International Journal of Case Method Research & Application (2014) XXVI, 2
© 2014 WACRA®. All rights reserved ISSN 1554-7752
SUSTAINABLE GROWTH FOR COFFEE FARMERS IN GUATEMALA:
ARE THERE ALTERNATIVES TO CERTIFICATION?
Stephen Lynch
Vancouver Community College
VANCOUVER, CANADA
Geoffrey Smith
University of Guelph
GUELPH, CANADA
Abstract
Emilio Juarez is a coffee farmer in the Esquipulas region of rural Guatemala. In 2004
he converted his small subsistence farm that provided food for his family to the growing
of coffee as a cash crop. He sought a new life for his family and believed that the growing
and sale of coffee might provide some measurable income and economic stability. In
2009 he decided to join a Coffee Partnership. The two partners were Tim Hortons
International (TDI) and Hanns R.Neumann Stiftung (HRNS) Foundation. The three pillars
of the partnership, environmental, economic and social sustainability, appealed to Emilio.
There was no certification, for example Fair Trade or organic, attached to this program,
although farmers had the option to become certified. Emilio needed to decide what the
advantages and disadvantages of certification might be and what the impact would be on
his coffee business and his family, today and into the future.
KEY WORDS: sustainability, certification, developing countries, coffee production
INTRODUCTION
Emilio Juarez is a coffee farmer in the Esquipulas region of rural Guatemala. In 2004 he converted
his small, subsistence farm, to the growing of coffee. He sought a new life for his family and believed that
the growing of coffee might provide some measurable income and economic stability. As Emilio
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considered his options he decided to work with the Hanns R.Neumann Stiftung (HRNS) Foundation .
2
Working with the Neumann Foundation was a Canadian company, Tim Hortons International . Together
3
they created a Coffee Partnership in the Trifinio Region of Central America.
Emilio had started experimenting with coffee farming eight years ago, prior to that he produced only
maize and beans as a way to help feed his family. He joined the Neumann Foundation/Tim Hortons
project in 2010. During the first three years of this association he closely followed the sustainable farming
program outlined and supported by the Coffee Partnership. He began learning and using new farming
techniques designed to help him increase his hectare coffee bean yield and to improve the bean quality.
By 2012, his small 1.4 hectare coffee farm provided Emilio with a farm income large enough to support
his family.
Could there be other benefits or other opportunities that might contribute to the success that he
enjoyed? As he sat at his kitchen table he listed several options. He needed to consider his involvement
in the Coffee Partnership, what he had learned at this point in time. How useful was the partnership to
him; how did his success compare with other farmers in the program; and, how did his success compare
with other farmers not in the program? Emilio had three major issues at hand: (1)should he stay in the
International Journal of Case Method Research & Application (2014) XXVI, 2
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association or work independently; (2) should he certify; if so, what type of certification and what were the
benefits of each; (3) should he grow organic coffee; or, (4) should he maintain the status quo? Which
would be the best option for him and his family today and in the future?
CASE FOCUS
Emilio read over the notes he had made during the 3 years that he had been working with the Coffee
Partnership. When he first joined he remembered that there were discussions about aspects of coffee
farming that were unfamiliar to him.
Coffee was Emilio’s only cash crop. In addition to the 1.4 hectares under coffee cultivation there was
an additional 0.35 hectares dedicated to beans and banana trees, most of which was consumed by his
family and any surplus was sold in a local market. He had a small coffee drying patio which he rented to
the community as a football (soccer) field. Emilio did his best to diversify his income. The additional
income, however small, allowed Emilio to replant any coffee plants that needed replacement, for
whatever reason. If he wished to expand his coffee production he needed to purchase additional land.
From the beginning of his association with the Coffee Partnership program, Emilio found the
information a little overwhelming, simply because he had never had the opportunity to learn about the
growing of coffee. He had only spent a few years in school and had spent his entire life working on a
farm. Certainly everything about sustainability was new to him, but he was willing to learn if it meant he
could provide for his family in a more sustainable way. Through the technical assistance the Partnership
program provided he gained knowledge of soil sampling, the timing of fertilizer application, the picking of
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the cherries , and the correct quantity and ingredients of the granular fertilizer mix. He learned the
benefits of shade farming, water management, farm management and book keeping. He better
understood how he could improve profits by better management and control over the components of his
production costs. He learned the benefits of working with an organization whose membership included
only other small farmers like Emilio.
