On Monday, the LA Times ran an article titled Coffee drinkers rejoice: Price of beans hits four-year low. Now, we’re glad that favorable weather conditions are helping increase coffee production. And, you certainly can’t blame consumers (or the LA Times) for welcoming lower prices.
However, keep in mind that lower green coffee prices can adversely affect the financial well-being of coffee farmers and their families. Increased production can offset lower prices but not if margins and profit are squeezed to nothing. It often forces growers to cut costs and corners, which can often lead to compromises in quality.
Frankly, we would rather pay a little more for a great cup of coffee. We encourage you to continue buying quality coffee, many of which quite affordable.
And, remember, October is Fair Trade month. Learn more about Fair Trade coffee at FairTradeUSA.org and Wikipedia.com. Looking for a quality Fair Trade coffee? You can find hundreds of Fair Trade coffee reviews on CoffeeReview.com.
No one is talking about what happens at home as young men increasingly migrate to urban and cross-border jobs – and it’s not just in Mexico. Census studies in many countries indicate that there is an increasing proportion of people over 50 in rural areas. In fact one study suggests that the average age of farmers in Latin American countries will be over 50 and not expected to decline. What does that mean for the future of production, local agriculture and food security.
People are also living longer. That may not sound too bad if, like me, you make your living mostly at a laptop. I can expect to do that for decades longer, and my wife certainly hopes that I keep working. But in societies where the work of farming is considerably more back-breaking and risky, being over 50 is simply not good news. Nor is the increasing feminization of agricultural labor – honey did you hear that? The young are leaving and those left behind may often be women – but that is a topic for another blog.
There are 2 worrisome issues at play here. First, is that the flight of youth from rural areas means that in the long term there will be no experienced farmers to take over. Even when adult children return, many do not have an interest in long hours of physical labor or have the farm skills to make their labor really productive.
Second is the consequent increase in labor costs due to the acute shortages, particularly at harvest times. Agricultural labor is not an easy job in places like the US and Canada; it is even harder south of the border. The ageing farmers in many poorer countries such as Mexico and beyond to Latin America and even parts of Africa and Asia fuel fears that there will be less production and less food. Labor is often the largest portion of the cost of agriculture in many countries. Having higher wage labor can also be a good thing, as it tends to indicate improved economic conditions. But, its significant increase will often mean the concomitant rise of agriculture prices, something that can be positive or can make a farming community economically uncompetitive and then dependent on market foods that, for poorer areas at least, are often cheap processed items and rarely fresh or nutritious.
You just can’t keep them down on the farm. My friend Rogelio Alba knows the problem well. In his late 50s he is left to manage the family’s modest hillside acreage with his wife Gabriella. Each year he is less able to work long days and he plants a bit less. At first neighbors helped each other, but even that support declines as they all face the same issues, and he expects they will all have to plant less.
The labor challenge would seem enough to predict a crumbling trajectory toward subsistence production. Yet, there is more bad news. The Albas face higher energy costs that affect not only the transportation to market but also the cost of fertilizers (making synthetic fertilizer uses considerable amounts of petroleum energy). Composting is a valid solution but more labor intensive. Higher agrochemical costs initially forced then to do weeding by hand but now organic methods such as leguminous ground covers reduce weeding and improve fertility. In the last few years they have faced what may be their biggest challenge: dramatic increases and longer periods of rainfall that increase fungal disease and negatively alter production patterns. These could be part of longer term climate change. The increased risk is certainly not attracting new farmers. So, can Rogelio interest you in a small hillside plot of land?
While some lands revert to forest, most are bought by larger farmers and converted to grazing lands to meet the increasing demand for meat as even relatively poor consumers in developing countries adopt US-style eating habits. What may be most apparent are the significantly altered landscapes especially where tree crops such as coffee, cocoa, or fruits once grew. While demand for foods will certainly grow, it seems certain that in the coming years the supply will be far more chaotic and uncertain. But back to the topic of aging farmers.
