Coffee Roasters Searching New Ways To Level Up Fairness In Trade As Ethical Certifications Totter On The Moral High Ground

Food & Drink

You never know where life is going to take you — how I met Andrés Felipe Botero on a serendipitous trip to Caldas in August 2022 annotates that romantic adage. The sturdy, forthright man in his 30s inherits three multigenerational farms across Chinchiná in the Colombian department. The finca where the Botero’s lives, conveniently dubbed Hacienda La Mesa, is one of the region’s crown jewels for coffee plantations, attracting a small but growing number of curious-minded tourists to explore coffee production, host their weddings, and leisurely hammock into the sunset.

At Hacienda La Mesa, the distance between farm and table is a stone’s throw away; and even the excessively marketed single-origin label in the coffee industry that stands for quality and transparency has to guiltily surrender to a fancier “single estate.”

“If we only produced coffee last year, I would’ve lost these farms.” The first thing Botero told me when we reunited a year and half later at Jericó, a small bustling town just two hours south of Medellín, crisscrossed with vertiginous cobbled lanes. “Fairtrade is not helping us financially,” he added. It sent a chill up my spine against the humid 80-degree weather.

For the next four days of our close-up coffee journey, I was determined to find out how sustainability certifications, a badge honor for conscious consumerism in the western world, are actually implemented on the ground level.

Coffee Farmers’ Negative Balance Sheet

Colombia, best known for its aromatic and slightly citric Castillo beans, is reputably the third largest coffee-producing country globally after Brazil and Vietnam. However, recent unpredictable weather patterns and unfavorable exchange rate ($1 equaled 0.00020 COP towards the end of 2022, a historic low over the past two decades) have taken a significant toll on productivity. Botero saw overall yields decline by over 50% in 2023, but luckily, side hustles from managing nursery, growing plantains, to operating hospitality are helping his family stay afloat.

Botero is not alone. An increasingly fragile coffee ecosystem is being tormented by climate change-related factors, including leaf rust, El Nino, and loss of pollinators, coupled with soaring prices of fertilizers and an aging population of coffee farmers (the average age is 56 in Colombia). Small-scale farmers, who supply 70% of the world’s coffee, are hit hardest.

To understand the current state of an average coffee farmer in Colombia, our crew traveled eastbound from the town square of Jericó teeming with euphoric musicians, artists, and local residents await for the Hay Festival. After a short seven-minute drive, we arrived in the bucolic Palenque, where we greeted the 62-year-old Edgar Correa, a fourth-generation coffee farmer who classically donned a white sombrero vueltiao and a red checkered shirt. His weathered face and soft-spoken manner seemed to already give away a dire glimpse into their farm performance.

Between 2020 and 2023, Correa experienced a 60% decrease in yield, and now, his family is struggling to make ends meet. “I’ll never give up, because it’s not viable to sell our farm,” he told me, “and those sustainability programs don’t really benefit us financially.” We then decided to run a simple math based on facts provided by local coffee traders to better apprehend Correa and other farmers’ financial situation:

  • A typical small farm is two hectares, about five acres
  • Each hectare grows approximately 5,000-7,000 regular coffee trees or 2,000-2,500 specialty ones — Geisha, Wush Wush, and other exotic species require more space and special treatments
  • Each plant can produce approximately 500g parchment — net weight will decrease by 20% after dried husks are removed during the hulling process
  • So a hectare that grows 7,000 regular coffee trees can produce up to 3,500kg (7,716lbs) parchment, equivalent to 50 70kg bags per year
  • A typical farm can produce 2 hectares x 7,716lbs = 15,432lbs of parchment per year, excluding the exotic coffees that usually grow in small quantities
  • Fairtrade claims it pays certified coffee cooperatives a minimum price of $1.4/lbs, about 40% above market price, which totals $21,604.8 in revenue for a small farm, but only $12,962.88 without the certification
  • Fertilizers on average cost $11,000 per year for a small farm. The Russo-Ukrainian War sent the price of 50kg fertilizer bag from $20 to $75 given the region provides key fertilizer ingredients. Organic fertilizers could cost seven times more
  • During the main harvest season from September to January, a coffee farm hires seven cherry pickers on average to work 12 hours a day for $21.5, five days a week, which totals $430 in labor cost per month, $2,150 during main season
  • A small farmer’s income from coffee is around $8,000 per year excluding living cost, transportation, farm maintenance, etc., and only when they’re able to sell all their beans to the certification program, which is always not a guarantee given 3-5% coffee ends up being pasilla, beans damaged by bugs and other diseases
  • The reality is the balance sheet of an average coffee farmer constantly remains negative

Fairtrade insists its minimum price can provide producers with a safety net when market prices drop, and it has contributed a total premium of $1.3 million to coffee farmers in 2022, according to Amanda Archila, Executive Director of Fairtrade America.

“The Fairtrade Premium is an extra sum of money, paid on top of the selling price, that farmers or workers invest in projects of their choice,” Archila explained. “They decide together how to spend the Fairtrade Premium to reach their goals, such as improving their farming, businesses, or health and education in their community.

For example, the Fairtrade Climate Academy was created earlier in Kenya to increase the resilience of coffee farmers through training and resources for adaption and mitigation. As a result, 10,000 local farmers gained knowledge on climate change, more efficient agricultural practices, and income diversification.

The premium model focuses on three pillars: economic, environmental, and social, Archila notes. The premium goes directly to the co-op level before distributed democratically across communities. This is to maintain a long-term trading partnership between buyers and sellers.