Emilio knew that he could benefit by working with other small farmers in his area and those in
neighbouring communities. One immediate benefit was the ability to get supplies of fertilizer more cheaply
than before because the group could buy in bulk. They could pool their very limited resources, save
money, and learn from each other.
Emilio thought back to his participation in self-assessments and group evaluations that helped him
improve his business. Through his work with other local farmers he now felt a certain control over his
business decisions and his involvement in decisions at the group level. He knew that he could sell his
coffee through the exporter to anyone he chose and was not restricted to just the Partnership buyers. He
knew it was his decision on how, when, and to some extent, at what price he took his coffee to market.
He knew that he could not control the international price of coffee, but he was able to watch the prices
posted by the local buyer. Before joining the program he grew and sold his coffee to the best of his ability
but really never understood the business of sustainable coffee growing, processing and selling. Now
Emilio had a better understanding about the “economic, social and environmental” issues of coffee
growing.
As Emilio thought about all of this he was still left wondering what decision he might make as he
looked to the future. In conversations with other farmers that had formed an “association” of local farmers,
all of whom were in the Coffee Partnership, there were different opinions, particularly around the idea of
sustainability and certification. He remembered chats with his farm friends about the costs and benefits
associated with the various certification models. Some of his farmer friends chose to certify their coffee to
increase the opportunities to get their coffee to market at a given price. He decided that he needed to see
what the advantages and disadvantages of certification might be and decided to gather that information
himself. Some of the other farmers in the region were asking the same questions and asked whether
Emilio would share with them whatever he found out.
Co-operative: ACCSO
This is the first time Emilio had worked together with other farmers in the area. The group, ACCSO
(Asociacion Comercializadora Cafe Sostenible Oriente), was the name of the organization in his area. His
membership in the group provided a number of advantages such as buying fertilizer more cheaply and
the ability to talk to the people in the group if he had a problem with his crop. Emilio’s group was not a
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cooperative in legal terms; it was an "association". There were two tiers in the structure, one at the farm
level and one at the regional level. Both tiers of the organization had their own parallel legal structure
which included president, secretary, and treasurer. All of the farmers were involved in decisions that
affected the local parts of the process.
The farm level, or second tier in the ACCSO structure, decided to buy a processing station from an
intermediary. Before 2010, all the coffee was sold to intermediaries as the cherry but by 2012 100% of the
5
coffee beans went via 1st and 2nd tier organizations to an exporter as parchment . The difference
between cherry and parchment was important. This meant that Emilio and the other farmers moved up in
their value chain and could sell a semi-perishable product (dry parchment). This allowed the group to
store the dry parchment for a while and hence, farmers could play the market and possibly hold back
coffee before they sold it. This could not be done when sold only as cherry, as cherry coffee had to be
sold within hours of picking in order to avoid the onset of the fermentation processes. After 2012 all of the
farmers in the group “owned” the processing station. This gave better control over the costs. The
processing station became the basis for their commercial activities. While there were benefits to owning
the processing station, there were also costs that each farmer had incurred and which would reduce their
short-term profits. The financial obligation that each of the ten farmers in Emilio’s farm group accepted
was $1,650. Each farmer agreed to a two-year payback period.
The Coffee Partnership worked with the farmers to recycle the wastewater. They were able to use the
pulp from the waste water as fertilizer for the coffee plants. Traditional bank financing was not available to
the farmers. Borrowing from the intermediary was too expensive as a method of finance. ASSCO had
provided an avenue for the farmers to pool their limited resources to buy the processing station and also
to buy the land upon which they could lay a cement drying pad and a warehouse. Although not yet built,
these two items were in-process and provided the farmers, including Emilio, the opportunity to plan for the
future. The “organization” that the Coffee Partnership encouraged was enabling some plans for today and
tomorrow. But would it be enough?
