Can a coffee farmer pay the rent?

By now you probably know about the coffee price crisis; coffee prices worldwide are hitting rock bottom. Trabocca is an importer of so called specialty coffee and is paying a significant higher price for that coffee. As the first user of Fairfood’s soon-to-be-launched traceability tool Trace they want to find out: is this price enough for a coffee farmer to reach a living income? Commercial director Sander Reuderink tells us about his quest for poverty-free coffee.

Around the globe, eighty percent of the coffee we drink is grown by twenty-five million smallholder farmers. For years, the price they have received for their coffee has been too low to cover household expenses and even the cost of production. In our industry this is known as the coffee price crisis and it has resulted in migration, child-labour and deforestation at an unimaginable scale.

Over the years, there have been countless initiatives aimed at solving the problem of low coffee prices. A complicating factor is that small-scale coffee farmers typically produce a semi-finished product that needs to undergo further processing prior to export. Existing social sustainability initiatives tend to focus on the price at which the finished product is exported, and do not provide transparency about the price received by the small-scale farmer, nor their ability to cover their cost of production and household expenses. Even in certified supply-chains, poverty is still omnipresent.

A human right
A living income is a human right (the International Labour Organisation has defined a living wage as a basic human right under their conventions and recommendations to the Universal Declaration of Human Rights Article 23) but often one that remains out of sight in long, opaque supply-chains. In the specialty coffee sector, we tend to believe that because we pay a premium for higher-quality coffee on our end, the farmer earns more. But how sure are we that that is actually true? And how much more is enough? To answer these questions, we (Trabocca) decided to start tracking our farmers’ ability to earn a living income.

The group of farmers we selected for our first trial consisted of 278 small-scale producers in Guji, Ethiopia. Every year, the farmers deliver their freshly harvested coffee cherries for further processing to the Suke Quto washing station, one of our long-time suppliers. We introduced Fairfood’s traceability platform Trace to the supply chain to track both the farmers’ deliveries and the payments they received. The platform allows us to provide insight about these transactions to our customers.

Families up to thirty-six members
Before we started the project, I calculated a price that would cover household expenses and cost of production. When the first data from actual transactions arrived, I realised how much I had underestimated the diversity of our farmers: where I had assumed an average family size of five, our dataset included families of up to thirty-six members! As a result, the data we had available on household expenses was not specific enough to make a solid claim about whether our farmers were able to earn a living income.

An additional complicating factor was that farmers are not selling all of their coffee to us. Often, families keep a share of their coffee in dried form to be sold on the local market later, much in the same way that we would use a savings account. This meant that a significant amount of coffee was invisible to us, and we had no idea how much income was earned from these sales, or from any other non-coffee related activities, such as breeding livestock or growing subsistence crops.

Above average
Farmers in Ethiopia typically receive around 10 Ethiopian Birr (USD 0,30) per kilogram of coffee cherries, depending on the region and season. Our data showed that the farmers in our trial received an amazing 27 Ethiopian Birr (USD 0,90) for their coffee. This translates into USD 6,30 per kilogram of roasted coffee going directly into the farmers’ pockets. Part of the explanation for these high prices is that this season cherry prices in the entire Guji zone were above average, but it also showed that with long term commitment and a focus on quality, we can significantly improve the income of our farmers.

Was our price enough to cover cost of production and household expenses, to allow farmers to reach a living income? The honest answer is that there is too much diversity between the farmers to draw that conclusion with the available data. For the coming season, we will need to develop partnerships to gather much more data about cost of production and household expenses in the different sourcing regions in Ethiopia. Only then can we make coffee truly poverty-free!