Creating Financial Stability in Coffee Farming: Three Young Latin American Coffee Professionals’ Solutions – 25 Magazine: Issue 6

Creating Financial Stability in Coffee Farming: Three Young Latin American Coffee Professionals’ Solutions – 25 Magazine: Issue 6

WWith the average age of coffee farmers hovering around 55 years old and steadily increasing, many coffee families and their farms are in transition, handing over from one generation to the next.

HORTENSIA SOLIS interviewed three young Latin American coffee professionals from three different countries to better understand their perspective on the future of coffee production, the industry’s most pressing challenges, and the steps they’re taking to resolve or otherwise navigate them.

On paper, working in coffee production is an increasingly difficult path – a complicated conflagration of globalization, politics, economics, and climate change has created a mire of difficulties for coffee farmers to overcome. Despite this, three young coffee professionals from Latin America – Arturo Aguirre Saenz (39, Guatemala), Diego Alfonso Robelo (30, Costa Rica), and Iliana Delgado Chegwin (30, Colombia) – are integrating their families’ lived experience with an understanding of the global market to try to overcome one of the greatest challenges they currently face: coffee prices. Each has a different approach.

Raising International Prices through Value Chain Integration

Arturo, a fourth generation coffee farmer in Huehuetenango, Guatemala, spent his childhood working on coffee farms, but he didn’t begin truly working in the coffee industry until he was 24. Now the Chief Operating Officer of Finca El Injerto, he supervises the farm alongside his father; over the past fifteen years, his focus has shifted to adding value to the farm’s products, spending his time managing sales and relationships. “I started learning about production from my father,” says Arturo, “but with time, I noticed that we needed to move closer to the customer to get a better price.”

Arturo wishes he had started his career in the exporting and trading part of the business, as he thinks its lessons would haveproven valuable for his farm based business. “Producers don’t always understand how international coffee buying and selling works. It really bothers me that producers are often on their knees to the traders.” He laments that the industry struggles to price coffee, ensuring its sustainability as an enterprise for farmers.

He acknowledges that certifications and quality differentiation help with keeping prices higher, but these are difficult to achieve for most farmers and, as a result, many farms in Guatemala are abandoned because farmers simply don’t find it profitable anymore. Coffee prices are below production costs. A shortage of farm labor in Guatemala – particularly as the rural population moves towards cities and emigrates to richer countries – further complicates the issue. “Our workers stay with us because we pay them enough and provide them with housing and other social benefits. However, this is a big challenge for our industry. If [green coffee] prices stay this low, no one will be able to continue.”

Arturo cups lots from El Injerto with his father.

 

Arturo’s efforts over many years to differentiate El Injerto’s coffees and integrate up the value chain are paying off: his farm has won seven Cup of Excellence awards. “The monies from these auctions gave us the opportunity to reinvest in the farm and to build better houses for the workers. We now have running water in the workers’ homes. We have improved the mill and now have better access  the farm.” The true integration, however, has come from a brand new venture: Arturo has opened four specialty coffee shops and a coffee school in Guatemala City to meet the needs of a more sophisticated coffee drinker in his native country, creating both a demand and a showcase for El Injerto’s coffee.

Stabilizing and Increasing Revenue through Diversification

Diego, who has recently finished his MBA and will soon take over the General Manager position of his family’s farm, Finca Aquiares, has opted for a completely different approach. In 2010, straight out of university, Diego began his coffee career as a trainee at La Minita Coffee Farm. “I was very young and inexperienced, so it was a perfect job because I learned about farming and certifications, marketing and sales.”

Two years later, he returned to the family farm to help his father with new product innovation. He kick-started the farm’s efforts on achieving carbon neutrality, processing microlots, planting new varietals, and developing a brand strategy.

Diego cups lots from Finca Aquiares.

