Yesterday I summarized the key findings of a study in the current issue of Food Policy that is based on data from our Borderlands project in Colombia. Today, I discuss the content and implications of that article with its lead author, Wytse Vellema, a Ph.D. candidate at Ghent University in Belgium.
The highlights of my conversation with Wytse appear below. Download the unabridged version here.
Michael Sheridan: For clarity, can you define what you mean by “certifications” in the context of this study? Does this category include only voluntary sustainability standards like Fair Trade and Rainforest Alliance Certifications? Or does it also include corporate sourcing standards like Starbucks’ C.A.F.E. Practices and Nespresso AAA Sustainable Quality?
Wytse Vellema: For this study, the term certifications refers to both of the categories you mention.
Most of the farming households which held a certification in this study were certified through either C.A.F.E. Practices (Starbucks), Nespresso AAA, or both. Organic, Fair Trade, and Rainforest Alliance certifications were also present in the region, but none of the interviewed farmers with one of these three certifications did not also have either C.A.F.E. Practices or Nespresso AAA. In 2012, when the data was collected, around 52 percent of the interviewed households held at least one farm certification. Of the certified farmers, 65 percent held only a single certification, 29 percent held two, and 6 percent three.
Causality or Correlation?
MS: You write that “certification encourages specialization.” But do the data really show causality or “mere” correlation? Could the causal relationship run in the other direction, with farmers committed to specialization in coffee the ones most likely to pursue certification?
WV: Causality is impossible to prove with data or statistics alone. However, we have some reason to believe that the effect we are observing runs from certification to specialization, which is due to the pattern of certification and its relationship with violence — the men with guns you referred to in your presentation at SCAA Symposium earlier this year. When you look at the share of certified farmers per region, you see a clear pattern: in the north, almost every farmer is certified, in the center about half the farmers is certified, and in the south most farmers are not certified. This appears to reflect the history of violence in the region. Since certifications first appeared in the north of Nariño in 2004, the influence of armed extra-legal groups has been steadily pushed south by the Colombian Army. At the time of data collection, 2012, the only part of the region which was still considered a zona roja—unsafe for travel — was the south.
As a final point, your question appears to suggest that farmers “pursue” certification. This is not the impression that we had. In most cases, farmers get selected by exporters, not the other way around. It is also not technically the farmers who are certified but the exporter. It is the responsibility of the exporter to make sure farmers adhere to certification requirements, and ensure traceability.
Certifications and Coffee Profitability
MS: You found that certified farms generated more income from coffee than uncertified farms. But did certified growers earn higher returns on their investment in coffee specialization? Are specialized coffee farmers more profitable in their coffee farming than their comparatively less-specialized peers? If so, is there an implication there for smallholder farmers growing coffee who aren’t specialized/certified? Should they read the results as “certify or die” as far as the viability of their coffee crop is concerned?
WV: That is absolutely not the message that we would like growers to take home. In our paper we were not able to say anything about profitability. Rather, we speak of gross returns, which exclude labor costs. Since labor costs are estimated to make up a very large share of total costs — perhaps as much as 80 percent — this distinction between profit and gross returns is important.
Applying the agricultural practices required to receive certification is known to be tremendously labor-intensive. Although the input of labor could not be measured directly, and hence could not be compared between certified and non-certified farmers, the observation that certified farmers earn more coffee income but less other income — leaving total income the same between certified and non-certified farmers — appears to suggest that the additional time and effort required to apply these ‘certified’ practices does not pay off. In other words, the negative effect of these extra costs cancels out the positive effect of a higher price.
Certification as a Tool for Managing Supply Chain Risk?
MS: You suggest that certifications are the new tool companies use to manage intrinsic quality standards in their supply chains. But what about the idea of certifications as instruments for managing sourcing risk — for creating incentives for growers to adopt the environmental practices that will be essential in an era of accelerated climate change to ensure continued production?