Certification
Emilio had heard of some of the possible certification programs, but the information was mostly word
of mouth. At the last Cooperative meeting there were conversations about UTZ certification. A couple of
the farmers in Nicaragua, in a similar program to Emilio, were UTZ certified but it would be impossible to
meet with them to discuss the program. There was discussion about Rainforest Alliance Certification, Fair
Trade, Organic certification and SMBC (Smithsonian Migratory Bird Center) Bird Friendly certification.
Could there be other Certification programs? How could he distinguish between the large numbers of
different certifications, each with its own differing standards? If he could find the information it would need
to be organized. Emilio decided he would need a chart for better comparison. He needed to know about
cost vs. benefits and the balance between supply and demand. He was also sure that he would find other
areas for comparison.
Financials
Emilio’s understanding of the financial situation was made easier with the field books and records he
began keeping. On his 1.4 hectare (Ha) farm he would be able to produce about 932lbs. of coffee over
the year (666lbs/Ha). The price he would receive for his coffee was not the world price. Local market
forces, coffee bean quality, and harvest yield would affect prices the average Guatemalan farmer would
receive. For Emilio and other Guatemalan farmers the price they can receive from an exporter or
middleman may be around $3.50 per pound, but could change dramatically year to year. Through the
support he received from the Coffee partnership he had kept track of waste, which included the coffee
that he grew but that he could not sell because it was damaged, lost, or over/under ripe. Overall Emilio
calculated that approximately 7.7% of his crop did not make it to market.
There were many expenses involved in coffee production. Based on his notes, Emilio estimated
labour as follows: cutting and harvesting was about 19% of the sales he would typically make; pruning
0.5%, weeding and cleaning 2% and general labour about 3% of his coffee sales. Additionally he needed
to factor in the costs associated with controlling insects, disease, and the increasing ‘coffee rust’ issue.
Emilio spent, on average, 4% of sales on fumigation, 3% on fungicide, insecticide, and herbicides; and
6% on fertilizer. Once the processing was done all the coffee was bagged in 48-kilogram bags and then
International Journal of Case Method Research & Application (2014) XXVI, 2
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transported to be sold which usually costs $300 USD per truckload. Emilio estimated that each 46kilogram bag of coffee would $3.00-$4.00USD. from farm to processing.
At the beginning of his association with the Coffee Partnership, Emilio paid an intermediary to
separate and dry the beans and to use a water processing machine and a drying area, where the
separated coffee beans would be dried in the sun and raked on a concrete slab until ready to bag. A
group of local farmers, like Emilio, have pooled their resources and borrowed funds to purchase these
facilities for use by all farmers in the group. Based on their particular yields and usage of this equipment,
farmers paid back their appropriate portion of the debt. Emilio’s remaining portion of the loan is $5,000
borrowed funds from an exporter, at an interest rate of 20%.
Emilio was also constantly growing new plants to eventually replace older plants that had become
less productive. His normal budget for seeding, transplanting, and running this nursery section on his
farm is 1%, 1%, and 1.5% of sales respectively. Finally the Guatemalan Government does not tax Emilio
in an effort to help Guatemalan farmers. Emilio's annual gross income from coffee in December 2012 was
US$3012.12 or 1954.11 Quetzals per month (current exchange rate was 7.7850).
Guatemala and the Trifinio Region
Coffee farming in the Trifinio region produces some of the world's finest coffee. The area includes
three ('Tri') countries that share common borders - El Salvador, Guatemala and Honduras. It's one of the
UNESCO (United Nations Educational, Scientific and Cultural Organization) designated biospheres and is
home to the Montecristo cloud forest, a mountainous area of incredible bio-diversity, supporting a variety
of rare fauna and wildlife. It's also the source of three hugely important rivers, each providing much of the
water supply for the three countries. These factors make environmentally sustainable coffee farming
extremely important in this area. (Tim Hortons Coffee Partnerships, n.d.)
