Wednesday, November 9, 2016

63. Cost of Production research paper announced

November 9, 2016
Feeling a little proud and anxious today as Michigan State University announced to my department, (Community Sustainability in the College of Natural Resources), that I will defend my "Masters B Project" on January 11. Below is the announcement. All invited!

Estimating Farmer Cost of Production: Implications for
Sustainable Growth in Rwanda’s Coffee Sector

Master’s B Project Proposal Defense
By Ruth Ann Church
Wednesday, January 11, 2017, 10:00am
Room 130 Natural Resources Building

A better understanding of costs of production is essential to understanding the profitability and sustainability of coffee in Rwanda where the crop is a main source of household income at the farm level, and of export revenue at the national level. Toward this end the present research seeks first to provide an analysis of the major components of producer cost of production. Further, the study describes a methodology and quantitative estimation process that can be used to collect the necessary data and generate CoP estimates in other coffee producing countries with predominantly smallholder production. Applied to Rwanda, the estimation procedures arrive at mean and median CoP values of 177 RWF/KG and 122 RWF/KG cherry, respectively. These costs for many farmer groups are higher than the average cherry prices being paid in Rwanda. This finding has serious implications for Rwanda’s long-term production as the country continues its transition into higher quality and higher priced specialty coffee markets.

In addition to satisfying the above dual objectives, (an analysis of components of CoP and an estimation methodology) this study provides an analysis of five external determinants of coffee cost of production and how they affect farmer costs in Rwanda: number of trees, years of farmer’s experience, cooperative membership, gender of head of household, and steepness of the slope of the coffee field. The research shows that the number of trees on a farm plantation is significantly and inversely related to CoP. It is recommended that this finding be used to guide both the design and the evaluation of farmer training programs. Programs should maximize impact by seeking to target their resources according to the scale of the targeted coffee producer. The study also shows how the main determinants of CoP can help to explain notable regional differences in production costs.   

With this research on costs of production, those who set cherry prices in Rwanda and those who purchase coffee anywhere in the coffee value chain are better able to adjust the incentive structure to motivate Rwanda’s coffee farmers to invest in their coffee plantations and to raise their productivity levels. We recommend that the cost of production estimated in this study (177 RWF/KG cherry) be incorporated into the formula and process for determining the floor price for coffee cherry in Rwanda. We also see the need for steps to regularly update CoP estimates in the future.  Tracking such cost estimates over time will be helpful to NAEB and washing stations in their strategic planning and as well as day-to-day management decisions. A more accurate formula for establishing cherry floor prices based on multiple years of data will be an essential step towards ensuring Rwanda’s “second sunrise” for coffee.

Committee Members:
Dr. Daniel C. Clay (Chair)
Dr. Maria Claudia Lopez

Monday, October 24, 2016

62. Serious Potato Taste Defect "Fall Out"

Oct. 24, 2016
I spent the past week on the North American West Coast -- Los Angeles and Vancouver to be specific. I visited roasters in both cities and the Swiss Water Decaffeination Coffee Co. in Burnaby. My plan was to promote interest in the Rwandan Ejo Heza coffee that Artisan Coffee Imports is bringing in to Oakland in January. I got a clear reminder of just how serious the potato taste defect (PTD) "fall-out" is among specialty coffee buyers. Too many have been "stung" too many times. Many told me "we just stopped buying it."

This is difficult but probably not "new" news for stakeholders in Rwanda's coffee industry. Many producers and exporters in Kigali and its environs have expressed to me frustration with an inability to increase volumes with specialty buyers. I suspect a few know they have lost buyers due to potato taste, but probably many do not realize that this is the reason a small specialty buyer did not return. Therefore in a recent survey of the 16 washing stations in the AGLC project, 56% said they had at least one problem with potato taste in the past year, but only one said a customer had rejected a load due to PTD. (The survey did not ask how many customers the Producer Organization thought they had lost, only how many had rejected a shipment.)

Meanwhile, ICO data shows the following downward trend for Rwanda's production. The causes for the production declines are more complex than "just" PTD, of course. The AGLC research team has written papers on issues related to productivity, motivation and capacity (link here). All of these "root" causes affect PTD also, we just don't have numbers yet to say exactly how.

Figure: Rwanda’s Arabica green coffee production trend is downward. Source: ICO

Below are a few quotes I heard while on the road. But don't get discouraged - especially if you're a buyer or a producer. Each of the people I talked to were happy to hear that research continues to reduce and eliminate PTD root causes. Most were willing to consider trying another batch of Rwandan or Burundian coffee, even if they had been avoiding it intentionally for years. They all know the great taste that it can have, and they miss it!

"[On potato taste] I'm at the point of withdrawl. I'm so tired of it. I get a great Burundi or Rwanda and then 'bam!' the potato smell hits you as you brew. I've trained my staff to notice it, but I just don't want the hassle."  ~ small, micro-roaster with retail outlet in Culver City, CA (Los Angeles neighborhood).

"We are focusing on providing micro-lot, specialty decaffeinated coffee, but we cannot take out defects -- only the caffeine. We can't buy Rwandan, Burundian or Congo coffee and decaffeinate because if even one of those beans gets into the system it could ruin the entire batch and more than 7,000 lbs of coffee."  ~ executive at Swiss Water Process

"We stopped buying Rwanda a couple years ago. Too many incidents of potato defect. We pride ourselves on great tasting coffee, so it's just too risky."   ~ green buyer for Vancouver roaster buying ~ 20 containers/year

"We have to train the baristas very carefully to detect PTD and throw away the batch. Seems like every Rwanda or Burundi has a few, but with the very high quality ones (like Gaharo from Long Miles Coffee Project), the incidents have been very, very few."  ~ high-end roaster in Costa Mesa, CA (Los Angeles neighborhood)