Friday, December 7, 2018

What Transparent Trade Looks Like

Dec. 7, 2018
The new wave of roasters want more cost transparency to complement their relationships to the farmers who grow their coffee. That's what we offer at Artisan Coffee Imports in a way that other importers cannot. We offer a closer connection, a deeper relationship through cost transparency, to the coffees we source. (Click here for the last blog describing some of that connection at Kopakama.) Currently we focus on Rwanda, but soon we'll include other origins. As we expand, we plan to replicate the model we've developed in Rwanda:
  • Receipts tracking how the money got to the farmers. Artisan sent $7,290 in mid-November to pay the $.30/KG green second payment to Ejo Heza farmers. Kopakama sends to Artisan the receipts showing conversion of the $7,290 to RWF at a Forex office and the bank receipt confirming the funds are deposited in Ejo Heza's local (Mushubati) SACCO account.
  • Signatures of the farmers themselves on lists with their names. Kopkama also sends the lists, broken out by sub-groups, of the women who received their share of the $7,290 mentioned above, in their hands, on November 30, 2018, during their general assembly. Click here to see the previous blog with photos and video!
Pay day!

Farmer Compensation Revisited:
This works for the second-payment. The other, more important piece of a farmer's compensation is the first payment -- the payment received for cherry as it's delivered. For example in Rwanda, this base cherry price can range from 150 - 400 Rwf/Kg cherry. A second payment typically ranges from 10 - 35 RWF/Kg cherry. In percentages:
  • base cherry price = 90 - 100% of farmer's compensation for coffee (many farmers receive no 2nd payment)
  • second payment = 5 - 10% of farmer's compensation for coffee
Obviously, the most important piece of a farmer's compensation in Rwanda (and many E. African countries) is the base cherry price. How that cherry price is set is a critical question. Is it based on pure competition for cherry in the market? No, it's usually a mix of government regulations and competitive forces. In cultures with low tolerance and understanding of competition and market economics, the former, (government regulations), tends to be the more dominant determinant of the farmer's cherry price (see paper referenced below). Unfortunately, two major hurdles are frequently encountered in origin countries:
  1. Lack of market data
  2. Overly heavy influence of a few, oligarchic players
These two factors can both, independently, weaken the government's ability to design and implement effective regulations, even when the government's intentions towards the farming community are positive. A recent paper in the Journal of Rural Studies delves deep into this topic in Rwanda. 
Bette, one of Ejo Heza's leaders, meets Ritual's buyer, Aaron.

The New Wave Roasters: Junior's Roasted Coffee (JRC), Portland, OR, is an example of the trend we anticipate will continue. Daily Coffee News recently wrote about Mike Nelson's multi-year effort to bring deeper understanding of cost transparency to his coffee supply chain.

The picture that became clear to Nelson was that in order for JRC to purchase a grower's coffee at a price that allowed the farm to break even, a significant premium would have to be added to the going market price. "Given the longstanding relationship between the roaster and the producer, and that the coffee consistently cups up to Junior’s stringent standards, JRC was happy to pay more for the benefit of all involved, today and into the future."
“We were able to come up with a premium,” said Nelson. Nelson's importer was paying $3.25/lb. green to the farmer, and Nelson added an additional $.75 per pound green, to ensure break even on his coffee purchase." Thus, the producer in this case is receiving $4 per pound on this coffee. With the premium, the price JRC paid to the importer was $5.62 a pound. "Adding shipping, roast loss, labor, packaging, and everything else, this worked out to be an $8.10 per pound coffee [for Junior’s].” 

JRC's roasted coffee (consumer-facing) label says: 
"Coffee is traded as a commodity, trading for as low as $1.00/lb during the 2017/2018 season. This season, it cost the [producer name] $2.87/lb [green] to produce this coffee. We paid $4.00 /lb [green] directly to the [producer name] family to cover production costs and to help ensure future production."
JRC is making their support for covering cost of production not only a clear priority of the company, it's seems to be a value. It's a little like telling airline customers exactly how much you, as the airline operator, have included as a carbon credit in the price of the ticket. You're making sure you cover the real costs of production, and you're ensuring sustainability of your industry. [Story credit to Howard Bryman, 10/1/2018, Daily Coffee News, published by Roast Magazine.]

