Author: jonkingsman

 

Good morning, Andrey. Could you tell me a little bit about yourself and your company?

After leaving university, I worked for ExportKleb, which at one time was the largest importer of grain into the Soviet Union. My father, Andrey Sizov Sr, founded Sovecon in 1991, and I joined in 1998.

Sovecon is the oldest established firm in the Black Sea analysing and closely following agricultural markets – mainly wheat, corn, some barley and oilseeds. In addition to our regular reports included in sizov.report service, we also do multi-client studies. We are a small company – about five people in total.

What is the biggest issue in the Black Sea grain markets today?

Officials in both Russia and Ukraine have little faith in free markets. They don’t believe that price can balance supply and demand. They want to take administrative control of their domestic grain markets, primarily by limiting exports.

A few weeks ago, the Russian Ministry of Agriculture published a proposal that, if accepted, would limit total grain exports, including wheat, corn and barley, to 15 million mt for the current season. That tonnage was in line with expectations, and the market did not react.

Russian domestic grain consumers – flour millers, farmers and animal feed manufacturers – argue that export quotas won’t be enough to stop an increase in domestic prices.  They have written to the Prime Minister to ask instead for a tax on grain exports. They have requested the government set a threshold price in roubles, with a 50 per cent tax on anything above that threshold price.

I believe that both proposals are bad, but the second one will be tough to manage because of the currency risk between the threshold price in roubles and the export price in dollars.

How likely is it that the government will impose one or other of these restrictions?

There is a third possibility – that the government doesn’t do anything. I would rate the probability of export quotas at 60 per cent, export taxes at 30 per cent, and of the government doing neither, and perhaps proving some subsidies to local grain consumers, at 10 per cent.

The market is expecting export quotas; they are already in the price.  The market is not expecting export taxes; they are not on the radar. If the government introduced them, it would catch the market on the wrong foot; we could see a market reaction.

What about Ukraine?

Local consumers are also not happy with domestic grain prices and have written to the government to ask them to limit corn exports. The government has already imposed soft limits on wheat exports, but there are no set penalties if you over-export. If the Ukrainian government imposed rigid limits on corn exports, it would come as a shock to the market.

Exports have been the primary driver of the growth in the Russian and Ukrainian grain sector over the past 20 years, and I am afraid that restrictions on exports would be detrimental to further expansion. They could be harmful in the long term for everyone in the supply chain, farmers, traders and firms investing in sea terminals.

Going back to Russia, couldn’t traders get around the proposed system by declaring lower prices on their export contracts?

I believe that would be impossible given the transparency of prices all along the supply chain. However, it may mean that traders make sales basis FAS (Free Alongside Ship) rather than FOB (Free on Board), or that they ship more from the lower-draught ports in the Sea of Azov, which trade at a discount due to higher shipping costs.

When do you think any changes might come into effect?

The government may try to publish the necessary decrees by the end of this year for validity in 2021.

Isn’t this all part of the Russian government looking to take control of every aspect of grain exports? The state-owned bank VTB is already a significant terminal and port operator.

You shouldn’t confuse the two issues. VTB is majority state-owned, but it is in their interest is to maximise export flows through their infrastructure. The government may want, for domestic political reasons, to reduce exports. The two forces are opposing, not complementary.

Do you see Black Sea exports continuing to grow in the medium to long term?

Ukraine does not have much land on which to expand its grain area, but the country does have plenty of room to improve yields. Average wheat yields are around 4 mt/ha; this compares with 6-7 mt/ha in the EU. Wheat yields in Ukraine could improve to 5-6 mt/ha. As for corn, average yields are currently around 6-7 mt/ha; this compares to 10-11 mt/ha in North America.

Russia also has considerable room to increase yields. Global warming has been beneficial to Russian agriculture. Milder winters have meant that farmers could plant more area under winter, as opposed to spring, wheat. Average winter wheat yields are around 4 mt/ha compared to 2 mt/ha for spring wheat.

Russia also has a lot of area that they could bring back into production. Potentially, farmers could bring in an additional 300,000 to one million hectares into production every year. It will mostly be in the Volga Valley region, which has relatively easy access to the Caspian Sea. It will facilitate Russia’s exports to Iran, a significant wheat and corn importer.

There is also some potential for Russia to expand corn and soybean areas in the Far East of the country; Russia could become a significant competitor in Asia for Northern and Southern American farmers.

How much do you expect Russia and Ukraine to export in ten years?

We estimate that Russia, including Crimea, will produce 85.5 million mt of wheat this season. Our figure for Ukraine is 25 million mt. Aggregated production is 110 million mt. We could see that increasing to 150 million mt in ten years.

We estimate the total corn crop in 2020 at around 45 million mt (31 million mt in Ukraine and 14 million mt in Russia). In ten years, this number could increase to 60 million mt.

That additional production is likely to result in a substantial increase in exports. We expect local consumption to grow at a slower pace, something around 0.5-0.7 per cent annually.

