What coffee should I drink?
“Low coffee market prices are not profitable for coffee farmers anymore; therefore Specialty Coffee production represents the best opportunity for development and prosperity at coffee producing regions. Although commercial grade coffee is still dominant in the global market, Specialty Coffee already has a 60% share in the US and growing at 12% each year.”
In the previous article, (you can access it here), we discussed how governments, international NGOs and institutions have massively used coffee globally as the tool of choice to lift farmers out of poverty, either by developing the agriculture sector in some countries and fighting drug manufacture in others. Despite, intentions were originally good, by the end of the 20th century, the global coffee market was near total collapse, prices were record low and coffee surplus was larger than 3 million tons/year worldwide.
Fortunately, the global coffee economy has recovered, thanks to emerging economies like India and China adding up to the list of consuming nations and an important growth of local consumption in producing countries. Nevertheless, coffee market price is still lower than the production cost in several parts of the world.
Surprisingly, while traditional coffee consumption has remained stable through the years, growing steadily at just 1.5% – 2.5% per year, the demand of a higher grade coffee (A.K.A specialty coffee) has exploded at astounding 10% – 13% per year. In the US alone, specialty coffee accounts for 59% of the industry. For every ten cups of coffee being sold nationwide, six correspond to specialty coffee.
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The consequences of this sudden switch in global coffee consumption habits are, structural, deep and colossal for the industry. They represent an entire revolution in the way we produce, grade and sell coffee. Nowadays competiveness and performance in the global coffee market is in direct proportion to how fast producing countries adapt to new market demands. These structural changes in the industry are sophisticated, they require a complete new set of skills and tools that farmers from all over the world have never had at their disposal or used before.
Adopting this new set of skills and technology is expensive and requires a huge investment. Unfortunately, coffee prices have not increased at the same ratio quality demands did; making it difficult or even impossible for some coffee producing nations to absorb them. Nowadays, specialty coffee prices are still estimated by using market coffee price as a reference; although, commodity and specialty coffee’s value chains have diverged profoundly.
Some of the 21st century coffee market challenges are:
Traceability
Historically coffee has been commercialized only by its inherent market value, any additional attribute has always been considered irrelevant or secondary. To illustrate it better, the same way as we don’t mind today, knowing where the gas we use in our cars come from; in the past, we used not to mind to know where our coffee originated from. At the end of the day, we only needed gas to make our cars move from A to B, regardless the gas was from Saudi Arabia or Sudan. Likewise, we used to drink coffee, only to help us wake up in the morning or to be more productive. Regardless the coffee was from Colombia or Congo. Why bother. It was just coffee.
Nonetheless, farmers who produce commodity coffee tend to focus exclusively on volume and efficiency, the faster they processed and ship their coffee the sooner they would get paid. Once coffee is sold, lots with similar characteristics are mixed together, packed in big bulk bags and ship locally or internationally. A characteristic all commodity coffee farmers share, ultimately, they never know where their coffee ends up.
The first step of differentiation or de-commoditization of any coffee is traceability. Traceability means, the farmer’s identity, lot size and integrity have been preserved. Though, while it sounds simple in theory, it is challenging to implement. Keeping, sorting, milling, tagging, tracking and shipping several lots of multiple sizes is a lot harder and logistically laborious than dealing with only one large lot.
SEE ALSO: Is coffee really good for your health?
I was lucky enough to play a small role during the implementation of traceability in Ethiopia, and I witnessed firsthand how it took a multidisciplinary team from more than a few institutions, several years to install it and implement it nationwide.
Relevance
More than two thirds of all coffee farmers are considered smallholder farmers. By definition, a smallholder farmer is a farmer who grows coffee on an area 20HA or less. In reality, only a few of them grow coffee in an area larger than 1HA. In east Africa alone, there are more than 4 million farmers in the same conditions. Coffee has always been sold by them as coffee cherry, or as a dry cherry pods at local markets, with little opportunity to get any benefit out of the added value processing and commercializing their own coffee offers. Nowadays, for the first time in coffee history, traceability to origin matters, giving coffee farmers the leading role in the coffee economy and coffee buyers a unique opportunity, to make transactions more transparent and ethical than ever before.
Nevertheless, smallholder farmer’s individual crop volume (500kg/farmer average) doesn’t make the cut in size to be competitive in the global market. To scale it up, farmers need to aggregate volume by getting organized into cooperatives and dividing labor. Unfortunately, doing it requires cash farmers ultimately don’t have. Financial tools, like credits and loans are usually not available when the only collateral farmers have to offer is their own crop. Loans intended for agricultural purposes have always been difficult but in some countries where farmers do not own their land, it gets even more challenging. Luckily, I have had the opportunity to work with exemplary financial institutions who, aware of this issue, are willing to find a way around it, so even though it’s by no means easy, it is no longer impossible.
Quality
When a coffee farmer is exclusively focused in improving his processing speed and total volume, there is little room for a tastier and better coffee. Luckily, this is also changing, every year, coffee quality has a higher priority in international coffee markets. Therefore, the basic need for farmers to understand the sensory attributes (cupping and grading) of their own coffee has become imperative. Their success in terms of pricing, market reach and networking would ultimately depend on it. This is not an easy task, it requires, training, infrastructure and technology, typically most coffee farmers don’t have.
Market linkage
It’s not uncommon for coffee farmers to be located in remote rural areas, with little access to basic services, like phone, water, electricity, internet and many others. Not including cultural, social, geographic and language barriers that set them aside from their potential customers. Most of the time, channels farmers use to commercialize their coffee, only include a bunch of local coffee brokers and markets, which by no means reward coffee quality. It takes a huge effort, and a very unique breed of international coffee buyers and professionals to create a successful bridge between coffee origin and international markets. Throughout the years, I have been very fortunate to witness, specialty coffee buyers and importers who are willing to take the risk and do what it takes to close this gap. Although, this encounters are exceptional. They are getting more common as the quest for better coffee intensifies worldwide.
Price
Ultimately, coffee price would be the main factor, necessary to secure the future of specialty coffee. Nowadays, although the market share of this type of coffee is growing, market price is still insufficient to bear the colossal structural changes and cost, coffee producing countries and coffee farmers must endure to produce it. Achieving this goal, would depend on the value, awareness, attitude and appreciation, international consumer express towards specialty coffees. Therefore, education shouldn’t be limited just to farmers, it should include final consumers as well.
So next time, you are enjoying an amazing coffee from some remote cooperative in Congo or Burundi, spare a minute to appreciate the logistical and technological challenges, farmers, nations and coffee professionals had to overcome, for you to have the privilege to enjoy that cup of coffee in all its glory.
“Coffee quality is just a consequence of social development. Charity alone, does not lift smallholder coffee farmers out of poverty. Skill development and education do.”