 

“In 30 years’ time, I don’t think any farm in our area will be able to survive on coffee production alone,” Diego says. “The revenues from coffee farming are volatile and factors like climate change are increasing this risk for the farm.” Finca Aquiares’ success will be closely linked to Diego’s ability to manages this risk for the enterprise.

Diego reckons that Finca Aquiares will need to optimize the use of its land in the near future. “Some land is just not as good for coffee anymore; climate change is impacting our lower altitude growing areas. We are now focusing our higher altitude areas for coffee growing. But, we [are] also considering how to use [areas of the farm] less suited [to coffee] for activities that can generate more revenues.”

To generate more dependable income, Diego has begun work on two fronts. First, he began exploring complementary farming and tourism activities. “We are now piloting the planting of cacao on some land. We are also considering banana and ornamental flower plantations. It would be great to have more people visit the farm, because they would value our products more.”

Second, he’s seeking partnerships with roasters that are willing to share market risks through three-year fixed-price contracts. He also thinks that roasters and their customers could gain more from his farm-level insights: “I could help with transmitting the message to better sell [our] coffee in certain consumer markets.”

Communicating More Accurate Production Costs through Study

For Iliana, a coffee entrepreneur who now works with a coffee export firm to get a wider view of coffee production and sales, the biggest challenge is simply that we don’t know how much coffee costs to produce.

According to Iliana, there’s a complete lack of understanding of production costs for both buyers and sellers. The recent boom in micromills and the diversity of processing methods have further complicated this, leading to higher production costs without any increase in price for the farmer, diminishing an already small return on their time and work, harming the future of the industry.

Iliana with her parents.

 

Recently, she did a study of the costs of production based on different varietals and post-harvest processes used, garnering some interesting insights into the current micromill and specialty coffee market. Through her experience as the Accounts Manager for her father’s business (as well as her knowledge of financial markets and exchange rate risk), Iliana found that the biggest issue was that producers weren’t accounting for their time and labor costs when agreeing to prices for these new, labor-intensive processing methods – it wasn’t quantified in any way. This leads to an unknown reduction in the profit margin for each sale, often putting the selling price of the coffee below the production price.

Iliana believes that producers need to become more aware of their production cost when working on specialty coffee lots – financially sustainable coffee farming, aside from other challenges and risks to coffee production, isn’t a possibility until we understand the costs of everything involved. Arturo agrees: “With [these] ridiculous prices under production costs, no one is able to subsist.”

United in Motivation

Despite their different approaches to solving the issue of coffee pricing, Arturo, Diego, and Iliana all agree on one thing: there’s nothing else they’d rather do. “I wouldn’t have dreamt of or chosen another job,” says Diego. “The challenges [of this profession] make it a very interesting job for someone of my age; it is full of purpose … [I want to] continue working in a job that allows me to bring stability and sustainability to the other parts of the coffee world.”

Arturo agrees: “Coffee [has been] my passion since I was a little kid. It’s a noble cultivar that creates jobs for lots of people and gives you the chance to be in contact with nature. It gives you the chance to keep learning every day, to investigate and meet new people.”

“I believe no path is easy – coffee growing is definitely harder than others – but it is proportionally rewarding,” says Iliana. “I hope that eventually Colombia learns enough about coffee so our production can have markets both internally and abroad, aiming to increase prices not out of pity, but out of a real supply and demand economy.”

At the end of the day, their ability to solve the issue of pricing – and create their own futures in coffee – is second to that of climate change, which they feel is outside their realm of control. “It’s hard to tackle and anticipate,” says Diego. Arturo agrees: “It’s difficult to work against nature – we were hit by a hailstorm in October that really affected our production for both this year and next, but there isn’t anything we can do about it.”

HORTENSIA SOLIS is the Managing Director of Viaje con Café, which brings coffee professionals and aficionados alike on expeditions to coffee-growing regions. She is a former Humboldt Scholar with over 10 years of experience in the Costa Rican coffee sector, with a focus on climate change.

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