There are two significant obstacles to this. The first one is the governments’ actions – we hope to see more freedom and less export control in both countries. Our industry doesn’t need subsidies, nor does it require state investment. All we need is the freedom to grow and remain competitive.

The second one is global warming – so far it has been beneficial for the region, but medium-long term things could start to change. It could put the southern areas of Ukraine and Russia in a risk zone with a higher probability of drought and crop failure.

We are possibly already seeing this. The 2020 crop was a disaster for many farmers in Odesa (southern Ukraine) and Kuban (south Russia) because of a lack of precipitation. The outlook for 2021 is rather grim again for Russian South after another dry autumn. This issue could be addressed by the rapid introduction of new drought-resistance varieties. Still, these new varieties are being developed with gene-editing methods which are officially forbidden in both countries.

Thank you, Andrey, for your time and inputs.

© Commodity Conversations ®

Jonathan’s book, ‘Out of the Shadows – The New Merchants of Grain’ is available on Amazon.

 

Coffee should be black as hell, strong as death and sweet as love. – Turkish Proverb

Coffee grows in tropical regions between the tropics of Cancer and Capricorn in what is known as the ‘bean belt’. Arabica generally likes higher altitudes of 550 to 1,950 metres (1,800 to 6,300 feet); anything above 1200 metres is ideal. Coffee grown below about 1,000 metres may be of inferior quality, although Hawaii is an exception. Robusta varieties prefer a lower elevation of 180 to 750 metres (600 to 2,400 feet) with warmer temperatures. Within those ranges, the altitude profoundly impacts the coffee. High elevation coffee will produce more acidic, aromatic and flavourful coffee; lower elevation coffee tends to have less acidity and a more muted character.

Coffee plants are evergreen shrubs that can grow up to 4-6 metres tall with broad, glossy leaves and white flowers. Older varietals take 3 to 4 years to bear fruit while recent varietals will bear their first crop two years after being planted out.

The fruit, the coffee cherry, ripens around eight months after the emergence of the flower. The cherries are harvested once they have changed colour from green to deep red. In most coffee-growing countries, there is one major harvest a year. A few countries, including Colombia, have a primary and secondary crop: the main harvest is from April to June and the smaller one from November to December.

Just as there are two main kinds of coffee, arabica and robusta, there are two main methods of coffee cultivation: sun-grown and shade-grown. Shade-grown coffee is the more traditional approach that mimics the natural way coffee trees grow in the wild, underneath a forest canopy. Farmers, particularly in Brazil, began growing coffee in full sun in the 1970s to increase yields and production.

Coffee trees growing in the shade of a forest maintain the forest’s biodiversity, particularly its wildlife, and shade-grown coffee often trades at a premium to full-sun coffee. However, the thick forest cover – combined with the steep mountain slopes where coffee grows – makes harvesting more difficult and costlier. It is much cheaper to produce coffee on open flat land, especially if it is mechanically harvested.

There are different degrees of shade-grown coffee production. Rustic shade-grown coffee is where the trees are planted in an existing forest with only the lowest levels of the original forest removed. Once planted, the coffee trees require little care and often no pesticides or herbicides. It is the least capital-intensive method of coffee production. It suffers from a low yield and is quite rare except in India and some of the western coffee areas of Ethiopia.

Traditional polyculture involves planting other (usually food-bearing) trees alongside the coffee trees under a natural forest’s canopy. Commercial polyculture consists of removing or pruning much of the native forest trees to allow sunlight to pass and to give space for the coffee and other crops to grow. The shaded monoculture system is where farmers plant and then prune a single species of tree to provide shade for the coffee trees, allowing them to be grown more densely.

Over the past half-century, growers have developed new sun-tolerant coffee trees and shrubs to combat disease (particularly rust-leaf disease) and provide higher yields. As a result, the percentage of coffee that is shade-grown has been steadily falling. The increase in global production over the past twenty years has almost all been full-sun coffee.  Shade-grown coffee fell from 43 per cent of the total cultivated area in 1996 to 24 per cent in 2014. It has almost certainly continued to fall since then.

Coffee is picked by hand in most countries. In Brazil, where the landscape is relatively flat and the coffee fields immense, the process has been mechanised. Mechanical harvesters strip-pick all the cherries from the trees in one go, whether they are unripe (green), ripe (red) or overripe (purple/black). Mechanical harvesting can stress and damage the trees, reducing the yield the following year.

Coffee is sometimes also strip-picked by hand, particularly the lower quality arabica or robusta varieties. Better quality coffees tend to be selectively picked by hand. The pickers rotate among the trees every eight to ten days, choosing only the cherries which are at the peak of ripeness.

Selective hand picking is more labour intensive and more costly; it is used primarily to harvest the higher quality arabica beans. Red berries, with their higher aromatic oil and lower organic acid content, are more fragrant, smooth and mellow. As such, coffee picking is one of the most critical stages of coffee production.

© Commodity Conversations ®

This is an extract from my book Crop to Cup – Conversations over Coffee now available on Amazon.

