Coffee farmer welfare in Nicaragua, Mexico, and Guatemala Draft, 30 Nov 2007, Sam Fujisaka Green Mountain Coffee Roasters (GMCR) wanted to develop a set of indicators that would help determine whether the livelihoods of coffee producing farmers were sustainable and that would help target GMCR actions to positively benefit the livelihoods of producers and producer communities. A preliminary study using participatory open-ended queries was conducted in 2006. Some of the questions dealt with differences between good and bad years, defined in terms of coffee production and prices received for outputs. In good years, coffee was more important (than in bad years) to family livelihoods; family members had less need to work off-farm and could invest more in the coffee enterprise (including the hiring-in of needed labor); families relied proportionately less on remittances; diet and food intake improved; investments in housing were possible; and people could better care for health needs. A characterization of “good years” is useful in that any positive contributions or impacts of price premiums and/or programs reflecting social corporate responsibility would ideally increase the number of “good” years (so characterized) over the number of “bad” years. Several indicators were developed from the 2006 study. These included the ability to stay on farm (rather than out-migrate for work); the ability to invest sufficiently in the coffee enterprise; proportionately lower reliance on remittances; and adequate access to and use of health care, education, and food. This paper reports on a follow-up study conducted in selected coffee growing areas in Nicaragua, Mexico, and Guatemala and led by researchers from the Centro Internacional de Agricultura Tropical (CIAT) in 2007. Methods. Coffee growers were interviewed. Included were 33 persons (14 women and 19 men) in Nicaragua; 74 respondents in Mexico (12 women and 62 men); and 72 persons in Guatemala (46 women and 26 men). Interviews dealt with family composition, gender, age, education; livelihood sources; agricultural production systems; coffee production; marketing and prices received; perceptions regarding prices paid for premium coffees; perceptions regarding investment levels in the coffee enterprise; and credit access and cost. Results. The following results are presented: Income and livelihood sources; Coffee yield, price received, gross returns relative to coffee type (i.e., conventional,

fair trade organic, low input, high quality, and organic); Perceptions regarding price received for non-conventional coffees; Perceptions regarding investments in the coffee enterprise vs. desired levels of

investment; Sources and costs of credit; Education of family members by age and gender; Health problems and solutions; and Number of months of food scarcity.

Income and livelihood sources. All of those interviewed produced coffee. In Nicaragua, half (51%) of those interviewed relied on coffee for more than 80% of their livelihoods; a quarter relied on coffee for 51-80% of their livelihoods; and a quarter of the respondents relied on coffee to supply up to half of their livelihoods. For those interviewed in Mexico, two-fifths (42%) obtained more that 80% of their livelihoods from coffee; 14% obtained 51-80% of their livelihoods from coffee; and 16% depended on coffee for up to half of their livelihoods. In Guatemala, a quarter of those interviewed gained more than 80% of their livelihoods from coffee; 38% obtained 51-80% from coffee; and 38% relied on coffee to provide up to half of their livelihoods (Table 1). Other income and livelihood sources included bananas (grown as a cash crop by 27% of those interviewed in Nicaragua) and cardamom (grown by 21% of those interviewed in Guatemala). The staples of maize and beans were grown by some of the Nicaraguan coffee producers; a bit of fruit and produce were grown in Nicaragua and Guatemala, as were chickens, pigs, and some cattle in the same two countries (Table 1). There was little reported dependence on remittances: 5% in Nicaragua, 15% in Mexico, and 6% of respondents in Mexico received some support from family members working in other countries. Almost half of the Mexican respondents had some family member working outside of the country. For respondents in Nicaragua and Guatemala, 77% and 65% respectively had no one working outside of their countries. Significant numbers of respondents have wanted to or have discussed the possibility of temporary out-migration to earn money, with the constraint of so doing being the cost of such travel--including transaction costs (Table 1). Hiring out as wage laborers differed greatly by country: 5% of Nicaraguan families, 21% of Mexican families; and 57% of Guatemalan interviewed families. Reasons for such high differences were not determined (Table 1). Coffee yield, price paid, gross returns, production costs. Farmers obtained highly variable returns given yield and price paid differences. For Nicaragua, high gross returns were obtained via Fair Trade Organic ($881/ha) with moderate yields (434 kg/ha pergamino) but high prices ($2.03/kg) paid; and by Low Input ($837/ha) with highest yields (900 kg/ha) but the lowest price paid ($0.93/kg). Conventional coffee provided intermediate gross returns ($521/ha) from intermediate yields (493 kg/ha) and intermediate price ($1.05/kg). Organic coffee provided the lowest gross returns ($392/ha) due to lowest yield (344 kg/ha) and a price received only slightly more than that paid for conventional ($1.14/kg vs. $1.05/kg, Table 2). For Mexico, gross returns were similar for Conventional ($1113/ha) and for Organic ($1161/ha) given similar yields (484 and 427 kg/ha) and similar prices received ($2.30 and $2.72/kg). As will be discussed further, net returns would provide a different picture given the substantially higher cost of producing organic coffee. Fair Trade Organic provided lower gross returns ($843/ha) due to lower yields (300 kg/ha), albeit higher price received ($2.81/kg, Table 2). Returns were comparatively extremely low in Guatemala, due largely to low reported yields. Gross returns were best for High Quality ($242/ha) and worst for Fair Trade Organic ($30/ha) due to almost negligible yields (13-21 kg/ha). Although half of reported

