Today I resume this summer’s series on coffee and water resource management with a question: If there are affordable technologies out there that have a smaller water footprint than traditional wet mills, why aren’t they more widely used? Here are some ideas.
What we think.
The leading barriers to improved water resource management may not be mainly technological, but political and economic.
In the policy sphere, there may be room for improvement in awareness and enforcement of federal regulations regulating water resource management in the coffee process.
Economic barriers exist at the farm level and in the broader marketplace. At the farm level, resource-constrained smallholder farmers naturally resist new technologies, which entail risks they are unable to comfortably bear. Meantime, the market has failed to create the necessary incentives, goods and services for farmers to adopt sustainable water resource management in the coffee process.
What we know.
There are policy-based and economic barriers to wider adoption of water-efficient wet-milling technologies.
- Political barriers. The regulatory framework regarding water resource management in the coffee process varies from one country to another within Central America, but in all cases awareness of existing public standards is deficient and enforcement uneven. There are few consistent positive incentives to adopt new technologies.
- Economic barriers—market failures. The technologies identified here impose costs on smallholder farmers. Eco-pulper technologies with capacity appropriate for an individual farm can cost $1000 or more, with larger-capacity mills running well into the thousands of dollars. Few smallholders can afford this technology outright, and the market for financial products available to finance these purchases is still immature.
- Economic barriers—risk management. CRS has encountered resistance to new and unfamiliar technologies among the smallholder farmers it serves. Our CAFE Livelihoods project invested in 10 cooperative-managed processing centers featuring eco-pulper technology. During the first harvest after the processing centers were installed, only two were used to process any substantial portion of the coffee belonging to the cooperatives that operated them. Cooperatives preferred to forego opportunities to add value through vertical integration and quality improvements and continue paying for milling services rather than risk loss of quality and value through the use of new and unfamiliar technologies. Over time, all 10 cooperatives adopted, but only gradually, and with a full subsidy for technology acquisition and technical support.
What we still need to learn.
- Policy constraints. A comprehensive analysis of the regulatory framework for water resources in the coffee process in every coffee-growing country is in order.
- Economic constraints. Surveys of local markets could help identify more specifically what market-based constraints and opportunities there are in each country in terms of the increased adoption of improved technologies. Surveys of coffee farmers focused on their attitudes toward water-efficient technologies and their perceptions regarding the risks and rewards of adoption could help shed light on the microeconomic barriers to adoption.
- Coffee quality. Based on our field work, we know that concern over the impact of new wet-milling technologies on coffee quality is another obstacle to adoption. There is a surprising lack of rigorous research available regarding the impacts of water-efficient wet-milling technologies on coffee quality. Initial results from our field work and my consultations with coffee industry experts suggest that water-efficient technologies have no adverse impacts on coffee quality, and may actually improve cup profile and consistency. Eco-pulper technology eliminates the fickle fermentation process, in which minor missteps can lead to significant losses of coffee quality and value.
4 Comments
Very good discussion. I would suggest that an even more important market failure is the public good nature of the benefits (reduction of existing negative externalities). Much of the benefits of the improved technologies accrue to persons other than those who incur the costs. These kinds of issues are often addressed through state subsidies on the technologies.
Matt:
Thanks for the note. Agreed on the market’s failure to compensate farmers for creating positive (or reducing negative) externalities. In the realm of farming practices, payments for environmental services (PES) represent one way that governments and private-sector actors alike are creating incentives for conservation and sustainable farming. “Environmental” certifications such as organic, shade-grown/Bird-Friendly, Rainforest Alliance, etc. represent the leading PES approach in specialty coffee. But premiums for these certifications, in my estimation, are not tied tightly enough to water conservation and treatment in the post-harvest process, and do not generate sufficient capital on their own to help farmers adopt the kinds of technologies we are talking about here.
In any event, this is not exactly PES, since it involves a capital purchase and not “just” changes in farming practices. The subsidy language you propose seems more appropriate in this case, but I think the PES reference is helpful to remind folks that we are already doing something very similar to this in a massive way in coffee through the large and growing certified coffee segment of the specialty market.
So while I like the state subsidy idea, I also think there is a role for industry reinvestment at origin as well as credit-based approaches involving financial services providers. More soon on this issue, as well as financing for improved water conservation practices at origin.
Michael
Hi, Michael-
I didn’t mean to suggest that private actors shouldn’t provide the subsidies. In fact, they are probably better positioned to target subsidies so as to minimize “leakage,” ie, resources going to non-target groups. Directly subsidizing the desired technologies can be an effective form of targeting if the technologies cannot be re-purposed for other uses.
In 2003 the Mexican Government established the Payments for Hydrological Environmental Services Program, which was a PES program that included shade-grown coffee plantations. While programs like this have a lot of leakage, that leakage can help a constituency to make the programs politically sustainable.
Matt
Very good, Matt.
We have worked with groups in Mexico (and elsewhere in Central America) participating in public PES schemes. The farmers involved were not participating for the money, which was insignificant relative to their agricultural income, but because the PES program provided a modest incentive to perform the kinds of practices that they knew they should be doing, anyway.
My sense is that token compensation may work for agricultural practices, but might not be sufficient in the case of water-efficient post-harvest equipment, which can represent a significant capital expense.
Michael