 

Good morning Michelle, could you please tell us a little about yourself and how you ended up in coffee with the Rainforest Alliance?

I joined the Rainforest Alliance in 2008 and, throughout the years, I have managed a range of coffee projects in Latin America, Asia and Africa, focusing on the development of the Rainforest Alliance Certified coffee supply at the origin.  I am now the organisation’s sector lead for coffee.

Rainforest Alliance has merged with UTZ. Why?

Having a single certification programme will simplify certification for farmers and help companies to build more responsible supply chains and drive innovation more efficiently. Creating a single auditing process and streaming the certification process will not only help the more than 400,000 coffee farmers currently certified under both standards, but it will also help new farmers to certify.

It will also help to expand our advocacy efforts.

I understand you have a new strategy called ‘Reimagining Certification’.

‘Reimagining Certification’ is our long-term vision for the future of certification. It is part of our broader strategy at the Rainforest Alliance to drive change.

Certification has had a significant impact, but it must continue to evolve to drive further improvement for people and nature and provide more value for farmers and companies.

We are moving away from the idea that certification is a series of pass/fail requirements. Instead, we are adopting a continuous improvement approach that drives change from a set of core criteria.

What does this mean in practice? It means first ensuring that all workers receive a minimum wage – but continuing to drive improvements towards a living wage. It means working to stop deforestation–and then going beyond that, towards reforestation or regenerative agriculture.

Could you please explain the economic elements in the new criteria?

Our 2020 Sustainable Agriculture Standard outlines two financial requirements for the buyers of Rainforest Alliance Certified commodities: The Sustainability Differential (SD) and Sustainability Investments (SI).

The Sustainability Differential is a mandatory additional cash payment made to certified producers over and above the market price of the commodity. We don’t set the Sustainability Differential in the coffee sector; the grower and the first buyer will negotiate it between them.

The Sustainability Investments are mandatory cash or in-kind investments from buyers of Rainforest Alliance certified products to certified producers for the specific purpose of helping them meet the farm requirements of our Sustainable Agriculture Standard. The investments must go towards the needs identified by producers in their investment plans, and buyers must report the investments they make.

Besides these new criteria related to shared responsibility, our 2020 Sustainable Agriculture Standard also enhances practices which promote improved efficiency and farm-based profitability as the basis for an improved farm income.

How has the Rainforest Alliance changed its approach to child and forced labour?

Child labour, forced labour, discrimination, and workplace violence and harassment have never been – and will never be – tolerated by the Rainforest Alliance. However, what we have learned through many years of experience is that merely prohibiting these human rights violations in our standard is insufficient. Automatic decertification as the response to any incident of child labour is more likely to drive the problem underground, making it harder to detect and address. That’s why our new certification programme promotes an ‘Assess-and-Address’ approach to tackling these human rights issues.

The ‘Assess-and-Address’ approach puts the interest of children and workers at its centre. Without solving the root causes of child labour, forced labour, discrimination, and workplace violence or harassment, the problems will not go away. That’s why the Rainforest Alliance promotes collaboration between certified farms, governments, civil society and supply chain partners to solve these issues together.

How can you increase the demand for certified coffee?

Our market team works with brands, roasters and retailers to develop demand, and they have been successful in their work in the sense that both of our certification programmes have continued to grow since the merger. It has even been the case in 2020 in the context of the COVID-19 pandemic.

Besides that, you need to look beyond the data of one single certification system to get to the full understanding of supply-demand data. Many farms are double- or sometimes triple-certified. If they sell their coffee through one certification system, it is not available to sell through another certification system.

Last question: what is your favourite coffee, and how do you prepare it?

My favourite coffee comes from a sustainably managed small farm in the Tarrazú mountains of Costa Rica, at 1,700 meters above sea level. A young family manage the whole process from cherry to roasted bean, selling the coffee at the local market of the village where I live. I prepare it with a Chemex coffee maker to obtain the full flavour!

Thank you, Michelle, for your time and input!

You are welcome. Thank you for your interest in the Rainforest Alliance!

© Commodity Conversations ® 2020

This is an extract from my new book ‘Crop to Cup – Conversations over Coffee’ to be published shortly.

Good morning Soren. Could you please tell us what you have been doing since you left Bunge?

I left Bunge in June 2019 after six years as CEO, and after 36 years in traditional agricultural trading and processing with Continental, Cargill and Bunge.

Over the past year, I have been trying to use my experience to help emerging companies across the full spectrum of the agricultural value chain. I have provided advice, directorship and, in some cases, capital to support these new companies in plugging into the existing food chain, to avoid mistakes, and to develop their thinking and their products.

I started with a blank page, but my premise was that food and health are inseparable and that agriculture should not only be sustainable but regenerative.

Where did you start?

I started with Vindara, a company that produces seeds for indoor agriculture. It is a sector that is snowballing. For example, Singapore has a project called ‘30 / 30’ whereby the city-state aims to grow 30 per cent of their nation’s food by 2030. They can only do this through investment in vertical agriculture.

