A diverse response to the price crisis

Posted by Andrea Otte, Trader & Marketer, Twin on 1 October 2019

Diverse approach to coffee price crisis within blog

With coffee prices stagnating at rock bottom for all of 2019, coffee producers everywhere are looking for ways to mitigate the effects of the crisis. In Northern Peru heavy competition exists for buyers among producer organisations, but also between the cooperatives and private exporters, which are becoming increasingly common in the region. Cooperatives, facing shortfalls from traditional channels, are diversifying their strategies to attract higher margins for their products.

These strategies take many forms, but most can be broken down into two categories. First are the quality initiatives, looking to increase premiums-per-pound based on improved cup quality. This year, many farmers and coops began experimenting with post-harvest processing to secure additional revenue. There’s a scarcity of some types of coffee such as natural or honey processed, meaning new production methods are a good way to add value to existing coffee without having to wait a season for quality to improve with tactics such as planting new varietals, or increasing fertilisation. However, these experiments are not without their risks. New techniques require added knowledge which must be acquired and tested. Often, it also means investment into new equipment and increased quality oversight to ensure the desired results are achieved.

Location specific coffee

The second strategy is to increase product segmentation by the producers themselves. This can be through, for example, women’s groups, or even by separating a certain region, such as a specific village or farm. This appeals to end consumers who wish to impact certain targeted areas they might have an ethical interest in, like women’s rights. Or, those who are enticed by understanding the place of origin more extensively. However, premiums for these types of programmes don’t always come with significantly higher returns for farmers, particularly where the quality of the product stays the same.

On a recent visit to Peru, I visited three of Twin’s producer partners: Cenfrocafe, Chirinos, and Unicafec. All three cooperatives have struggled with the price crisis and are weathering it in their own ways.

At Cenfrocafe, the largest of the three, the cooperative began large-scale experiments with natural and honey processing this year. The team has brought in outside expertise to advise the coop on these new methods. While ambitious, the experiments bring additional risk, as many of the staff have to learn how to handle different styles of pulping, fermenting, and drying. Not all the coffee will necessarily come out as better quality this season, but the intention is to continue to learn and improve so they can build on their knowledge season after season. Premiums for good quality natural and honey processed coffees are typically much higher than for the traditional washed style.

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Deisy Santillan Arevalo, the Commercial Manager for Chirinos, the second cooperative I visited, acknowledges that this has been a tough year for the cooperative, a particular struggle has come from increased local competition. However, she also points to the amazing results they have had with helping farmers increase quality. In fact, this year the cooperative held an internal cupping contest, which I was lucky to participate in, as a judge. With the top scores well above 86 points, all of us at the competition could taste the farmers’ dedication. Precise and patient attention to the harvest, post-harvest, and storage of higher quality coffee means that the farmers made significant additional premiums for their hard work, usually between a 40 and 120% increase, with some lots even higher.

On my final stop, I met with the women from CODEMU, the women’s group which is part of Unicafec, a cooperative based in the San Ignacio region. CODEMU operates as an independent association and has its own board of directors which controls the administration of the group’s finances and projects. With the additional revenue they obtain from the premium paid for women’s coffee, they have been able to assist with on-farm improvements for many group members. These range from farm infrastructure, such as drying beds and fermentation tanks, to home improvements, such as proper sanitation systems and kitchen upgrades. The women are also dedicated to improving quality, which was evident in this year’s crop which scored 84.5 points on the Specialty Coffee Association’s Cupping Scale, an increase of over a point from last year.

This is just a selection of responses from cooperatives in Peru. Many other producer organisations across Latin America and East Africa are dealing with the price crisis in their own way and Twin aims to support these efforts. For example, our work with Challenges Worldwide engages with young people connected to coffee cooperatives in Rwanda and offers training on establishing and managing micro-enterprises. I’ve been lucky to travel to meet coffee farmers across South America since starting at Twin, and the thing that always strikes me is how dedicated the farmers and cooperative leaders are. I always leave the origins feeling a deep appreciation for the huge undertaking that farm life entails - the long hours, the physical labour, planning that must come months and often years ahead, the financial acumen required to run a successful business with such an unstable product, and so much more. 

After visiting the members of all three cooperatives and learning about the ways that they are coping with the current economic climate, the cooperatives’ message was clear across the board – despite the innovations and support networks they are tapping into, they need continued support from their partners on ALL levels in order to survive. Twin continues to believe in the power of long-term partnerships and fair prices to bring economic security to coffee producers. And, we will continue to advocate for this with all our trading partners throughout our worldwide network.