The issue of ageing farmers is a global one and not just for developing countries. It may well create a dilemma for poorer governments that cannot provide any safety net for the increasing numbers of older rural people and will be pressured to adopt inward-looking agricultural policies including subsidizing inputs, cost controls, and protection from competition even if these would be inconsistent with the market-oriented policies adopted by many of them today.
This problem does not seem to have a reasonable fix, at least not in any of the dozens of countries where I have worked. Large farmers, with the benefit of equipment and greater incomes can avoid the problem to a certain extent. Yet, more than 90% of the world’s farmers are small and mid-sized. This affects small farmers in Japan as much as small farmers in Jamaica. Farming may be noble but it is not an easy calling.
So, I was surprised recently to see the first results of COSA investigations in Colombia. Researchers there are trying to understand what happens when coffee farmers take up any of the many sustainability initiatives that are available today: Organic Fairtrade, Rainforest Alliance, Utz Certified, 4C, Smithsonian M.B.C. They were not looking for effects related to aging and were surprised to find that the average age of farmers participating in some of the initiatives is significantly lower than the age of conventional farmers.
There could be many reasons. For instance, younger farmers are probably less risk-averse and more likely to try new approaches. But among the likely implications is that younger farmers are finding something to be interested in, something that may make farming more worthwhile, even sustainable. It is not yet clear what aspect of these particular sustainable initiatives most affects them. That may well emerge in the follow-up studies being conducted and it will be interesting to learn whether it is because of improved environmental benefits, social progress, or better productivity and farm economics. What is clear is that perhaps sustainability approaches may be one of the few positive lights in an otherwise darkening future for small farmers.
 COSA is the Committee on Sustainability Assessment, a collaborative effort of institutions to scientifically understand and compare the many social, economic and environmental aspects of commodity production (coffee, cocoa, tea, cotton, etc.). For more information see: http://sustainablecommodities.org/cosa
Demand has been increasing faster than supply for a number of years now. This is a typical cycle after a disastrous and widely felt historic low. But it seems that this may not be an ordinary cycle and most producers may not be able to recover to meet the rising demand as new and powerful challenges emerge.
I must admit that I came to World Coffee Conference really expecting a mind numbing display of political posturing especially given the presence of heads of state at the event held this year in Guatemala at end of February. I was pleasantly surprised. I saw active engagement with new ideas and more discussions of challenging themes than ever before. Besides policy and markets, there were broad discussions on labor, soils, gender, climate change, and more. For the first time, the discussion of sustainability, in its various forms, was really front and center – and not a year too soon. “Bravo” to the ICO and to Anacafe’s excellent organization!
Each speaker had less than 20 minutes to address his peers. Naturally, I did not get to express some of my concerns about the future of coffee, so please allow me to share them with you now.
I am frankly worried; worried about the future of coffee as not only a delightful sensorial pleasure and an important cultural feature but most importantly as an immensely valuable form of income for millions. In a number of countries, coffee is so important for the wellbeing of a large proportion of farm families that anyone would be hard pressed to find a replacement should it disappear. And that is exactly what may happen.
Farmers will likely be facing a combination of daunting new challenges very soon, and some are already confronting them. We need only look to Colombia, arguably the world’s most organized producer country, where some historically unique weather patterns have so disrupted production that even the Fondo Nacional de Café and the powerful Federation (representing more than 500,000 farmers) have been powerless to improve the precipitous drop in production.
The first of these challenges is higher labor costs due in part to the ageing population and in part to the smaller workforce as internal and external migration impacts a number of producer countries from Kenya to Indonesia to Central America. The second is higher energy costs that will negatively affect transportation and, of course, fertilizers since many non-organic fertilizers require considerable energy and fluctuate with the cost of petroleum. The third is increasing climate risks as more frequent and more disruptive weather patterns combine with an apparently inexorable warming trend that is not only affecting current production in a number of countries but likely to shift the areas of production to higher and more difficult terrains. The fourth challenge – as if all that wasn’t enough – is the likelihood of higher than historic levels of market volatility due in part to greater speculation but also to a different type of speculator that can dislodge market movements from their relationship to the fundamentals of supply, demand, exchange rates, etc.
