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 BEST WORST.
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.
3 Comments
Hi Michael,
To my surprise what leaps out to me after reading this is neither why Nariño is the best, or the worst, place for the FT4All pilot but why it may be the most _irrelevant_ , and yet, for some parties, the most _convenient_.
As you stated well in an earlier post — “How to Measure Success” — the Nariño pilot project lacks most of the elements of a proper study and, by inference, we won’t actually be able to tell if it was in fact a “success” or a “failure”, but only that it happened.
And with what you just shared with us we’ve still further reason to assign little weight to how this pilot goes. For ex., I expect FTUSA will successfully recruit sufficient farmers & buyers despite the already high prices paid locally. And I can imagine that 2 or 3 years from now it’ll be announced that the pilot participants received “high prices” or “prices 20% above the NY ‘C’ price”, or even “prices 20% above the Colombian avg” , etc., even if the prices & premiums and other forms of support amounted to a negligible increase over local prices.
You can imagine any # of ways the results could be phrased that would sound great to the general public, media, and to most of the coffee industry, too, while not actually describing anything meaningful.
But let’s allow ourselves to entertain another scenerio.
I noticed you said that Starbucks and Nespresso (aka Nestle) are already major buyers in the area. Is that a coincidence? Is it possible that FTUSA has recruited a brand to buy the pilot’s coffee at some premium (even a hefty one above already high Nariño prices) so as to facilitate the subsequent pronouncement of “success”? Remember that the quality is essentially guaranteed up front, so there’s no risk to the buyer. And a mere 200 farmers are involved (do I have that right?), so essentially there’s no meaningful additional cost to the buyer either.
But for either FTUSA or the buyer there seems to be a lot to gain from the declaration of a successful “independent” farmer pilot – no?
Imagine you’re a coffee brand that spends, say, $500M to $1B a year on green beans, and has revenue over $5B/yr. Would you invest, maybe, $100-200k to pay 200 Colombian farmers a premium for a strategic pilot that would subsequently enable you to radically expand your offering of “Fair Trade Certified” coffee world-wide while only actually making minimal changes to your current supply chain practices?
Maybe I’m being jaded but since there are so many story lines associated with the FT4All initiative I thought I’d offer one of my own.
Rodney:
Thanks for your continued engagement on this issue and your sharp critiques today.
There is a lot to respond to there. I will address to some of your specific observations under separate cover in a moment.
But first, I want to address your concerns regarding the issue of credible, meaningful measurement of the pilot’s impact.
You write:
Absolutely. We see a huge conflict of interest here. This is why we have said we don’t think FTUSA can be judge and jury, and why we are proposing to be the third party assessing impact.
More importantly, you also write:
Help us measure something you and Equal Exchange would consider meaningful. We are right now working with economists and researchers from the International Center for Tropical Agriculture on impact indicators we want to measure in Nariño. We want industry involvement in this process so that we can be sure we are generating information that coffee companies will actually value and use in their decision-making process regarding Fair Trade Certification. We are especially interested in the participation of organizations like Equal Exchange that are critical of the pilots and have offered constructive critiques like yours. Help us understand what would be meaningful to measure from your perspective.
Thanks again for your constructive engagement here. More in a moment on the particulars of your latest comment.
Saludos,
M
Chiming in late here but Rodney’s mention of Nespresso inspired a half formed reflection. I’m currently in Manizales and have spent the last few days in 4 towns in Northwestern Caldas situating student teams who will be doing projects. I’ve had a few conversations about coffee (coffee isn’t really the focus on what I’m doing here at the moment) primarily with Federation people, and Nespresso is quick to everyone’s lips (and Rainforest Alliance). The critics I’ve spoken to have talked about how everyone is anxious to grab onto specialty as if it were a life preserver, yet Nespresso is what people are mentioning. If indeed FT4All is indeed going to have Nespresso as the primary outlet then it seems that maybe really they’re just going along with Federation policy, which, frankly, is still fundamentally focused on a consumerist market growth model rather than trying to rethink local agricultural economies in which coffee is part of an integrated agroecosystem with multi-layered market outlets that permit diverse incomes streams which allow farms to be resilient in the face of inevitable perturbations (whether economic, climatological, political or military). The “free trade” agreement with the US has just gone into effect (with the ironic acronym of TLC) and from what little I’ve been able to see I have no doubt that the peasant farm sector is going to get hammered even more than it has been. By playing into the corporate game, and Paul’s prices uber alles assessment (which showed up in a different post here) of FT is evidence of that, my guess is that the upshot will be more of the same here: farmers chasing after pennies in a globalized market as if those pennies could resolve the social and economic problems that face rural folk. The biggest problem here? Youth don’t want to be farmers, they don’t see a future in it and quite often they’re right. This is true for young men, doubly true for young women. The marginal increase of income on individual farms will do nothing to resolve this.
I recently made a fairly extensive search of the academic literature on FT and what struck me was that almost all of it focused almost exclusively on assessing the price question. The general result was the FT often had negligible price benefit, rather for most peasant farmers yield increases were a better measure of improved incomes. I’m not surprised by this and it’s in keeping with what Rodney said above that it isn’t always clear what exactly are the economic consequences of the FT price in comparison to other factors. So what needs to be focused on (as Rodney points out in his comment on a later post) is the social, political, organizational consequences of FT as an alternative model of collective action. In other words, the academic work, by focusing almost exclusively on prices, reflects Paul’s bias (and most of the work I encountered is by US analysts) and in doing so systematically ignores one of the central, and to my mind more significant, claims of the FT model: that organized farmers and change their overall social conditions not just because they have market access but because they can reform the broader context in which they live.
Finally (and these really are half formed thoughts so please forgive the ramble), I am very sympathetic to the fact that there are many areas in Colombia where there are not independent cooperatives. In part this is because the Federation has it’s own cooperative system, but that system is part of the paternalist control of the coffee industry by the Federation. (Disclaimer: I have had a long history with elements of the Federation (20 years or so). It is an organization that is admirable in many ways, it is also extremely problematic in how it exercises top down control and has locked peasant farmers into a productivist ag system that keeps them in a dependent status). But I don’t think the solution is doubling down on keeping farmers ‘independent’ coffee farmers, which really means isolated commodity producers, but rather in working to develop solidarities that cut across agricultural and economic sectors forming collective production and consumption networks that take advantage of export opportunities but have as a central focus reviving local diversified markets so that both farmers and small towns can minimize the destructive effects of import-export dependency. Diversified local markets that generate creative employment opportunities are more likely to keep youth interested in country life than waltzing down the path of coffee price dependency which the Federation has already been doing for decades and which frankly it is still better positioned to do than FTUSA despite its fall from grace over the last 10 to 15 years.