Loopholes In Sustainability Programs

In 2021, Fairtrade also launched its first “living income reference prices” in Colombia — $2.75 per kilogram of parchment and $3.06 for organic — to ensure coffee farmers can achieve sustainable yield levels by implementing required agricultural practices, and pay their workers a living wage.

However, this democratic premium distribution model is what many co-ops are struggling with. Farms with each co-op vary in sizes and yields, and oftentimes, a more productive land oftentimes receive the same amount of support as a low-yielding farm.

Carlos Andres Jaramillo, General Manager at one of the top five coffee co-ops in Colombia Cooperative Manizales La Selva, says their organization, which includes 3,600 coffee growers, together producing 13 million pounds of green coffee per year, earns about $500,000 in Fairtrade premium.

That equals merely a premium of four cents for each pound of green coffee sold, compared to Rainforest Alliance that pays six cents more, said Jaramillo. The latter also requires more rigorous paperworks and audit process, which could cost $10,000 upfront for an individual farm to obtain the certificate, and around $1,000 for maintenance every year after, according to Botero, whose farms are part of Cooperative Manizales La Selva.

The audit process, which typically involves assessing water usage in milling, risks of deforestation, how premiums are invested, gender equality, etc. also has its own loopholes, noted Jaramillo. Every year, when auditors selected by Fairtrade across Latin America spot-check 20 farms in Cooperative Manizales La Selva, “farmers sometimes run away from their backdoor. At other times, they stage farming tools invested through premiums in their kitchen, and put them away once auditors are gone,” Jaramillo said. “It’s easy to cheat the system.”

These ambivalent yet onerous auditing procedures, exacerbated by a lack of financial incentives and layers of bureaucracy in supply chain, are driving farmers to increasingly switch from large-scale sustainability programs to direct-trade coffee exporters promising higher pay and more transparency.

Jericó-based Campesino Coffee, a direct importer/exporter launched in 2016, says not only its coffees are fully traceable, farmers also get paid 20% more than global certifications right after dropping off their beans at its warehouse and buying station where strict quality control protocols are implemented.

“We chose to focus on one community instead of traveling the country sourcing coffees from different regions,” said Daniel Velasquez, owner of Campesino Coffee. “The idea was that by focusing on one town, we would be able to make a greater impact and create a coffee community of local farmers committed to specialty coffee and sustainable processes.”

Specialty varieties, although require more resources to cultivate, could significantly benefit farmers’ livelihood, Velasquez pointed out, adding how the company pays up to $8-11 per pound of exotic coffees, such as Geisha. One way to encourage farmers to grow these delicate species is offering free education through Campesino’s coffee school started in 2020.

“The Coffee School has become the foundation of our overall operation and also gave way to our latest venture, Campesino Café, a Specialty Coffee Shop in Medellín that offers the same coffees we export but for the local market,” said Velasquez. Notably, many farmers follow suit once they see their peers gain meaningful returns.

On the national level, the Colombian Coffee Growers Federation (FNC) also started a trading and logistics program CAFIX in February to help streamline exports directly from producers to international buyers. Registered farmers in the program are expected to save on traditional shipping or export costs.

Caution On Governing Oversight & Scalability

As the direct-trade model gains steam, roasters aiming to level up sustainability are taking note. Campesino currently supplies about 30 U.S. coffee roasters, many of which hope to increase the amount of directly sourced coffee in their businesses. Veteran-owned Fire Department Coffee (FDC) in Illinois says less than 5% of its coffee currently comes from direct trade, and plans to achieve 75% by 2025 with the support from its recently launched Fair Share Initiative. Through the initiative, $2 of every bag of coffee sold through FDC’s Coffee of The Month Club will be donated back to the community where the coffee is produced.

It’s a lofty, but an important goal, FDC’s founder and CEO Luke Schneider believes, and their business decision goes beyond recouping financial losses to the middleman.

“Direct trade is not about saving cost; it’s about minimizing tolls wherever possible to accomplish a fair share without sacrificing quality,” said Schneider. “Fair Share Initiative goes beyond direct trade… In the process, we want to learn more about the challenges the producers in that region face and the best ways to support them and give back.”

He added: “As we work towards our goals of direct trade and the Fair Share Initiative, we look to involve retailers and hospitality partners and become a resource for other coffee roasters to source their green coffee.”

However, skepticism remains due to a lack of official governing oversight and standardized certification, which critics argue could still prevent direct trade from becoming a scalable sourcing model. At worst, it may end up being another marketing scheme to woo consumers.

“We have to be very careful about relying on words,” said Martin Mayorga, owner of Mayorga Coffee. “Most relationships [between producers and buyers] are still guided by traders, and there’s absolutely no replacement for direct engagement.”

Mayorga Coffee sources only organic products across Latin America, and has assigned full-time managers in each producing region to engage with the farmer, according to Mayorga. “Our industry needs to be investigated deeply because a lot of people’s lives are at stake, and consumers should not be penalized for the fact that the industry is taking advantage of the world’s poorest people,” he added. “We, as an industry, need to create solutions to fix the supply chain.”

Both the fair trade movement and direct trade were created for a more equitable society and integral businesses nonetheless, and ultimately, it depends on what the farmer believes the most respectful way to reward their efforts of producing coffee.

“Fairtrade and direct trade aren’t mutually exclusive: a lot of these new farmer-centered initiatives function in this broader ecosystem of trade justice,” Archila concluded. “Fairtrade has really built the infrastructure many direct traders align with or source from the same cooperatives we’ve established… We’re supportive of models that ensure farmers are at the center of decision-making for their families, for their communities, and for their futures.”

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