A broken coffee market

Why specialty coffee producers are going bankrupt in Ecuador.
Marco Verch/ CC BY 2.0 / Flickr

Murray Cooper was one of the most famous specialty coffee farmers in Ecuador. I’m using the past tense because he’s now bankrupt.

Specialty coffee is touted as a way to give more money back to producers in exchange for higher quality coffee and environmentally and socially positive farming approaches. It should help producers much more than growing commodity coffee, where quality has little effect on prices and producers are exposed to dramatic price swings.

Cooper is one of many farmers who have gone bankrupt as they learn that, even in specialty coffee, consumers aren’t spending enough to keep these ecologically focused and socially empowering farms from going under. Consumers have been led to believe specialty coffee is a panacea.

Specialty Coffee Farming: A Doomed Career?

Cooper left a desk job in a South African marketing agency in his twenties to fight deforestation by living in the middle of an Ecuadorian jungle for 11 years. No electricity nor music. He began a coffee farm in 2011 when he and his wife decided to start a family.

Cooper quickly learned that Ecuador is expensive for coffee producers, whereas it’s great for coffee farm workers.

Ecuador has high labour costs compared to its neighbours, Colombia and Peru. This is partly due to a 2015 government initiative to raise minimum wages and provide social security. 35% of rural workers still live below the national poverty line, but things are improving for farm workers.

“Some of these people can even buy a car from the money they make harvesting coffee, which is a very different situation to other countries,” Juan Carlos Vega, a Senior Technical Coffee Consultant hired by the Ecuadorian government, said.

Cooper goes even further for his local community. “I paid above the [minimum] wage, always, like US $100 more,” he says. “That was another reason [my coffee] was more expensive, but that was part of my mission”

According to the World Bank, higher labour costs are helping Ecuador overtake Colombia in secondary school enrolment. In 2012, they were tied at 79%. Now, Ecuador has reached 88% while Colombia sits at 78%.

Cash Shortages Strangle Coffee Farms

Despite growing world-class coffee, Cooper is in a cash crisis. And he’s not alone: many coffee producers face steep cash flow challenges. After planting coffee, it takes up to four years to get a decent harvest. And then there are the significant costs of paying pickers during harvest. Specialty coffee farmers have to survive for years with no income while devoting the majority of their time to growing high-quality coffee.

Cooper should have been one of the last coffee farmers to suffer a cash crisis because he could earn money as a professional photographer. But this safety net broke. “The whole photography market crashed locally and the Ecuadorian market was going down, so there was less business for me.”

There are few other options for him. Getting a bank loan for a coffee farm is notoriously hard in Ecuador – it ranks in the bottom third in international “ease of access to loans” rankings.

Why weren’t coffee roasters paying more for his coffee?

However, one would expect that Cooper earned a good income when he finally began selling his world-class coffee to prestigious roasters around the world? Unfortunately not.

Zoom halfway across the world, and roasters have just received their green samples from their specialty importers. The options on the table: a specialty Ecuadorian coffee from Cooper and, right next to it and for half the price, a similar quality coffee from  Colombia.

“For the same quality, [Ecuadorian] coffee is more expensive, so obviously buyers will say, ‘no, I cannot buy your coffee’,” one specialty green buyer tells me.

In turn, the traders feel the squeeze. “[In Ecuador,] we are paying some high and crazy prices, to be honest. That’s very risky for us,” discloses another specialty green buyer.

To survive his cash crisis, Cooper needs to receive high prices – and quickly. The intermediaries do buy his coffee but, because they’re squeezed, they can either pay him well or fast, not both.

As he puts his farm up for sale, his coffee is turned from green to brown in roasteries across the world. It is being sold to coffee shops and consumers for profit. It is being ground, brewed, and enjoyed.

Cooper is not alone

Other bankruptcies may follow. “We’re seeing the same issue with other producers who are very desanimados… bummed out…” confides a green buyer. “They came into the business thinking they’d get into high prices and maybe they didn’t realise how high the costs were going to be.”

“I will have to close my farm…” sighed one producer when asked what will happen if he continues to receive the same prices. “The people who work for me, I’ll have to fire, legally or whatever. And especially for women who work in the area, they’re going to lose some extra income.”

How to Support Ecuadorian Producers

If you want to promote coffees from ecologically positive farmers such as Cooper and empower rural Ecuadorians, here are four starting points:

  • Choose specialty coffee rather than commodity coffee. Look for a specific farm, micro-region or the name of the farmer on the bag.
  • When you find Ecuadorian coffee, ask your roaster to pay more for Ecuadorian it and be prepared to pay more yourself.
  • Google the farmer’s name (many larger farmers are active on social media) and reach out. Ask for their opinion on coffee prices. Are they sufficient? Do producers get paid enough on the specialty market?
  • Ask your roaster to buy from the same farm next year, regardless of quality, through thick and thin.

A version of this was previously published on www.PerfectDailyGrind.com

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James Harper

James Harper is the founder of the Filter Stories podcast. Filter Stories are audio movies of dramatic, life-changing personal stories about people connected to coffee. Each episode takes over 100 hours of work and is like movies for radio. Previously, James has worked in business development in Berlin and Melbourne and for the Bank of England.
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