Although Emilio’s coffee farm is small the Trifinio region has some larger plantations. Conditions for
coffee workers on large plantations vary widely, but most are paid the equivalent to sweatshop wages
and toil under abysmal working conditions. In Guatemala for example, coffee pickers have to pick a 100pound quota in order to get the minimum wage of less than $3/day. The total average income reported
was Quetzals 1006 ($127.37/month). According to data published by Guatemala's National Institute of
Statistics, the cost of the Basic Food Basket for a family of five was in 1998 was 1353.86 Quetzals per
month ($171.37 @ 7.90 exchange rates). By December 2012 this same basket of food had jumped to
2617.80 Quetzals, an increase of 93.3% over the 1998 figure (World Food Programme, 2013). The
Basket of Goods and Services (including food, education, healthcare, clothing, and transportation) was
Q2470.55 ($312.72) (Global Exchange, 2011). Because of this situation, many coffee workers bring their
children to help them in the fields in order to pick the daily quota. These child workers are not officially
employed and therefore not subject to labor protections (Global Exchange, 2011).
Neumann/TDL Support Group
Emilio had learned about an independent verification process. At first he and the other farmers didn’t
fully understand the program. As they read about the Key Performance Indicators ("KPI"s) used to
measure the impact and success of the Coffee Partnership, they understood that this independent
assessment protected everyone, particularly the farmers. Control Union Certifications (Control Unions
World Group, n.d.) was the organization which provided the independent third party oversight and, in so
doing, reviewed the farmer’s performance. Emilio learned from his local association and or the
Neumann/TDL support program that this was just a form of assurance used by other organizations in their
sustainability reporting where there was some tracking, collection and modeling of data. He also learned
that Control Union Certifications worked with TDL and the Neumann Foundation to develop the audit
protocol that was specific to his program.
Recent Developments and Challenges
Beyond the advice offered by the Partnership Program Emilio noticed that there were other problems
6
with which he may have to contend. He and his friends incurred a recent flare-up of coffee rust and
Emilio soon learned that coffee rust was related to climate (Coffee & Climate, 2011). Could it be that
farmers were facing serious climate related challenges? From the Co-operative meetings Emilio also had
evidence that the rust attack was widespread and was frequently accompanied by die-back
(anthracnose). In many cases attacks were serious and it was evident that many farmers would suffer
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International Journal of Case Method Research & Application (2014) XXVI, 2
substantial yield reductions for the coming harvest. This was unfortunate since most of the coffee farms
were otherwise in good condition. There was clear evidence that substantial investment had been made
in renovation and fertilization that resulted in heavy-bearing coffee plants. If the climate continues to be
wetter than normal, rust attacks could impact next year’s harvest and it was possible that many farmers
would face major economic difficulties over the next two years and beyond.
Emilio thought. He needed to review his field notebooks. What had worked under this year’s difficult
conditions? What had spared some farmers from the damage of coffee rust? What did they do
differently? For some, the best coffee turned out to be of catimor origin, including Lempira, IHCAFE 90
and Cuscatleco (Aguilar et al., 2005), all of which proved to be virtually rust-free with little sign of dieback. Should farmers move to these particular strains? Was there additional cost? Coffee plants take a
minimum of 3-years to produce quality cherries, so how would that affect the income for his family and
for other farm families in the Co-operative group?
Another problem that Emilio and the Co-operative blamed on climate change and wetter conditions
was the erosion of the narrow and steep roads that led from the farms down to the main roads in the
valley. These were already in poor condition and would take many hours of hard labour to repair. How
would Emilio get his coffee to market? He knew that small landslides and erosion on uncovered soil
slopes were not uncommon. A large landslide in the Esquipulas zone had already caused abandonment
of a village. If the heavy rainfall continued, then transportation of the coffee harvest to market would be
difficult and hence more costly.
Emilio needed to determine to what extent these “changes” were abnormal – hopefully highly
abnormal, and how likely they were to be repeated in coming years. If the likelihood of a repeat of such
weather was high, then a great deal of work was needed to be undertaken. Did Emilio and his farm
friends need to shift from a ‘just-in-time’ to a ‘just-in-case’ approach to pest and disease control? Whether
Emilio and his family decided to “certify” or not, the weather changes were unpredictable, and potentially
maybe impossible to overcome.
