Coffee austerity in Uganda.
Traceability, price transparency and quality are essential to a sustainable supply chain.
You are a coffee farmer in Uganda. You till the soil on your patch of mountain with your spouse. You have three children and a dependent grandparent to support. You have a roof over your head and, to all intents and purposes, you are self-sufficient for food. You are poor but you are not malnourished. How much money do you need to live off the land in this way? What is the price of minimum viable coffee farming in Uganda?
According to Great Lakes Coffee, a Ugandan coffee trading company that works with and buys from thousands of smallholder farmers, it is $758.
Seven hundred and fifty eight US Dollars.
This is the annual cost of life’s essentials; cooking oil, fuel for heating (paraffin or equivalent), salt, sugar and secondary education for your three children. In Uganda, primary education is provided free by the state but secondary education costs $150 per child each year.
Three fifths of the breadline total is spent on schooling. Education is the single biggest outlay for these farmers but it is the last thing they would sacrifice.
The rest is all low tier Maslow’s hierarchy stuff. No frills. No luxuries.
No retail therapy. No first Thursday of the month date night dinners for two. No ketchup. Just African style austerity.
It is the economics of harsh reality. It is bean counting at its most basic. If you earn $758 from your coffee harvest you break even. If you don’t you find yourself in the kind of poverty trap that threatens to undermine many fragile food supply chains. Poverty at origin is at least as big a threat to sustainability as climate change. It acts like gravity to drag farmers down. In Uganda, $758 is the financial equivalent of escape velocity.
Sadly, this figure is more of a challenge than it might appear to developed world eyes. There is ample cause for pessimism.
A more optimistic view is that, with the poverty bar set so low, there is scope to significantly enhance farmer livelihoods with the right kind of constructive intervention from further up the supply chain. A higher yield of better quality coffee, with fewer defects, from the same amount of land, has a double multiplier effect on earning potential.
But these constructive interventions must also be sustainable pursuits. Dipping in is dangerous. Too many aid organisation infrastructure projects ignore the subsequent running costs that they impose. The long term price of these well intentioned but badly deployed projects is ongoing costs that commit farmers to debt funding which they are unable to service. A new coffee washing station won’t maintain itself.
Project has become a dirty word. In Ugandan coffee farming circles it means “fuck things up and take pretty pictures”.
It takes sustained effort to establish sustainable conditions. And these efforts need to be appropriately directed. Rather than remotely triggered events whose aim is to alleviate poverty, the focus needs to be on indigenous initiatives designed to create lasting prosperity.
And it takes local knowledge to direct and deploy these efforts effectively. There is no substitute for operating on the ground at origin.
I tagged along with Konrad Brits, CEO of Falcon Coffees, on an origin trip to Uganda. Falcon trades green (unroasted) coffee. It buys at origin and sells to roasters, such as Starbucks, across the globe. For these roaster brands, Falcon and its origin partners pretty much are the supply chain.
Great Lakes Coffee is Falcon’s origin partner in Uganda and both organisations are committed to the endeavour of sustainability. They are working with thousands of smallholder coffee farmers to unlock the latent potential of their land to mutual benefit.
Uganda’s Arabica beans are the cheapest in the world, and yet most of the coffee is grown in ideal conditions, at altitudes of up to 2000 metres, in volcanic soil, in an equatorial climate. There is therefore significant potential to increase farmer income through training and support in good agricultural practices; soil management, water management, pest control, tree surgery and such like.
Such well-directed support can pay handsome dividends. It creates better farmers who are also better business people.
Farmers who partner with the Great Lakes Coffee team of agronomists are hoping to repeat the success that Falcon has enjoyed with its trading partner in Rwanda, where a similar collaborative approach has seen yields increase by up to 211% and the level of defects reduced to levels that satisfy Premium Grade criteria.
Higher grade coffee that commands higher grade prices is good for everyone in the supply chain. But sustainability efforts at origin need to go beyond better agricultural practices. Governance and effective oversight are difficult to impose in remote areas, but they are essential to maintaining the transparency and traceability that are vital to instilling confidence in buyers.
Rain Forest Alliance certification is rightly coveted but it creates incentives for “dubious practices on the mountain”.
It takes vigilance, good processes and adequate resource to spot when an agent brings more “certified” coffee down from the mountain than should theoretically be possible in an attempt to secure a better price, which may or may not be passed on to the uncertified farmers he claims to represent.
Traceability and quality are essential for sustainable coffee farming. But so is price transparency.
A huge proportion of the value created in the coffee supply chain accrues to the roasters. The Free On Board (FOB) price paid to traders such as Falcon is roughly 3% of the final price of your Americano. And a typical Ugandan farmer might expect to see 72% of that 3%. In other words roughly 2% of the price charged by a roaster for a cup of Ugandan coffee goes to the family unit described at the head of this post.
Price transparency could have a transformative effect on farmer prosperity at origin. A more equitable distribution of value along the supply chain would be a boon to sustainability.
But this would require all stakeholders to be culturally invested in such an outcome. Sadly this is not the case. The attitude of many large roasters to their supply chains is based solely on commercial responses to market forces rather than a sense of duty or stewardship. Traders such as Falcon carry much of the risk associated with sourcing, processing and transporting a perishable commodity for a fraction of the value created. These imbalances serve to make a mockery of corporate social responsibility.
Don’t be fooled by the touching photograph of grateful farmers in your local coffee shop. As likely as not it is a thin veneer which cynically masks underlying supply chain venality.
People, both commercial people and consumer people, need to care more about these issues. What applies to coffee applies to the global provision of all foodstuffs.
Consumer education is part of the solution, but consumers can only be educated if the barriers to price transparency can be overcome as described in this post on the subject by Denmark’s Coffee Collective.
These barriers are cultural and commercial. “Sustainable” coffee commands a price premium in San Francisco in the same way that “certified” coffee commands premium on the mountain in Uganda. This creates incentives for “dubious games” all the way to the top of the supply chain. The sustainability trade secrets of smaller companies like Falcon are liable to be copied by larger competitors who are not as philosophically invested but who have greater resources. This conflict of interest is a serious dilemma and a major impediment to an open source solution to an urgent global problem.
Being able to take for granted where your food comes from and how it gets to you is destined to be a short-lived luxury.
Food chain sustainability is right up there with conflict resolution, renewable energy and over-population at the top of humanity’s to-do list.
An annual income of $758 translates to roughly $15 per week. The poverty line for a Ugandan coffee farmer is the same as the price of your daily coffee before work. It is everyone’s interests that everyone knows and everyone cares about how the price of that cup of coffee is justified and distributed.