While many do expect demand for coffee to grow, I am betting that in the coming years the supply will be far more chaotic and uncertain. This will be most serious for producers, especially those millions living at the margins. For years many have been discussing sustainability only as a way to differentiate and earn a greater income. However, the wiser pundits in the industry are seeing the dark side of what is coming and sustainability approaches may well become key tools for ensuring basic livelihoods and a measure of continuity for many of the producers and enterprises of the coffee industry.
 International Coffee Organization is an intergovernmental agency mandated to address the sector’s common and global issues.
 Guatemala’s National Coffee Association
 Deeper analysis is available in “Coffee Markets: New Paradigms in Global Supply and Demand”
 In case you are wondering, for every scientist contending the data on global warming, there seem to be a hundred confirming it. The only real questions left are whether humans caused it and what to do about it.
As more food industry leaders adopt visible sustainable procurement, private firms weigh the value of their own in-house approach versus partnering with existing public initiatives – even competitiveness guru Michael Porter is talking about it.
A common groan sounded recently when Andrea Illy, the chief executive of the esteemed Italian coffee roaster (Trieste-based illycaffé S.p.A.) announced they were to launch yet another private sustainability certification scheme onto the market. Some in the sustainability community see the move as counter-productive. I have not met Andrea but have had the pleasure of knowing other leaders in the firm and I do not doubt that there are some good intentions behind this but I cannot help but agree with those that think this may hurt farmers, particularly small and poor ones, more than help them.
Coffee farmers face more standards that demand certification (or verification) than any other commodity producers. There are currently eight that are widespread, six public and two private:
Each has its own level of difficulty, depending on a farmer’s starting conditions. Each has its own standards, certification criteria, and procedures. Each has its own costs of learning, adaptation, and inspection. There was talk nearly a decade ago that having four distinct standards was more than necessary when only Organic, Fairtrade, SMBC, and Rainforest Alliance were around. Unlike the later addition of Utz and the 4C, the standards set by a private firm are typically only accepted and remunerated by that firm’s own buyers. If you want to sell to somebody else, the new buyer cannot use the private certifications and is unlikely to offer any remuneration for it.
As a producer, this can force you into a costly bind. Which certification do you seek? What will it cost if you guess wrong? Make no mistake, it is a guess because very few producers have more than an inkling of what the implications of their choices are. In fact, I know only a few who can clearly articulate the differences. To make matters worse, achieving certification, any certification, does not guarantee that your coffee will be purchased.
Until the work of the Committee on Sustainability Assessment (COSA) captures the actual costs and benefits of the many certifications under different conditions, farmers are left to figure it out themselves. It is already clear that some poor choices could easily diminish their sustainability rather than enhance it. But even when farmers are better informed, they will still face risks with these initiatives because each has somewhat different outcomes depending on the application context. In other words, the results can be different from farmer to farmer especially when you have a different agro-ecological zone, farm size, production method, country, etc. Early results from COSA efforts in a number of countries indicate that there is a considerable cost, in both time and capital, for farmers to adopt a new standard and its accompanying certification or verification process.
So why does a notable 76 year-old business undertake to create its own certification? Ernesto Illy, the noted coffee scientist that led the company from a modest regional business in Italy to a globally recognized brand, and a US$ 300 million company, before his recent death was not a big fan of sustainability certifications. He sent me erudite notes on the shortcomings of one or another. He felt that cultivating, processing and harvesting a high quality coffee was basically all that was really needed for sustainability (I hope he would forgive this oversimplification). The rest would take care of itself. Well, we disagreed, but not that much and I always respected him for his candid views and his willingness to discuss; he was a good scientist, always willing to look at facts and data. I find it harder to muster respect for the company’s current move.
