffee prices low?

In the case of Brazil, the sheer size of production keeps overall costs low. Taking advantage of economies of scales means that Brazilian producers can preserve revenue even if global coffee prices drop. Scaling up like this is technically challenging and only possible in proportion to the farm’s size. However, several Brazilian coffee farms have the advantage of being the largest and most technologically advanced in the world. [3]

The shortcomings of industrial coffee production

Scaling up leads to industrialized farming, characterized by heavy use of synthetic fertilizers and pesticides over large-scale monocultures. [4]

Besides the well-known toxic effects pesticides and chemicals have on human and animal health, and the pollution from run-off that threatens the well-being of soil and water, there are secondary, lesser-known consequences that nowadays due to climate change are getting more relevant.

Monocultures also exhaust fertility, degrading soil’s structure over time and undermining the biodiversity that is both responsible for the ecosystem’s natural balance and essential for pollination and the self-regulation of pests.

When these natural cycles are disturbed, synthetic pesticides, herbicides, and fungicides eventually lose efficacy and pests get more resilient and recurrent. As a result, farmers are forced to increase application rates or switch to more toxic substances, exacerbating the problem. Degraded soils also lose their capacity to sequester carbon, an ecosystem service which is key if we intend to slow the ravages of climate change.

Restoring and protecting the world’s soil could absorb more than five billion tons of carbon dioxide each year—roughly what the US emits annually. [5]

Our addiction to cheap coffee

Industrial farming may be justified in some instances where the production of affordable food options is crucial for a persisting growing population; we should consider and possibly even accept the consequences.

A luxury good like coffee may feel like a necessity to us on a sleepy morning, but given that coffee offers no nutritional value, we should stop at least for a moment and reflect whether endangering the environment, annihilating biodiversity, and destroying the soil are acceptable consequences of growing it.

Are there better options?

Broad commercial interest in low-cost coffees is unlikely to disappear – as consumers we are addicted to this affordable luxury, and businesses are keen to keep providing that at a profit. But with more industry actors participating in sustainability efforts, it is becoming increasingly possible to make choices that better support living wages and environmental stewardship.

One general rule is that smallholder-produced coffees tend to have a lighter environmental footprint, in part because these farmers usually have fewer resources or incentives to apply synthetic pesticides and fertilizers. Around the world, 12.5 million smallholder families are responsible for the production of 60 percent of the world’s coffee in areas not larger than two hectares. [8] These yields are typically much lower than industrial farming can offer, but the smaller volumes often mean that farmers intercrop the same fields for additional cash or subsistence, thereby increasing biodiversity as well. This is not an argument in favor of inefficiency – for example, well established coffee production with permanent shade can produce higher yields than monocrop systems in the same conditions [7]

Well -run farmer cooperatives can further increase our access to these smallholder coffees, gaining a bit of the economies of scale larger farms can seize.

A study done in 2014 by the International Coffee Organization estimated that 95% of Ethiopia’s coffee is de facto organically grown. Nevertheless, only 10% of that coffee is eligible for organic certification because the rest is not fully traceable back to the cooperative or farm where it was produced. [10]

Unfortunately, due to their current lack of competitiveness, scale, and technology, small coffee farmers are the most affected by the market volatility. Often they don’t have a steady market, nor the resources to be part of larger farmer’s groups and participate in certification schemes. [8][9]

For this reason, smallholder farmers are gradually moving to cities or choosing more profitable crops, and new generations are reluctant to continue their work, while the remaining ones age to eventually vanish. [10]

What can we do to support smallholder farmers and sustainable coffee?

  • Choose coffees from cooperatives and coffee farmer’s associations.
  • Find ways to channel coffee lots to global markets, prioritizing those which are safe and conscious about biodiversity, soil management, and organic practices.
  • Rewarding farmers accordingly, regardless their income.
  • Evaluate independently the impact of certification in farmer’s livelihood.
  • Demand new certification schemes that provide benefits equally to both ends of the supply chain, facilitating certification compliance by providing smallholder coffee famers with the necessary tools, training, and financial help.
  • Prioritize transparency and traceability to minimize any type of abuse along the supply chain.
  • Stop supporting certification schemes that rely on farmers’ fees to operate. Coffee certification should be inclusive rather than exclusive to the privileged minority of coffee farmers.

It is worth mentioning the outstanding work Enveritas [11] is doing in this regard by creating new ways to evaluate coffee farmers completely free of charge regardless location, affiliation, and farm size. Through the use of satellite imagery and local visits, they cover sustainability aspects including social, environmental, and economic. Another good initiative is the transaction guide [12] that offers a better alternative to ICE to assess coffee pricing by using real transaction data donated by importers and buyers.

Conclusion

The pressure to “get big or get out” is fundamental to industrial agriculture and is taking an important social and environmental toll, by pushing smallholder coffee farmers out of business and at the same time threatening the environment. As long as the industry doesn’t have any other motivation other than price, the conditions will only get worse.

We, the consumers, have the power to stop and change it. By being aware of the hidden costs and modifying our preferences accordingly we can change the world. We don’t need to settle for the coffee industry we have, we can bet for the industry we want.

References

  1. https://www.reuters.com/article/brazil-coffee-crops/update-1-brazil-sees-2020-coffee-crop-at-61-62-mln-bags-below-2018-record-idUKL2N2GJ0EX
  2. http://www.ico.org/documents/cy2020-21/cmr-0421-e.pdf
  3. https://www.japantimes.co.jp/news/2019/08/23/business/technology-machinery-brazil-vietnam-tighten-grip-coffee-trade/
  4. https://www.ucsusa.org/resources/hidden-costs-industrial-agriculture
  5. https://www.nature.com/scitable/knowledge/library/soil-carbon-storage-84223790/
  6. https://apps.fas.usda.gov/psdonline/circulars/coffee.pdf
  7. https://www.researchgate.net/publication/336822552_Integrating_diversity_of_smallholder_coffee_cropping_systems_in_environmental_analysis
  8. https://carto.com/blog/enveritas-coffee-poverty-visualization/
  9. http://www.ico.org/projects/countryprofiles/countryprofileETHIOPIAe.pdf
  10. https://scanews.coffee/25-magazine/issue-6/english/creating-financial-stability-in-coffee-farming
  11. https://www.enveritas.org
  12. https://www.transactionguide.coffee