The technology in the indoor sector is changing rapidly. For example, Vidara has reduced the breeding cycle for new seeds from 5-7 years to 18 months and can essentially tailor-make seeds to suit a specific outcome.

What other companies have you become involved in, either as an investor, director, or external advisor?

I am an advisor to Gro Intelligence, a company that curates and assembles global digital data around agriculture and food and provides sophisticated analytical tools to help draw supply chain conclusions. It is my ‘go-to source’ for market intelligence and analytics. The company is also developing various indices relating to climate disruption.

I am on the board of Kultivat, a company that has developed the technology to extract high-quality latex – natural rubber – from dandelion roots. It is a sustainable and economically competitive alternative to synthetic and plantation-grown rubber. Remember, synthetic rubber is produced from fossil fuels, while natural rubber is currently grown on plantations in South East Asia; it has the same environmental challenges as palm oil. Dandelion is an excellent alternative crop for farmers.

I have worked closely with Locus Agriculture Solutions, a company that makes micro-biological products that improve yields, reduce the need for inputs, and increase the ability of plants to capture carbon. They recently completed the first circular deal in carbon capture in row crops. The $250,000 sale was between a prominent Iowa farmer and Shopify, a Canadian-based technology firm. They did the deal in partnership with the Nori Carbon Removal Marketplace.

I’m on the board of  Telesense, a company that has developed low-cost, remote sensor equipment that monitors grain quality. It uses data and AI to predict how grain quality will evolve during storage, helping to reduce spoilage. It also allows you to optimise merchandising decisions and improve processing yields for a range of raw materials from malting barley to oilseeds.

You have several diverse but complimentary themes here. What other arrows do you have in your quiver?

The one thing that all these companies have in common is that they are about optimising existing agriculture using modern technology.

Tilray, where I am on the board, is a publicly listed Canadian company that grows, processes, and distributes hemp and cannabis products.  I learned about the efficacy of medical cannabis through close friends who have been able to improve their quality of life through the use of medical cannabis. The applications are wide-ranging – from pain management to epilepsy. It has had a significant impact on me.

The Hemp plant, which is in the same family as cannabis, produces seeds and what are called “hemp hearts”, protein-rich superfoods in the same category as chia, flaxseed or chickpeas. The world is moving quickly towards plant-based proteins and healthy oils. Hemp is right on-trend.

Tilray is a pioneer in Cannabis and Hemp. It is still ‘day one’ for the industry, but the company is well-positioned for the significant growth which lies ahead.

Many trade houses have been investing in start-ups in high-growth areas, while at the same time running their legacy trading businesses. Does starting with a blank page give you an advantage?

Yes, although it has been a massive advantage having the understanding and appreciation of traditional agriculture and food. Those traditional value chains will still dominate the way we produce and consume food for many years. These other areas will initially develop in parallel, but they will eventually converge.

Do publicly quoted trading companies have more of an incentive than private companies to seek growth in new areas?

Public companies have to balance short-term results with long term strategy and investment. There can be a conflict between these two goals, whatever sector you are in. The cyclicality in agriculture and food can amplify this pressure, which is why many try to diversify into more added value activities.

Being public does have its advantages. You can access capital in a way that you can’t when you are private. As long as your investors understand what you are about, and they know the industry, being public does not have to be negative.

I am concerned that investors are looking to ‘revolutionise’ agriculture without realising that agriculture has been in a state of continual revolution for the past 75 years. Won’t investors in these new sectors ultimately be disappointed?

Over the past 75 years, the focus has been on increasing agricultural yields, while at the same time reducing costs. It has been about growing enough calories.

We still want to grow enough calories, but we now want to develop the right kind of calories in a way that doesn’t harm the environment, repairs the soil and produces nutrient-dense food.

It is a new revolution: using technology to find ways to improve existing production techniques and to regenerate soils. If you haven’t already read it, I recommend the book An Agricultural Testament by Howard Albert. It was first published in 1940 and explained the power of regenerative practices known already then. Imagine those ideas powered with current technology. The goal is to harness the power of ‘Production Ag’ without all the adverse side effects.

Will farmers buy into this?

Yes. Farmers love what they do, and they love their land.  Contrary to popular opinion, farmers are open to change. When you present them with a suitable alternative, they will go for it. The Locus-Nori deal is an example of that.

Up until now, many farmers have not had many other choices than improving yields and lowering costs. There is a way forward where farmers can get the results they need while consumers get the quality of calories they want. It is about producing sustainable, nutrient-dense products.

That’s one side of it. The other side is that investors are looking at the interface between food and health – the notion that you are only as healthy as the food that you eat.

The 15 to 35 age bracket is driving this movement; they will ultimately dictate the future of agriculture. There is a lot still to be done. There is room for a lot of investment, and the future is full of promise.

Thank you, Soren, for your time and inputs! And good luck with your presentation to the Geneva Grain Conference!

© Commodity Conversations ®

Good morning, Olumide. Can you tell me a little about yourself?

