Ethiopia: Getting a Better Deal for Coffee Farmers

Addis Ababa — Ethiopia is regarded as arabica coffee's birthplace, but while the country's high-quality coffee has made it to the gourmet shelves of major coffee houses around the world, many of its growers remain poor.

Ethiopian coffee cooperatives have gained critical access to international coffee markets including the fair trade movement, but questions remain about what constitutes a fair price for farmers picking the red cherry that coffee beans come from.

"Ethiopian coffees are still too moderately priced for what they are worth," said coffee consultant Willem Boot, who has managed coffee development projects for national coffee organizations in Ethiopia, Panama and El Salvador. "Their specialty coffees are significantly better than others and are really undersold."

After oil, coffee is the world's second most valuable legal exported commodity, worth an estimated US$15.4 billion in 2010, according to the International Coffee Organization, a global intergovernmental body aimed at strengthening the coffee sector.

Coffee is Ethiopia's primary export and its largest generator of foreign capital, totalling $840 million in 2010. But it is not enough for a struggling economy and a country where an estimated 39 percent of the population lives on less than $1.25 a day.

"The main reason for poverty is trade," said Tadesse Meskala, Oromia Coffee Farmers Cooperative Union's general manager. "It is not a lack of natural resources but the formulation of trading mechanisms that makes us poorer and poorer."

Fair trade is intended to be a transparent system of business mutually beneficial to consumers and producers. The movement began in 1960s Europe, and today Fairtrade Labelling Organizations International (FLO) is the most widely recognized fair trade certification system.

FLO sets the minimum price per pound of fair trade green coffee beans at $1.60 or at the New York Stock Exchange Commodity price, whichever is higher. It also mandates an additional Fairtrade social premium of $0.20, and another $0.30 for organic coffee.

It is not a lack of natural resources but the formulation of trading mechanisms that makes us poorer and poorer

There are two types of fair-trade buyer, said Tsegaye Anebo, Sidama Coffee Farmers Cooperative Union's general manager. One type of buyer, such as Starbucks Corp., will only buy if the Fairtrade price is low enough. The other consists of smaller roasting companies that buy whatever the price – absorbing cost fluctuations; one such roasting company is Third Coast Coffee in Austin, Texas. Third Coast Coffee pays more than the Fairtrade minimum in recognition of the coffees' quality, said roaster Clay Roper, for example, purchasing a batch of 300 bulk coffee bags at $27,777 above the Fairtrade minimum.

Tangible benefits

"My home has totally changed, my personal health and income have improved, and I'm expanding my farmland," said Mengesha Wocho, a farmer with the Kelaitu Hase Gola Cooperative in Southern Ethiopia's Abaya highlands. "We now have a shop the cooperative established where we can buy goods, and a school constructed by fair trade [benefits]."

He said the cooperative's committee engages with the local community and decides what projects to launch using the capital boosted by fair trade premiums; the community still lacks health facilities and potable water.

Cooperatives allow smallholding farmers to access previously unattainable international markets. They collect farmer's output, process and transport it to the capital, Addis Ababa, to be trucked to neighbouring Djibouti – Ethiopia is landlocked – from which it is shipped around the world.

A couple of kilometres from Wocho's farm, 40-year-old Shibru Worera says he plans to join the local cooperative because he cannot afford to feed his wife and six surviving children. Four children of his have already died.

"I hope to have a chance to improve," he said. "There are no other opportunities."

Fair trade flaws

Despite farmers' praise, some remain concerned that fair trade represents another form of charity that does not enable self-sufficiency. They would rather the quality and uniqueness of the coffee command the price instead of an arbitrary external system, said Adam Overton, an American who bought Ethiopian land in the south-western Bench Maji region to start a coffee farm.

The expense of Fairtrade certification can limit the number of markets available that are willing to pay additional costs, said Abdullah Bagersh, a director for the Ethiopian Commodity Exchange, which regulates much of the coffee industry.

Also, he said, farmers must adhere to strict practices or risk losing the market they have committed to and become dependent on.

Others argue the system splits communities along the lines of farmers who qualify for fair trade premiums and those that do not.

Direct Trade has emerged as an alternative, based on relationships between buyers and producers that vouch for fair trade practices and organic quality through trust, eschewing what some criticize as expensive certificates and imposed methodologies.

"The future is looking very bright for Ethiopian coffee," said Kassu Kebede, who worked for 27 years in the Ministry of Agriculture's coffee department. Ethiopia is well placed to provide certified specialty blends increasingly sought by the world market – such as highland coffee, forest coffee and even naturally decaffeinated coffee – due to its variable agro-ecology, he added.

The history of coffee is intertwined with Ethiopia's own. The story goes that after coffee was discovered in Ethiopia, it traded to Yemen around the sixth century – by the 17th and 18th centuries it had been exported to Europe and the Americas, becoming truly global. But it all traces back to an Ethiopian shrub.

"If Ethiopia could do a better job selling its unique story," Boot said, "it could make significantly more money for farmers."



Ethiopia: Getting a Better Deal for Coffee Farmers

Ethiopia is regarded as arabica coffee's birthplace, but while the country's high-quality coffee has made it to the gourmet shelves of major coffee houses around the world, many of its growers remain poor.