Sure, companies need to grow and evolve and I am glad to see Illy more actively considering sustainability issues But does the coffee world need another certification claiming sustainability? It is likely that one or more of the six existing public certifications have adequate sustainability criteria for any occasion since they cover the range of options quite thoroughly. Illy notes that it wants strict quality criteria as well, something not explicit in the public standards. Fair enough. But do you need a certification for that? The buyers always apply quality criteria anyway, and this is somewhat standardized within the firm’s purchasing guidelines already. Why not just widely publish that – so folks in their supply chains know whether they can meet the grade or not? What is the point – if producer sustainability is the objective – of requiring farmers to take on the costs and effort of yet another certification process, particularly when it applies to only one buyer?
Illy notes that this certified coffee will be marketed with a distinct label that they also plan to license to other roasters. I wonder how many competitors would want to use that label. Does anyone really believe that it will become a new public standard to be used by more than one company? Of the firms that have recently moved toward the use of certifications in their purchasing, all of the food industry leaders have all elected to use public, not private, certifications.
Very recently, Mars, one of the world’s largest and most profitable food companies, made announcements about its commitments to public sustainability certifications such as Rainforest Alliance and Utz Certified for both its coffee and chocolate-based brands. Similarly, Kraft Foods, the world’s second-largest food and beverage company, has partnered with Rainforest Alliance for its certification needs. Cadbury, a leading global chocolate and confectionary brand recently announced that its flagship product will be Fairtrade certified. Even Wal-Mart, the world’s largest food retailer – and a leading seller of certified products – has chosen to go with public certifications such as organic, Fairtrade and Rainforest Alliance. Perhaps these firms’ strategic thinkers know something about the value of working with public systems when they want consumers to believe that they have an interest in the public good.
In a paper with Stefano Ponte (Food Policy Journal) we suggest that in this age of global capitalism, public–private partnerships with civic organizations or NGOs provide the normative framework that corporations use for social legitimacy. Leading firms have been researching the issues for years and nearly all elect to support existing public approaches. They go this route not only for the credibility that these offer but also because they realize the burdens that come with managing a certification transparently. Similarly, most pundits in the sustainability arena understand that adding yet another certification only makes a small producer’s life harder.
One could have taken a lesson from the experience of Starbucks, the world’s largest private coffee firm that is using its own certification. They get kudos from consumers, media, and the sustainability community when they increase their purchasing of a public certification such as Fairtrade. As the largest buyer of Fairtrade coffees in the world this recognition is well-deserved. But few give Starbucks credit for getting farmers to meet its private C.A.F.E. Practices standard. And there is certainly plenty of grumbling in the field about it.
This is unfortunate because the investments of Starbucks and Nespresso — the only two firms seriously mounting their own standards — have been substantial. And I believe that leaders in both firms had good intentions when these approaches were designed. Even the ongoing administrative costs alone are a considerable and perhaps unnecessary burden to the firms. Nespresso’s management is already shifting its sustainability focus toward having farmers certified by Rainforest Alliance. The discussion of the value of its C.A.F.E. Practices program has come up within Starbucks as well. When firms take the time to independently measure their real impacts, they can better understand how their sustainability investments could yield higher returns in terms of farmer relations, sustainability, and public credibility. Consumers may trust a corporate claim to quality and the long-term growth of Illy, Nespresso and Starbucks attests to that. Yet it would be foolish to assume that such trust extends to issues of corporate social responsibility. Most consumers have long ago stopped trusting firms’ own claims about their goodness or their commitment to sustainability.
An FAO report on coffee certifications co-authored in 2008 notes that such essentially private standards are seldom credible because they are under the private control of firms that can at any time alter, dilute, or simply not fully use the standard (Chapter 3). Most are formulated for corporate needs perhaps more than for farmer sustainability and give rise to accusations that they are designed by well-off northerners that have little empathy for the producers that supply them in a developing country.
I wonder if there are any credible voices suggesting there ought to be more certification standards. Taking the available lessons, is there a good business case to be made for such a decision? A sustainability case? In fact, after a recent presentation and discussion by noted Harvard Business School professor and competitiveness expert Michael Porter, I would venture to say that the consensus is that having more sustainability standards will make it more difficult for farmers and for firms. So, is this going to be Illy’s contribution to sustainability? I hope not. They have a talented and very creative team and surely they can come up with a bolder and better idea.