Long queues for take-out coffee during closings are a sure sign that demand continues to flourish. But for the majority of the smallholder farmers who produce the world’s coffee beans, COVID-19 has exacerbated underlying vulnerabilities, potentially putting supply chains at risk.
In the recent annual barometer of Olam farmers, more than half (55%) of the 1,354 coffee farmers surveyed from 12 sources of supply said they had seen their incomes drop in the past six months compared to before the pandemic.
This is a worrying scenario for farmers who are already living at a subsistence level and struggling with the lasting impacts of markets and climate shocks. They have few opportunities to invest in their farms for the future and are increasingly likely to abandon coffee as their main source of income. This has repercussions across the entire supply chain, from lower volumes to less diversity of supply.
Ironically, if supply drops, prices start to rise again, but given that it takes three to four years for newly planted coffee trees to bear fruit, starting over when the market picks up is not an option, especially given of such a volatile market.
With boots on the ground in 17 coffee sourcing origins, Olam Food IngredientsThe Coffee Sector (OFI) has been working to close the income gap for farmers, while facilitating holistic support for sustainability, for over a decade. Our new sustainability information platform, AtSource Plus allows us and our customers to track the progress of our farmers and helps us identify where support is needed.
However, to find out if we are focusing on the right interventions to really make a difference on farmer profitability, we conducted a detailed literature review and a meta-analysis on the most effective strategies that close out the campaign. living income difference. The review revealed five factors that have the most impact when it comes to improving the sustainability of income for coffee producers. While there is no single solution to the profitability issues facing coffee growers, we have also outlined some potential courses of action based on recent concrete results:
1. Viable farm size
According to HDI Living Coffee Income Working Group (TCLI), the average small producer in Colombia would need to cultivate 12.4 hectares of coffee to earn a living income, yet nearly 70% of coffee is produced by farmers of less than 5 hectares. No technical assistance or price support from buyers is enough to close this gap.
Models such as block farming allow farmers to consolidate their land to develop more intensive production systems using economies of scale. However, there are few examples of work in practice, due to the significant facilitation required from local government, as well as the demand for behavioral and cultural changes among farming communities.
One strategy that could be used to address the complex issue of farm size sustainability is multi-stakeholder partnership involving both coffee communities and government. Thanks to a partnership between OFI, the national forest agency of Peru (SERFOR) and the association Solidarity in Peru, farmers were able to access official government land titles in exchange for implementing agroforestry practices.
2. Income and crop diversification
When prices suddenly drop or unprecedented rainfall triggers a devastating outbreak of leaf rust, farmers must have an alternative source of income to make up for their coffee losses.
Equipping farmers with the training, inputs and business linkages necessary to diversify their coffee plantations with other cash crops such as bananas, avocados or pepper enables them to increase productivity from the same. land area, and therefore supplement their income during periods of low coffee prices.
Combining different crops on the same plot generates the added benefit of better climate resilience. It tends to promote a healthier microclimate on farms while adding a potential source of income if farmers are rewarded for increasing biodiversity or sequestering carbon.
Another avenue is that of small businesses such as chicken breeding, fruit production or beekeeping. OFI is associated with the association International Heifer to present these activities to coffee growers in Mexico, Nicaragua and Honduras, respectively, and our report shows an average calculated ROI of 185%
3. Record keeping
Farm records should be up to date to show the exact production area of ââthe farm, the area cultivated with coffee and the unproductive area under renovation or conservation, and even the number of coffee plants in the ground. .
This information allows farmers to estimate production costs, which in turn provides information on the minimum price they would need to obtain to maintain profitability in a given year. Having formalized bookkeeping processes can also help small farmers seek loans.
Certified producers are required to track both the income and expenses of their farms, so the pursuit of certification alone could help improve farm management practices and potentially profitability. In home countries with low literacy levels, basic numeracy training is often a prerequisite for developing professional skills such as bookkeeping.
We promote accounting through our Coffee LENS strategy, which aims to train 100,000 members of the farming community by 2025.
4. Tree age and health
Over time, the trees produce less and lower quality coffee. Regular pruning is essential to prolong their productive life.
In the Democratic Republic of the Congo, where years of civil war have eroded the economic resilience of farming families and caused financial hardship for many, a partnership with Momentum DRC (DIFID) trained local teams to prune neglected coffee trees and provided one million coffee plants to replace old or diseased trees.
In the Chikmagalur district of India, we have seen growers switching from varieties of Arabica susceptible to white stem borer infestations to more resistant but less lucrative Robusta. Our report found a 5% increase in income for these farmers when they switched to good quality, disease resistant Arabica plants over standard Robusta.
5. Access to finance
The lack of banking infrastructure in rural communities and the risk aversion of financial institutions make access to credit for farmers difficult and sometimes impossible. This can leave them without the capital to invest in their farms, and when they have the required financing, interest rates are usually so high that any productivity or quality gain is often swallowed up when paying off loans.
Facilitating access to interest-free or low-interest loans for the purchase of crops and the purchase of agricultural inputs and equipment enables farmers to make the necessary investments in their operations and to reap the benefits. creating a circle of growth, returns and reinvestment.
A mechanism known as Village savings and loan associations (VSLA) has the ability to promote financial inclusion by building up credit histories until farmers are able to open their own bank accounts. They have the added benefit of bringing community members together, encouraging knowledge sharing on agricultural and financial management.
An assessment of 10 of OFI’s service delivery models (SDMs) in Peru, Colombia, DRC, Uganda, Vietnam and Mexico found that on average, just over two of the five critical factors ci above were taken into account per individual farm.
Given a better understanding of the most effective livelihood income strategies, we are now focusing on redesigning the DSMs and future partnerships to be more effective in closing the livelihood income gap. In Honduras, Uganda and Colombia, this will involve tailor-made approaches for some 3,500 farmers based on needs assessments.
Now that the industry has come to a consensus on what living income benchmarks should look like – thanks to the work of the Public-Private ICO Coffee Working Group – we all need to keep the conversation going and work on cost-effective and replicable models that can help fill these gaps.
We invite partners from across the industry to join us in developing models to ensure that farmers around the world can receive, at a minimum, a decent income.
[Editorâs note: Daily Coffee News does not publish paid content or sponsored content of any kind. Any views expressed in this piece are those of the author and are not necessarily shared by Daily Coffee News.]
JÃ©rÃ©my Dufour and Simon Zuk
Jeremy Dufour has worked at Olam for 10 years. His current role is that of Global Sustainability Projects Manager within the coffee business of Olam Food Ingredient. Simon Zuk is an international supply chain developer with a keen interest in making food systems more sustainable and equitable. He holds a bachelor’s degree in international development management with a specialization in sustainable value chains from Van Hall Larenstein University in the Netherlands.