WV: It is a tantalizing idea to think of certification as a tool to reduce production risk for farmers and sourcing risk for coffee buyers. This is not something we have looked at in this particular research. To my knowledge, very little is known about the relationship between climate-change-resistant agricultural practices and production risk. Given how sensitive coffee production is to climate change, more research on on-farm adaptation options is warranted, although I think we should be careful not to shift the burden of climate change to already vulnerable farming households.
To the question whether certifications might be an effective tool to incentivize farmers to adopt such climate-smart practices — suppose these could be identified — my answer would probably be yes, although not based on the results of our study. There are two reasons for me to be hesitantly positive. First, because certifications appear to be good at channeling farmer effort. Other data we have collected and analyzed together in Nariño showed that reinvestment in coffee production was far higher for certified farmers than for any other category of coffee farmers. Second, if certification is required to sell your coffee (the sine qua non you refer to above) and climate smart practices are a requirement for certification, farmers have little choice.
Coffee-Led Approaches to Rural Development
MS: You conclude that “a narrow focus on coffee-related activities alone is unlikely to realize sustainable growth.” What are the implications of this conclusion for policy? What does a viable strategy for sustainable rural economic development in the coffeelands look like? Or perhaps more concretely, what other kinds of activities should be promoted to achieve broader economic impact?
WV: The last decade has seen increasing attention being paid to the opportunities for poor small-scale coffee farmers in producing high quality coffee. Certifications and labels are part of this story. Although our results only cover a small area in the south of Colombia and should therefore not be interpreted as the final conclusive impact of coffee certification anywhere in the world, they do show that household incomes do not necessarily increase because of certification.
Why? These farmers have little land. With an average farm size of less than 2 hectares, how much should policy increase their incomes before they can feed their family and their plants and at least send their children to school, maybe even university? Given that most will remain dependent on world coffee prices, which are unlikely to increase sufficiently to make a 2-hectare farmer a middle-income wage, it seems obvious that over time, farm sizes have to increase.
Coffee as an Economic Environmental “Hero Crop”
MS: Your conclusion may undermine the case for coffee as an economic “hero crop,” but it doesn’t address the important ecosystem services that coffee delivers. You suggest that the most common alternatives to coffee are basic grains and livestock, two economic activities that are notoriously bad for soil and water resource conservation. Is it possible that the reallocation of labor and other resources away from these activities toward coffee may generate net positives even if they don’t deliver net financial positives to specialized coffee growers?
WV: Whether the re-allocation from other crops to coffee generates net positives for the well-being of the world I really would not know. All we show is that certified farmers do not have higher incomes, but do obtain a larger share of this income from coffee. Whether this switch to more specialized coffee farming is positive from the point of view of the well-being of the world — so-called positive externalities — would probably depend on the specific crops that are replaced, and the way in which they are replaced. And then there might be another crop than coffee which is even better for the environment.
To answer your question more directly: it might very well be that the switch to more intensive coffee production has positive effects. However, the extent to which such a switch would be positive will depend very much from farmer to farmer.
Are Relationships a Natural Hedge
MS: It is something of an article of faith in specialty coffee that good relationships are a natural hedge. But you point out in the closing sentence of your article that, “the question to what extent the more relational nature of specialty coffee value chains protects producers against [production and price] risks remains open.” Is that something that can be measured? If so, how?
WV: Because we would primarily be interested in the difference in production and price risk between types of buyers, we would need to compare these risks between different channels. Ideally we would make such a comparison for identical farmers at the same point in time. Given that this is not possible, we should control as much as possible for observable farmer characteristics which might influence differences such that we measure the effect of the type of buyer as cleanly as possible. Not an easy task perhaps, but not impossible either.
Michael Sheridan is the Director of Sourcing and Shared Value at Intelligentsia Coffee. He also orchestrates the Extraordinary Coffee Workshop (ECW), an annual supply chain summit that convenes Intelligentsia’s Direct Trade partners from around the world. Prior to joining Intelligentsia, Sheridan led coffee programming for the international development agency CRS for more than a decade. He is a member of the SCA’s Sustainability Center Advisory Council, and has served as a volunteer advisor to the industry on sustainability issues since 2012.