A Solution in Boaco

Posted: 25 May 2004

by Kevin Pepper

The New Land Cooperative is offering more than just a savvy business plan to Boaco coffee farmers. In the midst of a global crisis, their sophisticated program is helping farmers build a bridge out of poverty.

May is a slow month on a typical coffee farm in Nicaragua. Well after the harvest, which takes place in November through January, most farmers enjoy some relative peace and quiet.

Yet in the Boaco region in southwestern Nicaragua, things have never been busier for 540 coffee farmers. They are members of the New Land Cooperative, an Oxfam partner who is helping them to streamline their business and tap into a burgeoning specialty coffee market which earned $8.4 billion last year in the US alone.

The New Land Cooperative is providing the farmers with technical training to increase their coffee production, giving them access to credit, and forging relationships with major buyers and retailers in the United States and Europe. The cooperative's assistance is enabling them to evolve and adapt to meet the demands of an ever-changing coffee market. These activities and others have the potential to transform struggling farmers into successful entrepreneurs.

"The only way a farmer can survive today is to offer quality coffee and to offer different kinds of coffee," says New Land Cooperative member Juan Mora. "The cooperative is not giving us the kind of training that we already have, for example how to plant coffee trees and take care of them. They are teaching us practices like soil conservation, shade grown coffee, and other things we don't know that affect the quality of our coffee."

The New Land Cooperative is offering more than just a savvy business plan. In the midst of a global coffee crisis, their sophisticated program is helping farmers build a bridge out of poverty.

The Global Coffee Market

Coffee prices are lower in real terms than they have been for the last 100 years, with many farmers selling coffee for less than it costs them to produce it. Governments' and international financial institutions' investment in high-yielding, low-quality coffee in countries like Brazil, and their half-hearted response to the impact of the price crisis on growers, are threatening the livelihoods of more than 25 million coffee farmers in Latin America and Africa.

The giants in the coffee industry-American and Swiss multinationals such as Sara Lee, Procter & Gamble, Nestle, and Kraft, who comprise more than 50 percent of the coffee processing and retailing sector-threaten to make small coffee farms obsolete by out-producing small farms and flooding the market with low-quality coffee. The coffee market—without the authority to limit overproduction—cannot recover unless supply decreases or demand increases.

Why Quality is Key

For more than 500 farmers in Boaco, the solution has been to tap into a growing consumer demand for specialty coffee. Cooperatives like the New Land Cooperative have recognized that small coffee producers have one trump card to play in a competitive global market: quality.

The specialty coffee market is bursting at the seams in the US and Europe. Fair Trade sales have tripled in the past three years and constitute a growing percentage of the gourmet-coffee market. Small coffee producers in Latin America, Africa, and even Asia offer a specialized product that is rapidly emerging as major player in the US and European food service markets—which coffee connoisseurs are preferring and ethical consumers are demanding.

The New Land Cooperative's small producers are capitalizing on this market surge. Eighty percent of their coffee is now certified organic, and 100 percent is Fair Trade. To keep their edge, they continue to diversify their portfolio. The organization is training farmers in new varieties of specialty coffee, such as shade grown and high altitude beans.

They are experimenting with new techniques and growing conditions, and have trained and hired professional coffee "cuppers" to operate a cupping laboratory to train their members in quality control, ensuring that their coffee beans are up to par with the latest market trends.

Coffees are "cupped" to determine their good and bad qualities. With just one whiff, a professional cupper can determine the makeup and properties of a coffee bean based on a full range of criteria: altitude, acidity, fragrance, aroma, flavor, the region in which the coffee beans were grown, and ultimately the bean's marketability.

By demonstrating through cupping how different growing and processing techniques affect the final taste of the coffee, and by letting the farmers taste the results themselves, the cooperative has gained an invaluable educational tool that helps farmers understand why all of their quality-enhancing activities are so significant.

As cooperatives grow (The New Land Cooperative has increased its size tenfold since its founding) and attempt to become more professional in an increasingly demanding market, quality control mechanisms are vital to their survival; in today's market, cupping is the ultimate quality control mechanism.

With the support of Oxfam America, the New Land Cooperative offers a "pre-harvest financing" program, providing farmers with small loans which have allowed them to purchase critical supplies and equipment—ie. bags, cutting equipment, machinery—when they are most needed, and pay back the loans in full after they sell their beans.

"Most farmers just have a little parcel of land with a little bit of coffee and very little money," explains farmer Ramirio Espinosa. "If they didn't get this credit, none of these activities would be possible."

Prior to the New Land Cooperative's intervention, the farmers of the Boaco cooperative had no choice but to sell their coffee to "coyotes," local buyers who paid them less than the cost of production for their beans, around 30 cents a pound.

"They [coyotes] really had the power," Espinosa recalls. "They were the only ones who knew everything about the market, they could classify coffee however they wanted to, and they controlled everything. Everything has changed now, the whole practice. Today, the producers in our cooperative take better care of our coffee, because we are guaranteed a minimum price. I have been producing coffee ever since I can remember, and for the first time I don't have to go over my receipts. We will always get the same price or more. We can trust in that."

Today, The New Land Cooperative is a member of the CaféNica network, a coalition of nine coffee cooperatives in Nicaragua representing 8,000 farmers, approximately 20 percent of the small farmers in the country. Working together, The New Land Cooperative and the members of the CaféNica network have found new ways to collaborate with each other, and to pursue collective marketing initiatives. This larger network has succeeded in gaining a voice in national politics, and is able to advocate collectively for the interests of small rural farmers—something a small-medium sized coffee cooperative such as The New Land Cooperative could never achieve on its own.

Beyond Revenue

The New Land Cooperative is providing the farmers of Boaco with much more than just gains in family income:

Rather than following the common path of migration to Costa Rica in search of employment, hundreds of families have stayed home in Boaco to take advantage of the new opportunities.
In municipalities where less than 10 percent of children attend school, the New Land Cooperative is paying school fees for dozens of member's children.
The cooperative has signed an agreement with a local medical clinic to give a discount to cooperative members and their families. Considering that the state provides only minimal health services to its citizens and that rural areas rarely have any medical services available, this type of access to quality health care is literally saving lives.

"We really are trying to improve ourselves," says Espinosa. "We are taking care of our natural resources and of ourselves personally. Just because we are poor doesn't mean that we have to give up on those things."

Fair Trade

The Fair Trade concept started in Holland 50 years ago. The idea is simple: coffee companies that import and roast Fair Trade coffee guarantee farmers a minimum "floor price" of $1.26 per pound. This can be as much as a three- or even four-fold increase in what some farmers might otherwise receive for their crop. This increase is possible because the Fair Trade system eliminates a number of middlemen where much of the profit goes in the open coffee market.

Fair Trade is designed to help small-scale coffee farmers increase their incomes and improve the lives of their communities and their families. It also offers consumers a way to channel their purchases into socially responsible products that support families who might not otherwise have an opportunity to make a living, let alone receive a fair price for their coffee.