Sizing up Nariño for the FT4All pilot
On Tuesday, I announced here our involvement in an FT4All innovation pilot with independent smallholder farmers in Nariño, Colombia. Yesterday, I explained here how our involvement came to pass. Today, I discuss why Nariño might be the best imaginable place in the world for this pilot. And why it might be the worst.
WHY NARIÑO IS THE BEST.
If the Nariño smallholder pilot is a rousing success, it will likely have to do with these factors.
- Few cooperatives.
Nariño is home to more than 30,000 coffee growers, and only one Fair Trade Certified cooperative, which has fewer than 300 members. This means that the FT4All pilot is unlikely to pull farmers or coffee away from established cooperatives, or to otherwise adversely affect their commercial interests. It also means that there is plenty of opportunity to introduce new forms of farmer organization for the marketplace.
- Extraordinary quality.
In Colombia, the departments of Antioquia, Caldas, Quindío, Risaralda and parts of Valle de Cauca are known as the eje cafetero, or coffee axis. Nariño anchors what has come to be known as the eje de calidad, which needs no translation and also includes Cauca and Huila. Nariño dominated the 2010 Colombia Cup of Excellence competition, claiming the top six spots, eight of the top 10 and 17 of the 21 winning lots overall. It is fair to say that there is significant demand among buyers in all segments of the specialty coffee market for coffee from Nariño.
WHY NARIÑO IS THE
If the Nariño smallholder pilot underwhelms, it will likely be due in part to one or more of the following realities.
- Armed conflict.
Unfortunately, Colombia’s reputation for quality isn’t the only thing that has migrated toward Nariño. It is now one of the most insecure departments in the country. Elements of the FARC and ELN guerilla movements are active there and are skirmishing with greater frequency with the Army. And coffeelands of Nariño aren’t just an important transport lane between the jungles of Putumayo and the coast — as we have learned through our baseline survey, it is not uncommon that farm diversification strategies include intercropping of coffee and coca. Colombia has managed to export millions of sacks a year over the past 50 years while coping with a complex humanitarian situation. Still, it doesn’t make things easier on our project staff to have to add concerns about safety to the to-do list for the FT4All pilot.
- The Colombian Coffee Growers Federation.
Since 1927, the Federación Nacional de Cafeteros has been advancing the interests of Colombian coffee farmers through technical assistance, marketing, reinvestment and other programs. Among the most notable of its services is its standing commitment to purchase every last bean of coffee from every farmer in the country, whether they are members of the Federation or not. This extraordinary commitment, combined with the success of the Federation’s iconic Juan Valdez ad campaign in generating premiums for Colombian coffee, has meant stable markets and high prices for farmers throughout Colombia. In this context, there is less incentive than in other origins for smallholders to organize themselves for the market.
- Competitive market.
I have heard FTUSA CEO Paul Rice tell the story of his community organizing in Nicaragua a number times now. Each time, he underscores the importance of premium prices in catalyzing the process. The first time his coop exported coffee, it managed to get a $1-per-pound premium. Suddenly, the farmers who reluctant to participate in the process were lining up to join the coop. “That dollar was the best organizing tool I ever saw,” Paul says. It is not clear whether in the general context of high market prices, and the particular context of Nariño, Fair Trade Certification premiums will be sufficient incentives for organization.
Nariño is arguably the most competitive coffee market in the Americas. Colombian coffee commands a premium price on the international market. Within Colombia, Nariño commands an additional quality-based premium. This double premium makes the base price for Nariño coffee among the highest in all Latin America. Research conducted by the Federation suggests that certifications lose their value to farmers when prices are high.
But the upward pressure on prices doesn’t stop there. Two of the world’s leading coffee brands, Starbucks and Nespresso, together purchase the lion’s share of Nariño’s coffee. Each company requires farmers to meet the standards of its proprietary sourcing standards — C.A.F.E. Practices for Starbucks and AAA Sustainable Quality for Nespresso — each of which is associated with additional premiums. In this context, it will take deep pockets for roasters to meet local market prices and cover the Fair Trade social premium.