How can Ethiopia’s coffee farmers get more from your $3 latte?

September 30, 2010

     By Duncan Green     

kaldi + goatsAccording to legend Kaldi (left), a 9th Century Ethiopian goatherd, discovered coffee when he saw his flock start leaping around after nibbling the bright red berries of a certain bush. He gave them a try, and the ensuing buzz prompted him to bring the berries to an Islamic holy man in a nearby monastery. The holy man disapproved of their use and threw them into the fire, from which an enticing aroma then billowed. The roasted beans were quickly raked from the embers, ground up, and dissolved in hot water, yielding the world’s first cup of coffee. No, I don’t believe it either, but it’s a nice story.

In the 12 centuries since Kaldi got his first fix, coffee certainly hasn’t made many Ethiopians rich, so how can its farmers earn a decent

Teferi and Fikrte (my Oxfam minders) celebrate Kaldi's discovery

Teferi and Fikrte (my Oxfam minders) celebrate Kaldi's discovery

living from growing it, especially when world prices (as now) are good? To find out, I headed for Kaldi’s region, Jimma (see pic – they believe the Kaldi story, anyway), where Oxfam is trying to help thousands of small coffee farmers (typically 2-3 hectares a family) export directly into the international market for organic coffee, and so pocket a much bigger chunk of the final price.

But the international coffee trade requires container loads of uniformly high-quality coffee beans, with minimal impurities. That’s a leap for small farmers used to selling their coffee by the sack, with a fair number of broken and damaged beans. Here are some of the ways the farmers are facing up to the challenge:

1. Organization and scale: They set up the Limmu Innara Union of cooperatives in 2006, which now comprises 41 coops, with 30,000 households. Strengthening the management capacity and market linkages of the union will be crucial to getting the coffee to market.

2. Quality control: success will depend on improving the quality of the beans. That means making sure that every family member or day labourer picks the red beans, and not the green ones, and that every stage of transport and processing minimises impurities. One of the key ways to achieve this is actually through a fascinating ‘functional adult literacy’ programme and a focus on women’s rights – more on that tomorrow.

3. Access to working capital: the union needs to pay the farmers up front for their coffee, otherwise their desperate need for cash will force them to sell to private traders even though they pay less. It takes time to build up that capital, and access to credit is hard until they have assets they can put down as collateral, so Oxfam has part-funded the building of a new warehouse that can both clean up the coffee chain, and simultaneously act as collateral for bank loans.

coffee market chain4. Learning to navigate the value chain: the coffee value chain is complex (see diagram), and requires different skills as you move from selling to local traders at the farmgate to doing international deals. Oxfam is working with a team from Accenture to find organizations that can work with the union to set up those links.

What struck me most in conversations with farmers both at the grassroots and in the union’s management board, is their awareness of the need to change. As Marina, a dynamic board member, spelt out, in words echoed by several others, ‘Our parents had a simple, peaceful life, but technology is always advancing. Unless our kids get an education, many of them will be unemployed or on the street. That could threaten the stability of the country. If we learn to use technology, we can live better.’

If the project is successful, how big a difference would it make? According to Fikadu Dugassa, the union manager, selling direct to export would bump up profits by some 25% – an extra US$ 0.50 per kilo. Then there are union plans for diversification, insurance and other ways to reduce the vulnerability of its members.

Developments in the wider coffee market could also help. If Ethiopia manages to follow the example of Jamaica Blue Mountain, and trademark its coffee (following the successful campaign to stop Starbucks and others blocking its efforts) then the price it receives could jump significantly, and with it, farmers’ incomes.

When I asked a group of coffee farmers how much they thought I would pay for a coffee in London, they reckoned 1 birr, (6 US cents) would be about right. When they heard it was more like 50 times that much, they wondered where the money went. It would be extraordinary (and only fair) if a lot of more of it could go to the people who invented and now grow it.

Postscript: Some readers were pretty unconvinced by my earlier post on roses, which argued that Ethiopia getting just 3 cents DSC00455to the dollar on its roses was a rip off. That’s just how relative prices work, no big deal. OK, how about this. The women (and girls) sorting through the coffee beans in this pic will have to work for 8 years to earn what I get from Oxfam in one day. Sorry, but that just can’t be right.

September 30, 2010
Duncan Green