April 15, 2019
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| Dr. Celestin Gatarayiha, Head of Coffee Division, NAEB-Rwanda, takes in Dr. Clay's explanations of the new farmer typology. |
A milestone event occurred April 12, at the SCA Boston. Dr. Dan Clay was present at SCA Boston to present one of the newest and most credible pieces of research on sustainable farm profitability and a new 'Farmer Typology' model. "Farmer Incentives
and Value Chain Governance: Critical
Elements to Sustainable Growth in Rwanda’s coffee sector" was presented during the scientific research poster session, 12 noon - 2pm on that Friday. Ruth Ann Church, co-author of the report during her days as a masters student at Michigan State University, was pleased to present alongside professor Clay. Clay has been studying coffee value chains for about 30 years, primarily utilizing applied field research in African countries. In coffee circles, he is most noted for leading the PEARL project, 2003 - 2008, in Rwanda, which launched the country, previously unknown to the gourmet coffee world, into the specialty coffee sector.
The "Farmer Incentives" paper was published in the peer-reviewed journal,
Journal of Rural Studies 63 (2018), p. 200-213.
Given the number of recent reports and panels discussing the issue of cost of production, coffee prices and farm profitability, this research is likely to be received with excitement across the globe.
Recent reports on profitability include: ICO document 124-6e, "
Profitability of coffee farming in selected Latin American countries – interim report"; an SCA
two-session panel on the "Future of Specialty Coffee", and at least two other panels on cost of production at SCA -- one from Food 4 Farmers and one from a team of MBAs at the University of Michigan. The ICO report and the panels often lament the
lack of available and credible research with large sample-sizes on the topic of coffee smallholder profitability. These entities will welcome this new, peer-reviewed research with the largest single-country sample size of any report on the topic in the last 10 years, (n=1024 per country; both Rwanda and Burundi were surveyed, so total sample size = 2048.)
Not only is the research recent (based on 2015/2016 survey data) and robust, it has been vetted by the Rwandan government and found to be useful. They based significant policy decisions on the findings of this report. This fact is noted in the "Outcome in Rwanda" section of the poster. The section states:
The
Rwandan coffee board (the
National Agricultural Export Development Board, NAEB) used
the
data and analysis from this research to
defend its move to raise the cherry floor price 70% in 2017. (Floor
price of 150 Rwf/kg
cherry in 2016 was raised to 264.) They were
able to stand their ground against opposition
from
exporters, because of the legitimacy and independent nature of this analysis. The
research underscored the voice
of the farmer at the negotiation table.
This
real-life outcome (a 70% price
increase for
355,000 Rwandan coffee farmers in 2017) illustrates
how data can be the critical, enabling difference to improve governance of the
entire coffee value chain.
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| "Farmer Incentives and Value Chain Governance" poster from SCA Scientific Poster Session. Image of the 48" x 36" poster. |
Reviewers may wonder if the work can shed insights for coffee-growing geographies outside of Rwanda and Burundi, two small, land-locked central-African countries. Church maintains that the answer is "yes, the research offers a unique focus on differences in farmer motivation and capacity depending on farm size, and similar patterns can be observed in many countries and other value chains." The poster features the new "farmer typology" diagram that is ground-breaking for making something we've always known, suddenly visible and defined. It's like when the "coffee taster's flavor wheel" first came out. Cuppers everywhere knew those flavors, but an illustration and diagram of what "everyone knows" becomes an invaluable tool.
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| New Farmer Typology - hypothesized to be applicable in many countries, not just Rwanda and Burundi |
The new "farmer typology" diagram presented in the poster at SCA is a similarly universally valuable tool because it illustrates
capacity to invest versus
incentives to invest by size of plantation in a
low cherry price scenario. Let's look first at the issue of incentives, as this is the aspect of coffee farming that seems to be recognized as important, but so far not analyzed in terms of differences across farm size. Farmers do not respond equally to price incentives. The typology shows how in a low cherry price scenario, the largest farmers neglect their coffee trees because of lack of motivation from market returns. This phenomena is now being documented across the industry in almost every trade magazine one picks up every month:
C&CI, May 2019, pg. 43;
SCA Magazine 25 Issue 8, Feb. 2019, pg. 013;
Global Coffee Report, Mar/Apr 2019, pg. 21;
Roast, May/June 2019, pg. 79.