I am Nigerian, and I live in Lagos. I have a background in Economics, spending 17 years in banking, majorly financing small and medium businesses. I saw that there was a need in Nigeria to build capacity (Institutional and Infrastructure) for our country’s grain sector in West Africa – to make sustainable structures to increase trade within Africa and other markets, and I left banking to set up a consultancy company called Firstling.

Its goal is to facilitate trade, to improve the supply chain through better access to financing, better logistics and industrial investment – adding value in rice, wheat and soya in particular, as well as other critical commodities.

I am quite passionate about Public-Private Partnership models and structures as a panacea for spurring growth and development in Sub-Saharan Africa.

I am also an executive director in Cargo Marketing, a fifty-year-old company that handles cargo logistics and also involved in warehousing and other supply chain services.

Is the government supportive in helping you facilitate trade?

Not as much as we would like. There is a considerable gap; our government could do so much more in creating an enabling environment for trade facilitation.

On an international level, the African Free Trade Agreement (AFTA) should come into force next year. It should, over time, drive an increase in intra-African trade and services and act as a vehicle for West Africa to catch up with Southern and Eastern Africa. It should be the catalyst that we have been waiting for in terms of aligning policies over tariffs, documentation, standardization and certification. It will foster integration and facilitate inter-African trade, especially for agribusiness. It could be transformational.

We are also excited about the possibility of Nigeria’s Dr Ngozi Okonjo-Iweala becoming the new Director-General of the World Trade Organization. If she is selected, she will be the first woman, and the first African, to lead the institution. She understands Africa and the challenges we face, and she is well-suited to turn the searchlight on Africa and trigger support to overcome challenges trade-related.

Unfortunately, the US is for the moment holding up her appointment, but we are keeping our fingers crossed that her appointment will go through.

What are the biggest challenges that you face in your day to day business?

Lack of physical infrastructure: the road network and the seaports need to be updated to international standards to meet and increase import and export capabilities

Lack of skill and technical know-how: there is tremendous scope for improving or digitalizing the whole trade process in terms of IT, documentation process and generating/analysing data. We have to improve our systems across the spectrum.

Lack of capital: fixing the gaps in physical and knowledge infrastructure would give financiers more confidence and increase the availability of capital. More like asking, which comes first, chicken or the egg?

We need 10 -15-year consistent long-term funding to invest in the infrastructure necessary to build capacity for the medium and long term effect, but getting that is a challenge.

There is a tremendous opportunity here. Africa can leapfrog existing technology, and, in that sense, we are better placed that many parts of the developed world that have a pool of existing and limited ability to expand infrastructure. The developed markets are quite saturated, and diminishing returns might have set in.

If Dr Ngozi Okonjo-Iweala is appointed, what would be the first thing that she should do?

She should bring all African countries together to push for the right political will to implement the AFCFTA. We have everything that we need in terms of raw materials and natural resources; what we are lacking is the political will to realize our potential. She has to get political leaders to dismantle various bottlenecks and drive the private sector to operate optimally

What messages will you try to get across when you address the Geneva Grain Conference?

 Most markets around the world now are what I would call ‘mature’ markets. Whether you look at it from the production or the consumption side, African markets are not mature. That gives us all a tremendous opportunity to invest and to build the necessary infrastructure for production and distribution, and at the same time to develop consuming markets.

My main message will be that we all have to look at the African market from a different perspective. We have to re-evaluate the risks and how we manage them. For me, diversification is the key to manage risk across the whole grain value chain. And of course, we have to look at what has worked and what hasn’t worked. We have to learn from that.

My second message is that there is a big focus now within Africa on healthy living and diet. Our population is consistently growing, and so also is our middle class. Africa is a vast market and a huge opportunity, but local knowledge is essential as each country is different. So, my final message to investors, partners and interested stakeholders would be to think local but to act global!

Thank you Olumide and good luck with your presentation!

© Commodity Conversations ®

 

(Chris recently retired from Starbucks where he was coffee sustainability director. All views are his own and not necessarily those of Starbucks.)

Good morning Chris. Thank you for taking the time to chat. I think you grew up on a coffee farm. Can you tell me a little about that?

My father managed coffee farms in Kenya and Tanzania before buying his own farm on the slopes of Kilimanjaro in Tanganyika (Tanzania) in 1959. I was born in Kenya in 1953, and apart from my time in boarding schools in Tanzania, Ethiopia and England, the farm was my home until I was 19 years old.

We had 150 acres (60 hectares), but soils were poor and the land rocky. Mechanization wasn’t possible, and all the work was done manually. Operating costs were horrendous. We grew arabica coffee under rather heavy Gravilea robusta shade canopy, as was the custom at the time. The coffee was sold through the local auction system. There were very few direct sales back then.

My parents’ farm was nationalised in October 1973.

What are the main environmental challenges that now face coffee production?

Climate change.  Areas that were good for coffee 20-30 years ago are now becoming marginal. Coffee production is tending to move higher up mountains, especially smallholder production in Central America, but also in Colombia, Peru and Ecuador. This leads to deforestation – in many cases deforestation of primary forests, which in turn leads to changes in weather patterns, landslides, long-term soil infertility, etc.