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sales were of Conventional coffee, returns were a low $152/ha due to the low price paid ($0.87/kg, Table 2). Perceptions of prices paid to producers for non-conventional coffees. Farmers appeared to recognize that prices paid in Mexico were substantially higher than in Nicaragua and Guatemala: 30% of respondents in Mexico saw prices as “good” as opposed to 10% in each of the other two countries. Prices were seen as “regular” by 20% in Nicaragua and Guatemala; and by 10% in Guatemala. Prices were classified as “not enough” by 40% in Nicaragua and by 30% in both Mexico and Guatemala: farmers explained that the extra investment costs of producing organic coffees were not worth the returns. Perceptions of “bad” or “low” and of “very bad” and “very low” reflected prices paid: 20% in Mexico, 30% in Nicaragua, and 50% in Guatemala (Table 3). Invested vs. desired investment in coffee enterprises. Farmers were asked to what extent were they able to cover desired investment costs in their coffee enterprises in the last season. Investments included those for weeding, pruning, pruning of shade trees, fertilization, and timely harvesting. Oddly given their low yields, 70% of Guatemalan respondents reported meeting 100% of their investment goals; while a third in Mexico and a third in Nicaragua felt that they had met all investment needs. Some 23% in Nicaragua, 14% in Mexico, but no one in Guatemala thought that they had not been able to invest any of what was needed (Table 4). The availability and cost of credit. In terms of credit for production, most producers in Mexico were either: a) able to take advantage of virtually free credit from buyer cooperatives, or b) were unknowingly being charged for credit within the prices paid for coffee. Most loans in Nicaragua averaged 16% interest; although specific coops charged between 2 and 25%. Although interest rates were relatively low, little credit appeared to be available in Guatemala (Table 5). Education of family members by age and gender. It appears that most of the sons and daughters of the interviewed coffee growers are being educated through primary school, with no apparent gender bias. Family members in Mexico compared to Nicaragua and Guatemala were receiving substantially better educations in terms of any secondary and any university or technical training; again without apparent gender bias (Table 6). Health problems and solutions. Although respondents reported a wide range of mostly minor health problems--respiratory illnesses, intestinal problems, and kidney problems were the most widely reported. People in Nicaragua relied largely on local health posts for medical treatment. Mexican and Guatemalan respondents relied on both doctors and local clinics for consultation, treatment, and care (Table 7). Number of months of food shortages. A quarter of Nicaraguan, a fifth of Mexican, and 5% of Guatemalan respondents said that they had no months of food shortages. On the other hand, 44% of Nicaraguan, 31% of Mexican, and a high 61% of Guatemalan respondents reported suffering from food shortages for three to four months of each year. A fifth of Mexican respondents felt that food was lacking for five to six months (Table 8). Tentative conclusions and discussion. Although a substantial proportion of coffee farmers rely on coffee alone for their

livelihoods, an equally substantial proportion (and most so in Guatemala) rely on

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Prices paid to farmers in Mexico were substantially higher than in Nicaragua and

Guatemala. Differences among prices paid in Mexico for different types of coffee, however, were not great. Prices paid for organic and Fair Trade Organic in Nicaragua and Guatemala were substantially higher than what was paid for conventional. Data supports that in spite of such price premiums most farmers continue with conventional coffee production due to the high price of organic production (although production costs were not elicited in the present study).

