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Demystifying the coffee supply chain

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Written by Luiza Pereira Furquim
on April 09, 2021

On the 8th of April, Laura Meunier (photo below) and Gibrán Cervantes of Ensambles de Cafés Mexicanos took us on a tour to Huautla de Jiménez in the North of Oaxaca. We drove 7 hours from Oaxaca city into the highlands of small Huautla, starting at a desert landscape and ending in the midst of misty mountains where coffee grows. It was beautiful. We had a typical breakfast with beans, corn tortilla and lots of coffee and saw how producers manually pick and process coffee. But there was a lot more to this trip than lush scenery and people watching.

The Ensambles team is young and extremely committed to their work with farmers. When speaking to them, there is no brushing the hard stuff under the rug. They are serious and like to hit where it hurts. And we respect them for that. After our trip, Laura and Gibrán touched upon some big sore spots of our industry. Below are our main takeaways from the discussion, from bad prices and systems which keep farmers ignorant to the need to share feedback and market information. 

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It takes more than 2 days to produce a single bag
of green coffee
and growers don’t get paid enough

esperon family farm

Though there is a variation from state to state, in Oaxaca most producers are small, with farms ranging from 0.5 hectare to 2 hectares. The plots are steep and hard to walk. The trees are tall and old, not because of lack of care but due to farmers’ emotional connection to them. Those trees have been planted by the grower’s ancestors and many don’t prune them out of respect.  

Laura calculated that it took six pickers one day to pick 200 kg of cherry. This yields 40 kg of dry parchment or 26 kg of exportable coffee. All in all, it takes 2 and a half days and six people to produce a single 69 kg bag ready to export! The six people need to work from dawn to 3 pm and spend another three hours manually depulping the coffee so it ferments and can be put on the patio the next day. 

As the Ensambles team visits farms on a daily basis, they want to reward the work of producers. They pay a higher base price than they would get through middlemen or cooperatives, take the coffee to their lab and cup. No more than 3 days later, they go back to the farmer and pay a premium for quality depending on how the coffee performed. They also cup with growers so they start to understand quality and what is needed to achieve it. 

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Ensambles is also trying to address the trees’ low yield and the cultural aspect behind it. If production is low, the cost per kilo of cherry is high and even if the grower is paid better there is only so much money he or she can make. Low production also means the price of the exportable green coffee will be less competitive in the market. 

Global prices are largely dictated by what happens in Brazil, but the realities of the two countries don’t compare. There is an argument that says the market’s mechanism in price regulation works just fine and producers need to make themselves competitive to thrive. Yes, they need to prune their trees. However, this argument ignores centuries of poverty and social inequality. Growers are wonderfully resilient but they can’t erase history.

 

Cooperatives and coyotes keep farmers ignorant

Mexico has a reputation for high volume FTO coffee. “This model is very strong,” Laura starts. “Coffee is delivered to big cooperatives with up to 10.000 members and then mixed. There is no traceability and no incentive to quality.” The second model, according to her, is the coyote network. “We call the farmers who are not affiliated with big coops ‘free producers’. The only way they can sell coffee is to coyotes, local buyers with small warehouses in all areas of the country. They will buy as cheap as possible and mix lots with no quality criteria,” Laura explains.

We tend to think about a coyote as this one bad guy taking advantage of farmers but, as with everything in coffee, that is too black and white. Coyotes are still successful because they pay immediately and farmers can’t afford to wait. Also, coyotes are a network of people. Small coyotes sell to big coyotes who sell to big international buyers, everyone squeezing one another to make a margin.

Both systems keep farmers ignorant. With no traceability and incentive for quality, growers can’t improve their practices, differentiate, try to access a new market. There is no agency. Initially, farmers think the Ensambles folks are kind of crazy and don’t trust them straight away. What they do is also revolutionary. It has a very interesting impact on local markets. If a new buyer comes in and pays better than the base price they end up pushing other buyers to pay better too. It’s the basics of competition.

 

It’s OK to say no. It’s not OK to say nothing 

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Producers need to receive feedback on samples. At Algrano we always feedback on our cupping results but we are not the final buyers, so roasters need to step in too. “We send a lot of samples and, sometimes, for reasons we don’t know, we have zero responses. Even if we understand not all the coffees are going to be to a roaster’s liking it’s important to get feedback given all the work people do here and the cost of sending samples. It’s OK to say no but it's hard for people in the origin to send samples and hear nothing. It’s a bit rough,” says Laura.

For Gibrán, transparency needs to go further. “Roasters want traceability. On the other hand, we don’t have this kind of information from roasters. We would like to have an overview of profits throughout the value chain. Coffee is at risk because of climate change, financial issues, cultural issues... We need to start working in a more integrated way with our clients. If we don’t understand the whole it’s impossible to deal with the issues at the farm,” he stresses. 

Ensambles has developed a project with Equal Profit, an organization in Switzerland that partners with farmers and roasters to elaborate a model in which costs and profits from all sides of the chain are calculated and compared. In the end, everyone has an equal percentage of profit according to their costs. Equal Profit takes transparency a step forward, including positive action in the core of their model.

“We need to understand what a roaster earns per cup of coffee, compare to what a grower earns and start to balance it. If the numbers are open to everyone we can do business in another way. It’s a fact that the poverty people are facing in the field is not fair. We must move in another direction to create integrated solutions,” Gibrán explains.

 

Sourcing needs to start before the harvest

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Finally, both Laura and Gibrán (above) emphasized the need to contract coffee in advance. Way in advance. Ideally before the harvest. For Mexican coffees, this would be October. In fact, this is already what big buyers and importers do but it is not yet a habit for most roasters, who wait for fresh crop samples to make decisions. For Mexican coffees, especially the higher altitude ones, this happens around April and May, six months after the ideal period. 

For roasters, pre-booking is the best way to secure the best lots. If we wait, big buyers will have picked the good stuff and there will be less to choose from. For growers, this is financial security. “If we are talking about sustainability, we must create mid and long term relationship strategies to have stability,” Gibrán goes. “We take a risk to get access to these coffees. If we don’t have certainty in advance it’s impossible to access these coffees on time.” We need to stop thinking about the two ends of the supply chain and start thinking of the middle. Everything happens in the middle.

 

To support this, Algrano has recently launched a new feature to give producers the option to list offers in advance. The “Upcoming Harvests” show coffees that are not ready yet and can be booked all year round before the harvest starts. Algrano supports roasters with quality assurance to help guarantee they will receive the coffee they want and supports growers with pre-booking so they have more security. The platform also allows roasters to send direct feedback on each sample they cup so producers know how their coffees are being received in Europe. These are functions of long-term relationships. It’s how sustainability can begin.

 

Laura and Gibrán are here. Start a conversation now!

ensambles profile

 

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