Water is another challenge. Washed coffee uses a lot of water. I don’t believe that we should necessarily be retaining the washed coffee method; it can have quite a negative impact on the environment and water quality. Although washed coffees certainly tend to be much better in the cup, I do believe there are alternative methods such as pulped naturals or de-mucilaging machines that use much less water.

What are the main issues on the social side?

I would say child labour, and that goes back to general economic issues and poverty levels in producing communities. Low coffee prices haven’t helped.  The kids are working on the farms due to the high poverty levels in coffee communities; adult workers are unable to achieve sufficient income levels to feed and educate their families. They have no choice but to send their children into the fields to make up the deficit.

If you stop the kids from working, you are taking food away from desperately poor families. This is a problem that many coffee producing countries are confronted with – and not just in Africa. If consumers want to enjoy a product, then a living-wage price needs to be paid that can help alleviate the problems. Consumers can’t just mandate that there is no child labour without providing and supporting alternatives. The underlying issues need to be tackled.

That brings us on to economic sustainability…

Prior to the lapsing of the International Coffee Agreement (ICA) in 1989, the minimum trading reference price the ICA sought to protect through the quota system was $1.15 per pound; from a relative purchasing power perspective, that would be the equivalent today of around $2.45. The C market price currently is $1.10 – $1.20 per pound. That said, differentials have improved, but nowhere near enough to make up the difference.

In spite of all the aid, social and economic programmes that have over the years been implemented in producing countries by industry and governments, coffee farmers are half as well off today as they were 30 years ago.

Admittedly, they have found ways of cutting their costs, such as higher use of relatively cheaper pesticides, herbicides, etc. to increase production – not healthy for humans, wildlife biodiversity or the environment.

The wealth in the coffee supply chain now sits with the trade houses, the roasters, and the coffee shops. It’s not at the farmer level.

What coffee do you drink now?

Starbucks coffee of course! I make it in a French press or in a stove-top espresso. I enjoy House Blend, and particularly the single origin coffees from Guatemala, Ethiopia and Colombia.

Thank you, Chris for your time and input!

 © Commodity Conversations ®

This is an extract of an interview from my upcoming book Crop to Cup – Conversations over Coffee to be published later this year.

Caffeine was first chemically isolated in a German laboratory in 1819. It is an alkaloid, as is cocaine, that occurs naturally in some 60 tropical plant species, of which cocoa beans, tea leaves and coffee beans are the most well-known.

When coffee leaves die and fall to the ground, they contaminate the soil with caffeine, which makes it difficult for other plants to germinate; it acts as a natural herbicide. But coffee plants mainly use caffeine as an insecticide. It can be toxic to insects and they tend to avoid it. But coffee plants also lace their nectar with low doses of caffeine. When insects feed on the nectar, they get a buzz that makes them more likely to revisit the flower and spread its pollen.

It’s not just bees that get their buzz from caffeine. In his book All About Coffee, William Ukers writes that the French writer Balzac was a big fan, drinking a reported (but scarcely credible) 50 cups of coffee per day. In his Treatise on Modern Stimulants, Balzac describes the effect that caffeine had on him:

‘This coffee falls into your stomach, and straight away there is a general commotion. Ideas begin to move like the battalions of the Grand Army on the battlefield, and the battle takes place. Things remembered arrive at full gallop, ensign to the wind. The light cavalry of comparisons deliver a magnificent deploying charge, the artillery of logic hurry up with their train and ammunition, the shafts of wit start up like sharpshooters. Similes arise, the paper is covered with ink; for the struggle commences and is included with torrents of black water, just as a battle with powder.’

The author Mathew Walker is less of a fan.  In his book Why We Sleep: The New Science of Sleep and Dreams, he describes caffeine as ‘the most widely used (and abused) psychoactive stimulant in the world…It represents one of the longest and largest unsupervised drug studies ever conducted on the human race, perhaps rivalled only by alcohol, and it continues to this day.’

When caffeine hits your brain, it adheres to your brain’s adenosine receptors. Adenosine is what helps us feel sleepy. When caffeine binds to your adenosine receptors, it inactivates them and stops you from feeling tired. Caffeine tricks us into feeling alert and awake despite the high levels of adenosine that would otherwise make us sleepy.

Caffeine is removed from our system by an enzyme in our liver that gradually degrades it over time. Caffeine has an average half-life of five to seven hours: after five to seven hours, about 50 percent of the caffeine you have drunk is still circulating in the body. So, if you enjoy an espresso at 10pm after dinner, as I used to do when I was younger, then half of the caffeine will still be in your brain at 3am.

Some people have a more efficient version of this enzyme than others, allowing them to clear the caffeine quicker. Others have a slower, less efficient version. Unfortunately, aging affects the enzyme’s efficiency: the older we get, the longer it takes to clear our brains of caffeine.

