Better Business
October 2006
Banner photo: Partially Harvested Corn Field/corbis
How Much Is a Cup of Coffee?
Ashenafi Argaw is export manager for the Sidama Coffee Farmers Cooperative Union.
SGI Quarterly: What is the significance of coffee to Ethiopians?
Argaw: Ethiopia is the home of coffee. It is an integral part of Ethiopian culture. About 53 percent of Ethiopian coffee is consumed locally; everyone in the country drinks coffee, whether rich or poor. The coffee ceremony is an important feature of Ethiopian hospitality. The host washes the coffee beans, roasts them and grinds them with a pestle and mortar. The brewed coffee is served in tiny china cups with lots of sugar. Traditionally, the guest must accept at least three cups--the third in particular is considered to bestow a blessing.
Coffee, moreover, is the nucleus of the Ethiopian economy. It accounts for approximately 55 percent of the country's exports. There are about 1.2 million coffee farmers and about 15 million households either directly or indirectly dependent on coffee for their livelihoods. Small farmers grow 95 percent of the coffee; most of them work less than half a hectare of land.
SGIQ: What is the situation of the average coffee farmer?
Argaw: The price slump in the world coffee market in 1998, when prices dropped by more than half to around 50 cents a pound, had a drastic effect on the whole economy. Many coffee farmers have been forced to sell assets such as cattle and to cut down essential expenses, including food. I'll quote some comments from an interview_f with a farmer in our area: "I depend on coffee for all clothing, food, to pay taxes and medical expenses. Our lives depend on coffee. . . Ten years ago I was producing seven sacks of red cherry, and this was enough to buy clothes, medicines and services. But now, even if I sell four times as much, it is impossible to cover all my expenses . . . Three of the children can't go to school now because I can't afford the uniform . . . We have stopped buying teff and edible oil. We are eating just mainly corn."
Though the situation has improved, what the farmers get is still not fair compared to their costs.
Working Together
Cooperative unions are an attempt to redress some of these problems. The Sidama Coffee Farmers Cooperative Union was founded in 2001 and comprises 45 primary cooperatives, representing 86,675 smallholders in Ethiopia's southern region. The primary cooperatives are autonomous, democratic associations of smallholder coffee farmers.
By taking advantage of economies of scale and maximizing efficiency, our organization is trying to stay at the competitive edge of the coffee market while increasing the farmers' share of the market value of the goods, and protecting them from illegal actors in the domestic market. We're trying to stabilize the local market while opening international markets and increasing shares in niche markets, such as organic produce markets.
The coffee ceremony
[R.Maro/version-foto.de]
SGIQ: What are the main challenges?
Argaw: Lack of access to credit: there is a need for cooperative banks to help cooperatives obtain loans. Streamlining of the domestic coffee marketing chain is essential as it has a lot of intermediaries and high transaction costs. The formation of four cooperative unions in different growing regions is helping achieve this. The tariff and nontariff barriers that prevent local organizations from entering into the international market for roasted coffee are also a problem.
A Fair Deal
SGIQ: How can consumers help?
Argaw: Consumers should be aware of where the products on their shelves come from and choose those products, such as Fair Trade products, that respect the humanity behind the product, that is, the producer. Fair Trade is a responsible product that is identifiable and traceable down to the farm. So, consumers need to become informed about the products they consume, and we try to help in this by speaking to consumers, retailers and other stakeholders through venues such as international trade fairs and Fair Trade campaigns.
Fair Trade guarantees a minimum of $1.26 per pound: a living wage. At the moment this is about 21 cents above the market price. These fair payments are invested in food, shelter, health care, education, environmental stewardship and economic independence. Fair Trade also offers access to credit. It promotes socially and environmentally sustainable techniques and long-term trade relationships. In our area it's led to better cash flow, sustainable production of good-quality coffee, a better school enrollment ratio, better health conditions, and an improvement in infrastructure.
Fair Trade's focus on cooperatives is a powerful incentive for small farmers to get organized. This reduces the control of the middlemen and is a first step toward community empowerment. Every time the cooperative sells coffee in the Fair Trade market, five cents per pound is invested in development activities in that community. All decisions on premiums are made by the General Assembly of members.
SGIQ: Are there disadvantages to Fair Trade?
Argaw: The fixed price involves a risk of lower profits at times when the market price is high. It is also very niche. It represents only 3 percent of the global coffee trade. This makes it difficult for a lot of smallholder farmers to get involved. Only about 15 percent of farmers in Ethiopia are now involved in Fair Trade.
SGIQ: What other kinds of initiatives would be helpful?
Argaw: I think initiatives that focus on quality parameters are very good. I know how much effort farmers make for the quality of the product, but the market is generally not based on quality. Only a small percentage of buyers pay a premium based on quality. I really appreciate any initiatives that promote and reward quality; they benefit both the producer and consumer.
SGIQ: Has Fair Trade made a contribution to peace in Ethiopia?
Argaw: Definitely! Trade is the most powerful tool that links the lives of people on our planet, affecting economies either positively or negatively. The massive slump in the coffee price brought a sharp increase in poverty and hunger. But now, bit by bit, Fair Trade has made tangible differences in many farmers' lives. Children have gained access to medical care and education where before these services were nonexistent. Much needed infrastructure has been built, and progress against poverty has been achieved. An increased market share for Fair Trade would have a measurable impact on the peace and stability of our country.
Visit: www.sidacoop.com
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