POOLING EFFORTS: SUSTAINABILITY AND THE SMALL GROWERS by Carlos Brando
November 8, 2012 in Uncategorized
It is estimated that 80% of the world’s coffee is produced by small growers and, the joke goes, the remaining 20% is in Brazil! Indeed Brazil concentrates a large share of the world’s mid-size and large growers but the average area under coffee per grower is about 7 ha (17.3 acres) and small holders outnumber the other growers by a large portion. One advantage of Brazil is perhaps legislation that prevents the subdivision of farm land below a minimum area that is judged necessary to remain economically feasible in the activities that predominate in a given area. In other words, land subdivision has a limit that when reached forces the heirs to run the property together as a whole.
If the coffee market is concerned with the sustainability of its supply chain and if 80% of the world’s coffee is produced by small growers, the key question here is if the small grower will be sustainable in the mid and long run. On the one hand, the tendency is for the average coffee holding size to fall as a result of generational changes. On the other hand, not only the cost of living grows but, most importantly, growers’ aspirations also grow as a natural
result of development. To make matters worse, we know that in the long run the tendency is for the real price of commodities to fall as a result of technology and other factors. Not a promising scenario at all!
Maybe market forces or government intervention will take care of the problem and cause huge flows of rural workers to urban areas and the creation of shanty towns as it has already happened in some countries and is currently happening in others. This process may lead to more sustainable farming but will it create a more sustainable world?
The diseconomies of scale involved in “small farming” are huge, specially in access to technology, a subject we know well in what regards post-harvesting of coffee and cocoa. The price of coffee wet milling equipment only doubles when capacity is increased four fold. A large coffee or cocoa drier costs only twice the price of a small drier with one-tenth of the former’s capacity. A similar process happens with other types of equipment, e.g., tractors,
sprayers and even irrigation. Attempts to develop specific equipment for small growers often succeed on the technical side but fail as often on the cost / price side, sometimes miserably. This phenomenon is compounded by lack of access to credit for small growers to acquire equipment and inputs too.
The issue of credit brings up another problem that pesters small coffee growers: their limited bargaining power not only when buying equipment and inputs but also when selling their crop. It does not take a PhD in economics to know and understand that on average a small grower pays more and sells for less than a mid-size or large grower in the same way that goods often cost more in a corner store of a low income neighborhood than in a middle-class supermarket.
All in all, the small grower is left with its own low-cost labor as a comparative advantage, even though he or she is often forced to “consume” its meager savings or its own limited capital. Truth is that this labor is not low-cost but only “sold” or computed (or not) at a rate below market level. Without exaggeration, the prospects seem bleak for small growers. Is there a way out?
The recipe may be simpler than one thinks: to reverse the process. Instead of making technology compatible with small coffee farming and subsiding credit to small growers, the focus should be on bringing growers together to benefit from economies of scale in technology and to gain bargaining power by buying and selling as a group. Equipment sharing, joint processing facilities, group purchasing, group certification and pooling of coffee to be
marketed are some useful paths. Easily said than done, of course, but are we trying hard enough?
Cooperatives have existed for well over 100 years and growers’ associations are not that new either but their use is not as widespread as desirable. Perhaps these traditional forms of association have to be refreshed or revamped and innovative forms of association, country and culture sensitive, have to be developed to cater for the needs of micro and small coffee growers and to empower them lest they will disappear in the long run. The real barriers may be more behavioral and sociological than technical and should be dealt with accordingly. This is the challenge for governments, agencies and companies concerned with the plight of the small coffee grower.