Just because the caffeine is stopping our brain from processing the adenosine, it doesn’t mean the brain stops producing it. When the caffeine inevitably wears off, you’re left with an adenosine build-up which makes you feel even more tired – what is commonly known as a ‘caffeine crash.’

The good news is that roasted coffee does not just contain caffeine; it is full of biologically active compounds like chlorogenic acid, kahweol, and N-methylpyridinium, all of which have been found to reduce inflammation, serve as potential anticancer mechanisms, and improve insulin sensitivity.

In 2017, a review on coffee consumption and human health in the British Medical Journal examined more than 200 previous studies and found that moderate coffee drinkers had less cardiovascular disease and premature death from all causes, including heart attacks and stroke, than those who didn’t drink coffee.

The latest scientific view, as published in the World Cancer Report 2020 confirms that coffee is full of antioxidants that reduce the risk of certain cancers – such as liver and endometrial cancer. The report, published by the International Agency for Research on Cancer (IARC), part of the World Health Organisation, is a collaboration between the world’s most prominent scientists, and is considered the authoritative source on cancer related disease.

The National Institutes of Health (NIH) – part of the US Department of Health and Human Services – has conducted a study of 400,000 people that confirmed that moderate coffee drinking lowers the risk of death overall. The study found that relative to men and women who did not drink coffee, those who consumed three or more cups of coffee per day had approximately a 10 percent lower risk of death. The leader of the research team wrote,

‘We found coffee consumption to be associated with lower risk of death overall, and of death from a number of different causes. Although we cannot infer a causal relationship between coffee drinking and lower risk of death, we believe these results do provide some reassurance that coffee drinking does not adversely affect health.’

© Commodity Conversations ®

This a short extract from my upcoming book Coffee Conversations – Crop to Cup to be published later this year.

Good morning, David. First question: what coffee are you drinking?

I’m drinking an estate coffee  called “Finca El Valle” from Antigua, Guatemala.  Finca El Valle was the first direct trade estate partner I worked with, going back more than 25 years now, and it is a coffee I still buy for the same roaster. It was from a small specialty farm nestled at the foot of three volcanoes, owned by a determined woman, Christina Gonzales.  She was supported by her husband and three sons.  It has been a favorite of mine, in part because through this sourcing relationship I’ve come to create the elements of transparency and trust that are core to the Relationship Coffee model.  It is a delicious coffee, with intense sweetness, with notes of brown sugar, nougat, and molasses.

Why are there so many women coffee growers?

We started our first women’s coffee program in 2003 in Nicaragua. While far from perfect, some of the economic reforms following the Sandinista Revolution provided women with the ability to seek joint ownership rights to the land they worked with their husbands.  Many women have since been able to grow their coffee separately from their spouses. One group of about 140 women growers came together to form a cooperative, and we found that their coffees scored consistently higher in cup quality.

In fact, women-owned collectives score higher across the board than mixed-coffee collectives, and this data point is true in most origins. When you ask the women, they’ll tell you that they take better care of growing, picking and processing their coffee than the men.

In addition to quality, our buyers prefer purchasing coffee grown by women because of their higher impact. The purchase premiums go directly to the women’s groups, and World Bank studies have shown that, on average, 90 percent of their increased income is invested into the household. If you want to impact families and lives, supporting entrepreneurial women coffee growers is a really good way to do it.

You were somewhat of a pioneer in sustainability when you started Sustainable Harvest in 1996.

That’s true. It was an unusual approach to business at the time. When I would share my sustainable business concept three decades ago, I would typically have to first define the concept of sustainability. People were sceptical, as though I were trying to cover up a badly produced coffee with a lovely story.

But then buyers would call me a week after I had left them samples and say, “Wow, that coffee tastes incredible! Please tell me the story behind it!”

How would you define your Relationship Coffee business model?

Relationship Coffee is a business model that is about stakeholders working collaboratively toward a common good that benefits all of the many actors that make up the supply chain. The core values in Relationship Coffee are empathy, communication, transparency, and trust. It considers the needs of all the stakeholders, not just maximizing the profits of one party. It puts people ahead of profits and takes into account both sides of the coffee equation.

Isn’t this just stakeholder, rather than shareholder, capitalism?

We are a big proponent of stakeholder capitalism. We were the first coffee company certified as a B Corporation. We are not just concerned with shareholder value, but also the needs of other stakeholders. This includes our suppliers, our employees, the community, and the environment.

The Stanford Graduate School has conducted case studies analysing our Relationship Coffee model. They noted that where a traditional model only focuses on a buyer-seller approach, the collaborative model of Relationship Coffee brings more actors to the table. Because more actors have a vested interest in how the community will be impacted by a business decision this often means that they can bring other resources. We must find new and innovative ways to bring a wider group of diversified stakeholders to the table.

Are coffee farmers better off now than when you started 30 years ago?

I want to say we’ve made progress, but we’re nowhere near declaring mission accomplished. Recent data shows the current generation of coffee farmers makes less than half of what their parents made. For millions of producers, the coffee industry is still broken.