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| Coffee Taster's Flavor Wheel |
These publications, as well as the new
"Farmer Investments" paper we are highlighting here, describe how large farmers neglect their coffee trees, their yield per tree goes down
and their investments, meaning costs of production fall to extremely low levels. The typology goes on to show that, in contrast, the smallest farmers are
not motivated by market prices. Their incentives are basic survival and they do not have other choices or means to generate cash. They produce as much coffee as they can every year out of necessity. In a sense, they over-invest their labor in their coffee-trees, which drives up costs.
The Farmer Typology above illustrates this difference in incentives with the yellow curve, showing small farmers on the left with high incentives (despite low coffee prices) and large farmers (on the right) with low incentives.
However, high
performance in agriculture requires that producers have the
capacity not just the
incentive to
invest. Farmers must have the resources and abilities to invest in their coffee
trees and at the same time be motivated
to do so. One
without the other will not have a positive result. Capacity is illustrated with the
blue curve in the diagram.
Too often today, those working on issues of coffee sustainability and improvement of farmer livelihoods are wasting resources, because these two curves are not yet well understood. If someone meets a few farmers who haven't learned 'climate smart' best practices, it's too often assumed that 'best practices training' is going to help all coffee farmers. When in fact, what we see from the typology, is that large farmers usually know the best practices (capacity is high on the right side of diagram). Resources need not be wasted on training them. What is missing for largeholders is the business incentive from higher prices. Take training dollars and invest them instead in higher prices and for large farmers, and productivity increases will appear.(1)
The typology shows however that at the small farm level (left side), farmer capacity is low and investments in various types of training, (nutrition, basic math, basic business and best practices), may lead to both livelihood improvement and productivity improvement. Organizations such as Sustainable Growers in Rwanda, for example, target a population of smallholder coffee farmers characterized by tiny farms, low education levels and almost no other choice for cash income besides coffee. Looking at the typology, one would guess that investing in training programs for these farmers, will help them invest their labor in better ways. That will increase productivity, regardless of what cherry price is paid. This perspective of, "we can help them earn more by teaching them how to increase yield" is common in coffee. The problem is, most of any nation's coffee, even in small countries like Rwanda and Burundi, is not produced by these small farmers. 57% of Rwanda's coffee trees belong to Rwanda's largest farmers.
The typology may seem like common sense to coffee industry veterans who have seen the differences in farmer motivation before their own eyes. In a low cherry price scenario, the coffee veteran has observed A. the large farmer who has not hired labor to help harvest his trees for two years because "it's not worth it" and B. the smallholder farmer with a garden of trees who invests so much time and family effort in weeding, mulching, fertilizing, even paying neighbors to help with harvest, only to receive a tiny sum that doesn't begin to cover labor costs. Now, with the typology published in this report, we will have a tool to help us understand what we are seeing better - placing it in context with other scenarios we've seen. Like the coffee flavor wheel, it is a tool that can help the entire industry understand its business better.
(1)
A 22% productivity increase was documented in the Feed the Future Africa Great Lakes Coffee support project (award number: AID-OAA-LA-15-00006), after cherry prices increased 70% in 2017 vs 2016. Contact Ruth Ann Church for a copy of her presentation at SCA Expo 2018, "Farm Profitability: Impact of Best Practices."
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| L: Ruth Ann Church, co-author and now an M.S. in Community Sustainability; R: Dr. Dan Clay, lead author, professor and Director, Global Programs in Sustainable Agri-food Systems, Michigan State University |
