Are Sustainable Coffee Businesses Viable Financial Entities?

A primary goal when growing organic coffee is to develop a sustainable system of production. Coffee farmers strive to preserve the health of their soil, water table, and tree cover. By avoiding chemical fertilizers, herbicides, insecticides, and fungicides a coffee grower maintains their organic certification. Ideally, this means that they can sell their coffee for more than otherwise. Sadly, that is not always the case. All too often a grower quits paying to have their operation certified because they do not have a ready market for the coffee produced by their sustainable operation. This brings us to the point for today. Are sustainable coffee businesses viable financial entities?

What Is a Sustainable Coffee Operation?

Sustainability has to do with not damaging the soil, water table and wider environment while growing coffee. Avoiding exploitation of workers is sometimes included in the definition of sustainable coffee. The point is to maintain a long term environmental balance by not depleting the soil, poisoning the water table, or damaging surrounding plants and animals. It commonly has to do with maintaining as much of the natural forest cover as possible as well.

Are Sustainable Coffee Businesses Viable Financial Entities?

Is Coffee Sustainability Costly?

In the coffee business there is the price that a grower can get for their coffee and the cost of producing coffee. The coffee price is notoriously volatile. The cost of producing coffee can be broken down into fixed and variable costs. On an organic coffee farm labor costs are significantly higher due to weeding and other activities to control weeds and pests that would otherwise be dealt with by chemicals. In addition, there are labor costs associated with picking the coffee, multiple times because coffee beans do not all ripen at once, and processing. In a year when coffee prices are high in dollars and the local currency is weak in relation to the dollar, a coffee grower may do very well. When both coffee prices in dollars and the dollar itself fall against a local currency like the Colombian peso, a farmer may have a bumper crop and still lose money!

Sustainable Coffee Businesses Going Out of Business

Coffee News recently published an article about sustainable coffee businesses going out of business. They discuss both fixed fees like taxes, cooperative fees, and mortgage costs as well as labor and costs of chemicals or fertilizers to the extent that they may be used. When leaf rust strikes a coffee farm the costs of labor soar and, even when efforts to fight the plant disease are successful, coffee yield drops significantly. Because of the prevalence of coffee leaf rust in Central and South America, this can be a major factor in the survival of sustainable coffee businesses.

Relationships With Green Coffee Buyers and Business Survival

Over the years we have spoken with coffee growers in Panama and Colombia who went to the expense of having their coffee farms certified as organic. In many cases these growers had already been running what were essentially organic operations so there was little extra expense involved. However, they were not able to link up with a buyer who could guarantee them the sort of premium prices that should go with organic, sustainable coffee farming. In several cases the coffee farmers gave up their certification by simply not paying for the paperwork after a few years. We might compare this with something like the sugar beet business in the Red River Valley of North Dakota and Minnesota where growers are routinely guaranteed a set price for a set amount of sugar beets every year. This area includes many prosperous sugar beet farmers who have maintained their farms for generations. The key issue seems to be whether or not the market will be willing to pay for higher quality over the years!

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