If farmers are worse off, doesn’t it mean that only the coffee quality has increased, and that all your efforts have benefited the consumer and not the producer?

You are right; the producers have not received their fair share of the benefits that the specialty coffee market has generated. That has stayed up in the North, and the most recent data tells us that producer nations’ slice of the pie is a mere 10 percent of the total coffee market value. That is not sustainable for a global market. The coffee market is not serving all its members, and we’re putting our supply chain at risk if we don’t take serious action as individual companies to reverse this trend.

So, I’d ask the question a different way. Are your coffee farmers better off than they were 29 years ago – the ones that have relationships with?

I would hope that they are better off because of the investments we’ve made. We are now sourcing from almost 20 countries, we’re training leaders from over 100 cooperatives, and we are impacting over 200,000 smallholder coffee farmers and their families.

Thank you, David, for your time and input!

© Commodity Conversations ® 2020

This is an extract from my upcoming book Crop to Cup – Conversations over Coffee due to be published later this year.

Jorge Cárdenas Gutiérrez has been the leading figure in the Colombian coffee industry for over half a century. Born in 1930 in Medellín, he studied Law and Political Science in his hometown, then he completed a master’s degree in Administration at the University of Syracuse. He has held various public positions in his country, but his lifelong passion has been the promotion of the Colombian coffee sector, both domestically and internationally.

For many years he was head of the Colombian Federation of Coffee Growers where he fought to improve coffee cultivation in Colombia, to improve the quality of life for the country’s coffee growers and the quality of coffee for consumers.

Good morning, Jorge. How important is coffee to Colombia?

Coffee has been a leading product in the Colombian economy for 120 years. For many years it was 10 percent of the gross domestic product, 30 percent of the agricultural product and 40 percent of the external income.

Revenues from coffee exports have enabled Colombia to develop its industry, railways, ports and a good part of the national infrastructure.

Today coffee’s economic importance to Colombia is lower, but it is still the country’s most important source of rural employment: 500,000 families on one million hectares produce a coffee harvest worth US $ 2.5 billion, which is 3 percent of Colombia’s GDP. Its social impact is fundamental.

What role has the National Federation played in maintaining the competitiveness of the sector?

The government of Colombia has worked since 1927 in full agreement with the National Federation of Coffee Growers in the development of public policies that build progress in the coffee growing areas with road services, potable water, electricity, health and education.

The Federation administers the National Coffee Fund, which has existed since 1940. The Fund is for the development of these public policies and for the promotion of coffee cultivation, its modernization and the international promotion of its consumption. The National Coffee Fund is a very important instrument of all coffee policy.

The Federation has 350,000 affiliated producers; since 1930, all producers pay a parafiscal contribution by Law of the Republic of Colombia.

To what extent has coffee had to compete with cocaine in Colombia?

The Federation has carried out extensive campaigns to combat illegal crops, and there are really no significant coca crops in the coffee growing areas. The farms are small in the coffee zone. Coca crops are in areas of little agriculture and very far from population centers.

What are the main problems that the coffee sector faces in Colombia?

The main problem of coffee cultivation in Colombia is the size of the farms: most plots are of 1 to 3 hectares. The production costs in these small farms is high compared to that obtained in larger areas.

What is the Federation doing to improve things?

The Federation of Coffee Growers has a Coffee Research Center (Cenicafé) that carries out permanent research on innovation. It has helped introduce coffee varietals that are resistant to pests and are higher yielding. This has helped Colombia to maintain a production of between 12 and 14 million bags of 60 kg for the past several years.

What lies behind the success of Colombian coffee?

The competitiveness of Colombian coffee is due to its quality that is in turn a result of the care with which it is grown and processed.

With the image of Juan Valdez, the Federation of Coffee Growers created a special niche in the world market since 1960. He gave a name to a generic product, that’s the reality.

How does the Colombia maintain a sustainable living for its coffee growers?

From 1940 to 2000, Colombia had an internal price for coffee that did not change more than three times a year. A sustainable and stable price was financed with export earnings and contributions from the producers themselves to the National Coffee Fund. In addition, the various international coffee agreements provided price stability to international prices.

Since 2000, the domestic price reflects the international price of coffee. Only in times of very low international prices the Government and the Federation have given growers a special premium as part of the internal price of coffee.

The Colombian government has recently introduced a new Stabilization Fund which seeks price stability as in previous years; for the time being it does not yet have the necessary resources.

Are you optimistic for coffee in Colombia?

The National Federation of Coffee Growers continues in its task of innovating in the cultivation and harvesting and the producers accompany these efforts. The Federation celebrates 93 years of its founding and continues to be a leading rural service organization. It has the support of the Government and the backing of producers.

Roasters the world over continue to view Colombia as a highly reliable supplier. Today’s consumers are increasingly moving towards high quality coffees, which is very favorable for Colombia. The future of Colombian coffee is bright.

Thank you, Jorge for your time and comments!

© Commodity Conversations ®

This is an extract of an interview from my new book Crop to Cup, to be published later this year.