Summary
So, where could Emilio go to get this information? How could he evaluate the information once he
found it? How could he present the information to the Co-operative? Lots to think about, how to begin?
Emilio had three major issues at hand: (1) should he certify; if so, what type of certification and what were
the benefits of each; (2) should he grow organic coffee; or, (3) should he maintain the status quo? Which
would be the best option for him and his family today and in the future? This is where he needed to start.
APPENDIX A
Certification
Fair Trade is a mechanism of international exchange that attempts to improve the economic and
social well-being of small producers in developing countries. Through a guaranteed of a fair price for their
products and through other forms of support they advocate a change to a traditional international trade
system. The origins of Fair Trade appear rooted in a cooperative movement, relief programs, and other
development initiatives. The Fair Trade movement began with the implementation of a certification
program in 1988. With the implementation of the certification a wider variety of products, particularly
agricultural commodities such as coffee tea and cocoa, became available in the Fair Trade market.
Prior to these Fair Trade certification products were offered for sale primarily through alternative retail
outlets. An additional significant development in free trade was the new participation of traditional
businesses, especially large corporations.
There are advocates of Fair Trade who argue that participation by corporations helps to increase the
size of current Fair Trade markets and facilitate the introduction of new Fair Trade products. They cite an
increase in sales of Fair Trade products that has occurred through the increased involvement of various
corporations. Critics of Fair Trade believed that many traditional businesses are not committed to free
trade values and participate primarily for public relations reasons. Additionally, these critics believe that
some corporate participation has served to undermine the original goals of Fair Trade - the provision of
support for small producers and the advocacy of trade reform. Finally, these critics, many of whom
worked to build up the Fair Trade movement, were concerned that the current leadership of the certifying
International Journal of Case Method Research & Application (2014) XXVI, 2
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body is overly interested in increasing sales and has become distanced from the Fair Trade movement in
itself. Some small producers in Central and South America believe that they do not have sufficient say in
the decision-making of the movement that was developed to support them.
The Neumann Foundation, the philanthropic arm of the Neumann Coffee Group (NCG), has
worked with small cell coffee growers in Central and South America in an effort to provide these regions
with knowledge and expertise in order to encourage economic, social, and environmental sustainability.
Tim Horton International has worked with the Neumann Foundation for almost 10 years.
APPENDIX B
Tim Hortons International (http://www.timhortons.com/ca/en/difference/coffee-partnership.html)
Tim Hortons has a long-standing tradition of making a true difference in the communities it serves.
Its philosophy is to take the same approach to those communities that produce their coffee.
This
approach has produced the Tim Hortons Coffee Partnership which helps communities by supporting them
in key areas that will improve their coffee business and their lives.
Tim Hortons has over 45-years of coffee buying expertise. It understands the markets, the dynamics
of the coffee business, consumer trends and notably, the challenges facing small-scale coffee farmers. In
their project regions, small-scale farmers typically own between 5-10 hectares of land. They endeavour to
understand emerging trends and developments in improving the sustainability and livelihoods of coffee
farmers.
In 2005, THI examined the various coffee certification programs and their potential benefits. Through
this comprehensive analysis they created a Coffee Partnership. They developed the Tim Hortons Coffee
Partnership to address important philosophies relating to sustainable coffee production.
The Tim Horton’s Coffee Partnership approach is unique from other coffee initiatives. It works with
partners and is involved in grassroots projects that work closely with small farmers and local coffee
organizations. One of the partners with whom Tim Hortons works closely is the Hans R. Neumann
Stiftung Foundation (HRNS). Through these projects, farmers are encouraged to improve farming
practices to produce higher-quality coffee more efficiently, giving them more control and options for their
coffee. In Guatemala they have helped support the establishment of a new farmer organization: ACCSO
(Asociacion Comercializadora Cafe Sostenible Oriente).
These organizations are important to the success of coffee farmers. They provide economies of scale
in agricultural inputs, more efficient warehousing and better cooperation with the export companies.