Farmer perceptions regarding the premiums paid for non-conventional coffees

appeared accurate. The frequently expressed idea that prices received were “not enough” was in respect to the cost of production of organic coffee.

Most farmers achieved what they wanted to in terms of investments in coffee

production. The 23% in Nicaragua and the 14% in Mexico who reported not being able to invest anything (0%) and the 70% saying that they had met all investment needs in Guatemala may require further examination (the latter especially given the low yields in Guatemala).

Credit availability and cost did not appear to be a constraint. It is uncertain if the low

interest rates reported in Mexico and Guatemala were actually the case; or whether rates were “hidden” in the price farmers’ received for their coffees.

Educational opportunities for the sons and daughters of coffee growers in the studied

areas appear to be fairly robust. Health care in the areas visited appears to be adequate. A substantial proportion of those interviewed suffer from seasonal food shortages.

Such shortages most commonly last for three to four months. Indicator interpretation. Selected indicators can be used to monitor local changes over time if larger samples of informants are used. Simple changes in mean values combined with less variability (in part from the larger samples) would provide a way to monitor and evaluate and future pilot projects conducted by GMCR/Social Advocacy and Coffee Community Outreach. From the results of the present study, indicators and directions of desired changes would include: 1. Diversity of livelihood sources: Diversity is a desirable factor in the face of production

and price risk. Decreased livelihood source diversity could be expected from stable and reasonably high prices combined with reduced production risks. Reduced reliance on off-farm wage labor and on seasonal migration could be seen as a positive or desirable impact.

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2. Prices paid for coffee. Any increases in rice premiums paid for specialty coffees relative to prices paid for conventional coffees are desirable. Farmers’ perceptions regarding the differentials can be monitored.

3. Increasing the proportion of farmers able to invest what they think that they should

invest in their coffee enterprise is a desirable and easily monitored goal. 4. Further investigation into the cost of credit is needed. Monitoring the real costs of

credit to coffee farmers and the structures of indebtedness would be useful. 5. Months of food scarcity comprise an indicator in which any decrease is desirable. Selection of informants. Further consideration of local stratification is needed. Communities can be stratified by producers of conventional and producers of certified organic, or by inclusion of a greater set of producer types. Monitoring of at least 20 families of each type in each community would be desirable. Data analysis. Simple descriptive statistics will serve for most analyses. Once larger sets of informants are interviewed per site, correlations among variable values can be examined. Recording and aggregating data. To date data has been entered into Excel spreadsheets. GMCR personnel indicated an interest in developing and maintaining a system of data management. Training local GMCR partners. The utility of further monitoring and evaluation work will depend on consistent and reliable data. As such, a few simple, straightforward indicators have been selected. Some training of local partners will be desirable, as will be training of a group of partners from across the region at the same time and place. Towards further GMCR investment in local coffee communities. From our November meeting in Vermont, it would appear that GMCR is committed to addressing the months of food scarcity in coffee growing communities. Some of the specific means to such an end might include: Targeted technical assistance in integrated soil nutrient management, especially for

organic producers. Careful targeted and timely credit to address both months of food scarcity and

indebtedness that can contribute to very unfavorable management of family financial resources.

Specific, targeted capacity building for individuals and communities.

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Table 1. Sources of income and livelihood Source Nicaragua Mexico Guatemala Coffee 100 22% of people

depend on coffee up to 50% of livelihood; 24%: 51-80% and 51%: >80%

100 16% depend on coffee up to 50% of livelihood; 14%: 51-80% and 42%: >80%

100 38% of people depend on coffee up to 50% of livelihood; 38%: 51-80% and 25%: >80%

Banana 27 Major cash crop in Matagalpa

0 0

Maize 16 A consumption staple 0 0 Livestock 16 Chickens, pigs, cattle 0 7 Chickens Beans 15 A consumption staple 0 0 Fruit/produce 8 Tomato, avocado,

others 0 7 Banana,

vegetables Cacao 5 0 0 Remittances 5 77% have no family

away from home: 40% have talked about/want to work outside (underreported?)

