Wednesday, October 12, 2011

Java Jive

It’s been a tough year in the coffee world: in April, international coffee prices topped $3 a pound for the first time in 34 years, and while prices have dropped slightly, the price hike is likely here to stay. Heavy rain falls around the world are to blame for last year’s poor harvests, but in the long term, unpredictable weather and rising temperatures due to climate change are affecting premier coffee regions in places like Colombia, where production on some farms is down 70% from just 5 years ago. Coffee plants are sensitive and changes in temperature, rainfall and spells of dryness not only affect productivity, but also the taste of the high end Arabica beans.

With conventional coffee prices staying above $2 per pound, “fair trade is in an awkward position” as Matt Earley from Just Coffee describes it in a recent article on building a better pre-financing model. For 18 years the official Fair Trade Coffee minimum price remained stagnant at $1.41, not even keeping up with inflation. Last year, the price went up to $1.51 including a social premium. Meanwhile market price for conventional coffee is currently at $2.25 per pound.

For many Nicaraguan organic coffee co-ops, this has created quite a dilemma: “In the past,” explains Matt Earley, “enthusiastic farmers turned coffee into [fair trade buyers] knowing [they] would pay more than local buyers ‘coyotes.’ As a result, farmers would tolerate buyers’ partial (or zero) payment on delivery of the coffee and wait for full payment after buyers received the coffee in the United States or Europe. However, in these years of high prices, local buyers pay a price competitive with ‘fair trade’ importers and roasters, and they pay cash on the barrelhead instead of [fair trade buyers’] two or three payments. This welcome development for cash-strapped farmers benefits them in the short-term but damages their cooperatives as they default on contracts with buyers, lose members and weaken as democratic forces in their communities.”

For small farmers, the decision to choose a higher short-term price over a better long-term relationship is a very real one. El Porvenir supports 43 families (más o menos), more than 250 people total. Although they grow their own food, the cash payment they receive for their coffee crop is the only cash they see all year long. Like farmers all over the country, by the time harvest season rolls around, last year’s cash is long gone and co-op members are desperate for money to buy medicines, clothes, shoes and school supplies for their children. Unlike other farmers, El Porvenir already had a much more equitable relationship with its buyers, making it easier for them to turn down cash in hand from the coyotes.

For years, El Porvenir has sold its crop to Their Bucks Coffee knowing that they would pay more than$2 a pound. Additionally, Their Bucks has contributed 100% of its profits from coffee sales to establish a revolving loan fund that the El Porvenir co-op can access for harvesting costs. Their Bucks pays El Porvenir in three installments: 30% in October, 30% in December, and 40% upon shipping, so that the coffee is completely paid for before it ever leaves Nicaragua. A decision to sell to coyotes last year might have benefitted the co-op in the short-term, but they had an agreement with their buyers – reneging on that agreement last year would have meant throwing away a relationship of trust they’ve spent a decade building, and putting at risk the sale of future crops. The El Porvenir co-op followed through on their deal to sell to Their Bucks at $2.25 a pound…and got ready to negotiate this year’s crop in light of higher international prices.

Last week the coffee buyers came to negotiate: Al Jenkins from Their Bucks Coffee in Mt. Pleasant, SC and Jervais Hollowell of Little River Roasting Company in Spartanburg, SC came to Nicaragua to meet with the folks at El Porvenir and brought with them their daughters, Christy and Leland. In their face-to-face negotiations, El Porvenir agreed to sell at least 20,000 lbs of their coffee to Their Bucks, and Their Bucks agreed to pay $2.70 per pound –the $2.25 international price on the day of the negotiations, plus $0.45 per pound organic premium. These successful negotiations mean that the folks at El Porvenir can count on a better price for their crop – including continuing the important upfront payments – and means that Their Bucks can guarantee its growing customer base a supply of the excellent 43 Families brand coffee it markets, a good deal for farmers, buyers and discerning coffee drinkers!

NEW! Look for El Porvenir’s coffee at the Piggly Wiggly grocery store chain – it’s their in-house brand organic coffee, Newton Farms! -- Becca