Charlotte (Kopa), Ruth Ann (Artisan) and Dominique (Kopa)
Importer's Role: a final note here about the role of JRC's importer. One might ask why JRC had to go to all this trouble to find out the producer's cost of production? And more trouble to arrange a way to make the producer whole? It appears JRC's importer pays the producer a price that is either at or below the farmer's cost of production. In this happy case, a roaster came along to ensure not only costs are covered, but there is profit for the farmer to reinvest. At Artisan Coffee Imports, we assure all our roaster customers that farmers who grew the coffee we sell are paid a price that covers cost of production and a profit margin. For the base price, (before any second-payment), our minimum is 300 RWF/Kg cherry, well above the average cost of production in Rwanda of 177 RWF/Kg cherry. Not surprisingly, we check the cooperative's records to ensure this price was paid, and 'spot check' with farmers, too.
Welcome to transparently traded coffee!

Saturday, December 1, 2018

Ejo Heza Women Celebrate and say "Thank you!"

Ejo Heza General Assembly at KOPAKAMA Mushubati station, Nov. 30, 2018
Nov. 30 was the one of the best days of the year for 320 coffee farmers and their families in Mushubati cell, Rutsiro district, Western Province, Rwanda. Yesterday was the date of the annual general assembly for the Ejo Heza group of women, which is a sub-group of the well-established Kopakama cooperative. Perched on top of a mountain, in the building that doubles as meeting room and coffee warehouse, (depending on the season), the members of Ejo Heza gathered. Three of their officers led the proceedings: chairperson Therese UWIMANA, vice-chair Beatrice TUYISABE, and secretary Olive NYIRAGAHIGIRWA.

Each woman received $.136/lb green coffee sold by Artisan Coffee Imports. They receive cash in their hand, calculated based on two factors:
1. the KG of cherry they delivered from their "own trees" from near their home, and
2. their share, according to the days of work they contributed to the Ejo Heza cooperative plots of land.

This 'second payment' comes on top of the $1.078/lb green they receive as the 'first payment' or base price for their cherry. In other words, roasters who buy Ejo Heza helped those farmers have 13% bonus, a total of  $1.214/lb green. For this, they are grateful, as you can see in this video of them dancing and singing!

The 'first payment' the farmer receives is the larger of the two and an important signal to the farmers of how much the washing station is willing to pay to attract the farmer's loyalty, and also a signal of what quality level the washing station requires. Washing stations that expect more selective sorting prior to delivering cherry will pay more than those stations that don't care and buy everything.
Farmers bring cherry to the washing station to sell - usually transporting by foot.
Weighing cherry - preferably within 6 hours of it being picked from the tree.

A farmer watches as her Kgs of cherry and the corresponding price are recorded.

For Ejo Heza farmers, the process of bringing cherry to the washing station is part of what solidifies their unity and strengthens the sense of belonging for each woman. Ejo Heza cherry is only collected on one, sometimes two, specified days of the week. This allows the washing station to keep the "women's coffee" separate from the rest and sell it as women's coffee. So the women know when they bring their cherry that they are contributing to this specially selected batch, and this brings a sense of honor and duty. Their coffee won 8th place in Rwanda's Cup of Excellence in 2018!
Ejo Heza members sort cherry harvested from their community field on a Tuesday - the day for women's coffee.

The second payment from a cooperative is solidifies the loyalty of the farmers, and is the way the cooperatives shares it's 'profits' after costs and revenues for the year have been finalized. The timing of the payments can be a benefit to farming households as they come 6 months after the season has ended, when cash may be low.
Proceedings at the Ejo Heza general assembly, 2018.
We don't have the lists and other details from last week's meeting yet, but in August 2018, Artisan's Ruth Ann Church visited one of the farmer field schools (FFSs) with 24 Ejo Heza members (and 6 of the cooperative's male members). Church asked and a few of the women were willing to share what they did with the premium they received the year before. There among the coffee trees, they quietly stood and shared these short stories, firmly and with pride. (Names have been changed.)

Received 53,000 Frw (~ $60) premium from Artisan. "I was able to buy three bags of cement and put pavement in the floor of one room - the dining room of my home. ...I want to improve the taste of our coffee so that we can continue to develop.”

Received premium of 12,400 Frw (~ $14). "I bought chickens and hired a person to help me weed the coffee (and the beans?). I got the money when it was a ‘bad situation’ (poverty and hunger) in our community. It helped my family very much."

Received premium of 55,000 Frw (~$62). "It helped me to buy another cow from which I can use the manure to fertilize coffee."

These amounts of cash mentioned above can be verified in the list of 320 names showing that each woman signed for their premium on October 31, 2017. (Click here to request the list.) The premium from every roaster is impacting these women’s lives. They are motivated to work with us as we explain new tasks and efforts we’d like them to try to improve quality and consistency...and avoid potato-taste defect.