15 46% have one or more family members away: 23% talked about/want to work outside. 58% get no remittances; 23% gain 1-25% of livelihoods; 11% gain 26-49%; 14% gain 50% or more

6 65% have no family away from home: 29% talked about/want to work outside

Wage labor 5 Under-reported? 21 57 Highest proportion

Gov. aid 0 10 0 Cardamom 0 0 21 Major crop

Table 2. Coffee yield, price paid (pergamino), gross return, production cost magnitude Nic Mexicaragua o Guatemala Coffee type

Yield

kg/ha

Range

kg/ha

Price

$/kg

Gross $

Yield /h

a

g

/ha kg

Rane

kg $/kg

Price

Gross $

Yield

kg/ha

Range

kg/ha

Price

Gross $

$/kg

Pd

cot

ro

s

Conventional (n = )

496 (19)

29 – 1824

1.05 521 84 (5)

4 – 8

0 4 1891

2.3 1113 174 (21)

12 - 478

0.87 152 ++

Fair Trade organic

434 (3)

326 - 7

2.03 881 00 (19)

39 - 689

81 3 3 2. 84 18 58 (3)

13 - 21

1.64 30 +++

Low input (N) or high quality (G)

900 (5)

391 - 1629

0.93 837 - - - - 195 (5)

80 - 318

1.24 242 +

Organic 344 (9)

65 - 814

1.14 392 427 (21)

33 - 826

2.72 1161 114 (5)

17 - 318

1.81 207 +++

Table 3. Perception of prices p ium % of ) aid for prem coffees ( respondents

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Nicaragua Mexico Guatemala Very good 0 0 0 Good 10 30 10 “Regular” 20 20 10 “Not enough” 40 30 30 Bad/low 20 10 20 Very bad/very low 10 10 30 Table 4. Invested vs. des inired investment coffee enterprise % desired stment

% in Nicaragua

invested as part of inve

respondents % respondents in Mexico

%in Guatemala respondents

100 32 32 70 80 – 99 19 12 3 60 – 79 6 13 12 40 –59 19 19 6 20 –39 0 10 6

0 2 3 1 - 19 0 23 14 0

Tab it le 5. The cost of cred

Nicaragu o Mexicoa (Cord bas) (Pesos) Guatemala za (Quet les) Source Loans

x 1000 Interest

% Source L

1000 In

% oans x terest Source Loan

s x Interest

% 1000

Various 230 16 Cesmach 353 1 ACT (ngo) 1 3 Comanur 62 25 La Union 36 1 Mercy Corps 5 8 Cecocafen 54 18 Particular 31 10 NGO - 1 UCA 35 19 Asesmach 15 12 ADP Fundea - 6 Coop (?) 25 13 Coyote 12 8 Buyer 10 6 Esperanza 10 18 Caja de ahorro 3.5 5 FT 4 0 Fedensar 5 2 Familiar 1 0 Various 9 17 Table 6. Education of f bers by age and amily mem gender N a icaragu Mexico G la uatema

rs1

rs rs5-10 y

1-17y

18+ y

5-10 y

1 1-17yrs

18+ yrs rs s

1 s rs

5-10 yr

1-17yr

18+ y

M F M F M F M F M F M F M F M F M F None 3 1 0 1 14 12 3 2 0 0 16 14 3 3 0 0 21 46 1 - 2 primary 6 16 10 9 12 14 7 8 4 1 21 18 5 4 3 1 11 5 3 - 6 primary 3 1 18 21 29 34 9 11 10 8 47 60 2 1 13 8 13 16 Any secondary

- - 4 4 8 3 - - 12 14 25 15 - - 0 1 2 2

Univ/technical - - 0 0 1 1 - - 2 3 11 11 - - 0 0 0 0

Table 7. H ems and solutions ealth probl

Nica u Me rag a xico Guatemala Respiratory 11 Health

post 12 Respiratory 10 Doctor 11 Fever,

headache 11 Clinic 12

Kidney 3 Bear it 2 Intestinal 7 Clinic 9 Intestinal 10 Doctor 12

7

8

Hypertension 2 Clinic 2 Diabetes 3 5 Visit city

Respiratory 9 Pharmacy 8

Miscellaneous 8 Panadol 2 Kidney 2 1 Homemed

Miscellaneous 15 Medicinals 4

Doctor 1 Miscellaneous 15 meds

1 Free Hospital 2

Table 8. Nu of foomber of months d shortage %

Nic ua respondents

arag% respondents

Mexico % s

Guatemala respondent

None 26 21 5 1 - 2 18 25 7 3- 4 44 31 61 5 - 6 12 21 16 7 - 8 0 2 11