Furthermore, these farm farmer organizations are designed to continue training activities after finalizing
the project implementation.
ENDNOTES
1. In 2005, Neumann Gruppe GmbH and its shareholders founded the Hanns R. Neumann Stiftung
Foundation. Improving the prospects for under-privileged a coffee producer is the particular focus of
its activities. However, it is equally important to create a wider awareness of the conditions and
opportunities of farmers and their families, and the need to conserve the environment and protect
endangered natural resources. In order to reach larger numbers of beneficiaries it endeavours to
scale up project experiences, roll out sustainable practices and thereby contribute to the
implementation of change processes in the communities and countries where it operates.
2. Tim Hortons Inc. is a Canadian fast-casual restaurant known for its coffee and doughnuts. It is also
Canada's largest fast food service with over 3000 stores nationwide. It was founded in 1964. Tim
Hortons franchises spread rapidly and eventually overtook McDonald's as Canada's largest food
service operator. Tim Hortons holds 62% of the Canadian coffee market (compared to Starbucks, in
the number two position, at 7%). The local and community focus that has characterized the social
responsibility initiatives of TD I extend into the regions from which they source their coffee. The
Trifinio region is one such area.
3. Coffee farming in the Trifinio region produces some of the world's finest coffee. The area includes
three ('Tri') countries that share common borders - El Salvador, Guatemala and Honduras. It's one of
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International Journal of Case Method Research & Application (2014) XXVI, 2
the UNESCO (United Nations Educational, Scientific and Cultural Organization) designated
biospheres and is home to the Montecristo cloud forest, a mountainous area of incredible biodiversity, supporting a variety of rare fauna and wildlife. It's also the source of three hugely important
rivers, each providing much of the water supply for the three countries. These factors make
environmentally sustainable coffee farming extremely important in this area. http://www.tim
hortons.com /ca/en/difference/coffee-partnership-our-projects-trifinio.html
4. Coffee begins as the seed inside the fruit of a coffee bush. The fruit is called a cherry.
5. The processing station requires the use of specific equipment and substantial quantities of water. The
coffee cherries are sorted by immersion in water. The amount of water used in processing can vary,
but most often there is 1 to 1 ratio. Bad or unripe fruit will float and the good ripe fruit will sink. The
skin of the cherry and some of the pulp is removed by pressing the fruit by machine in water through
a screen. Any wet processing of coffee produces coffee wastewater which can be a pollutant.
Ecologically sensitive farms reprocess the wastewater along with the shell as compost to be used in
soil fertilization programs. The fruit covering the seeds/beans is removed before they are dried. Wet
beans are dried on the parchment for 30 days in the sun. The beans must be dried to a water content
of about 10% before they are stable. Coffee beans can be dried in the sun or by machine but in most
cases dried in the sun to 12-13% moisture and brought down to 10% by machine. After the drying
process, the parchment skin, or pergamino, is thoroughly dry and crumbly, and easily removed in the
hulling process. Parchment is a skin, similar to that found on red peanuts. Drying on the parchment
enhances taste and prevents beans from cracking or breaking up when roasted.
6. Coffee rust infections occur on the coffee leaves. The first observable symptoms are small, pale
yellow spots on the upper surfaces of the leaves. One of the key cultural management decisions is
whether to produce the coffee in full sun or with some degree of shade. This often is more a sociopolitical decision than an agronomic one. Some say that rust is easier to control on properly spaced
plants in full sun, since they dry faster and, therefore, have shorter periods of leaf wetness. Others
argue that shade-grown coffee has less rust because the closed canopy of shade trees prevents dew
formation on the coffee leaves and therefore reduces infection. The small, "low-tech" producers tend
to favour shade-grown coffee, which, despite its lower yields, requires less external input in the form
of pesticides and fertilizers. Since the susceptibility of the plant is markedly affected by its nutritional
status, the depletion of nutrients by a high yield in a given season can increase the severity of rust not
only in that season but in subsequent years as well, unless appropriate adjustments in nutrients are
made. (Arneson, 2000).
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