#63 | Re:co Podcast – Danielle Knueppel and Enrique Magaña on Profitability from the Ground Up (S2, Ep. 4)

Today, we’re very happy to present the fourth episode of “Cost of Production and Profitability for Coffee Producers,” a session recorded at Re:co Symposium this past April. Buyers and producers alike need to understand what it takes to produce specialty coffee so that it can be produced sustainably, so we convened experts to ask: Do we really know what specialty coffee costs? 

If you haven’t listened to the previous episodes in this series, we strongly recommend going back to listen before you continue with this episode. 

Almost everywhere we go, we find that coffee farmers are shouldering all the risk in coffee production because there is little information on the best varieties and agricultural practices, no access to the right plants, or not enough knowledge on how to prepare for the next drought or epidemic. Because of these seemingly simple barriers, many farmers that could be profitable aren’t. 

World Coffee Research, together with dozens of partners, is building an unprecedented network of global on-farm trials to discover which varieties and agricultural practices are most profitable for coffee producers around the world. The Global Coffee Monitoring Program addresses one of the most important decisions farmers make: Which plants and practices are right for my farm? For my climate? For my buyers? Here, World Coffee Research’s Danielle Knueppel, joined by Enrique Magaña, explores the platform’s aim to use rigorous, on-farm science to create a global data set that addresses the profitability of coffee farming from the ground up.

Special Thanks to Toddy 

This talk from Re:co Boston is supported by Toddy. For over 50 years, Toddy brand cold brew systems have delighted baristas, food critics, and regular folks alike. By extracting all the natural and delicious flavors of coffee and tea, Toddy Cold Brew Systems turn your favorite coffee beans and tea leaves into fresh cold brew concentrates, that are ready to serve and enjoy. Learn more about Toddy at http://www.toddycafe.com.

Related Links 
Table of Contents 

0:00 Introduction
2:50 Enrique Magana, an El Salvador coffee producer, on the challenges his farm is facing in a time of low prices
7:30 Danielle Knueppel on why current Arabica crops are not offering farmers a sustainable or reliable income and farmers are moving away from arabica production.
9:30 An explanation of the Global Coffee Monitoring Program and how it works. The trial data will monitor and track weather patterns and pest spread globally, which growing variables affects cup quality and farmer profitability.
20:30 The program’s next steps
22:30 Outro

Full Episode Transcript

0:00 Introduction

Peter Giuliano: Hello everybody, I’m Peter Giuliano, SCA’s Chief Research Officer. You’re listening to an episode of the Re:co Podcast, a series of the SCA Podcast. The Re:co podcast is dedicated to new thinking, discussion, and leadership in Specialty Coffee, featuring talks, discussions, and interviews from Re:co Symposium, the SCA’s premier event dedicated to amplifying the voices of those who are driving specialty coffee forward. Check out the show notes for links to our YouTube channel where you can find videos of these talks.

This episode of the Re:co Podcast is supported by Toddy. For over 50 years, Toddy brand cold brew systems have delighted baristas, food critics, and regular folks alike. By extracting all the natural and delicious flavors of coffee and tea, Toddy Cold Brew Systems turn your favorite coffee beans and tea leaves into fresh cold brew concentrates that are ready to serve and enjoy. Learn more about Toddy at toddycafe.com. Toddy: Cold brewed, simply better.

Re:co Symposium and the Specialty Coffee Expo are coming to Portland in April 2020. Don’t miss the forthcoming early-bird ticket release – find us on social media or sign up for our monthly newsletter to keep up-to-date with all our announcements.

Today, we’re very happy to present the fourth episode of “Cost of Production and Profitability for Coffee Producers,” a session recorded at Re:co Symposium this past April. Buyers and producers alike need to understand what it takes to produce specialty coffee so that it can be produced sustainably, so we convened experts to ask: Do we really know what specialty coffee costs?

If you haven’t listened to the previous episodes in this series, we strongly recommend going back to listen before you continue with this episode.

Almost everywhere we go, we find that coffee farmers are shouldering all the risk in coffee production because there is little information on the best varieties and agricultural practices, no access to the right plants, or not enough knowledge on how to prepare for the next drought or epidemic. Because of these seemingly simple barriers, many farmers that could be profitable aren’t.

World Coffee Research, together with dozens of partners, is building an unprecedented network of global on-farm trials to discover which varieties and agricultural practices are most profitable for coffee producers around the world. The Global Coffee Monitoring Program addresses one of the most important decisions farmers make: Which plants and practices are right for my farm? For my climate? For my buyers? Here, World Coffee Research’s Danielle Knueppel, joined by Enrique Magana, explores the platform’s aim to use rigorous, on-farm science to create a global data set that addresses the profitability of coffee farming from the ground up.

Also, to help you follow along in this podcast, I will chime in occasionally to help you visualize what you can’t see.

 

2:50 Enrique Magaña, a Salvadoran coffee producer, on the challenges his farm is facing in a time of low prices

Enrique Magaña: Hi. It’s a great honor to be standing here today. My name is Enrique Magaña and I’m a sixth-generation coffee farmer, miller, and exporter from El Salvador. Two years ago, when I decided to move back to El Salvador and work with my father to manage our family’s farms and mill, I was aware that the coffee industry in El Salvador was going through hard times. You see, the production in our farms had decreased by 50% due to coffee leaf rust and die-back. But still, continuing a family tradition was important to me. Today I’m here to talk to you about what it’s going to take for many families in El Salvador to continue growing coffee. As you’ve been hearing, the low coffee prices have made growing it unsustainable. At Magaña coffee we’ve been lucky enough of having had long-standing relationships with certain importers that have allowed us to maintain fixed prices but still with these low prices, we’ve had to cut back. We’ve had to cut back, for example, on certain important agronomical activities that we would otherwise do. For example, before we used to incorporate all of the coffee pulp from our mill back into the soil as organic compost. But in recent years we’ve been only incorporating less than half of it, and the rest we’ve been just giving it away to whoever can come and take it. Examples like these are many and they add up. But to the communities surrounding our farms, all these examples added up translate to jobs that are being cut back from them.

My country suffers from the lack of a dedicated coffee research institute. It’s institutes like these that help farmers by developing new varietals by helping them manage crisis and just by publishing best practices for farming coffee in the local environment. Like this one, for example.

Peter Giuliano: Enrique is showing pictures of old journals from the Coffee Growers Association of El Salvador.

Enrique Magaña: This is an example from El Salvador’s once-famous association called Asociación Cafetalera de El Salvador back from 1938 and in fact, they’re publications from over 80 years ago, I still find them relevant today when I read them, which is great, but a lot has happened since. In recent years we’ve relied on imitating and mimicking what other countries research institutes have recommended, which in my opinion, has had its drawbacks because each countries situation is different and El Salvador’s case is very unique. My country is one of the smallest countries in Latin America and the farmland we have available for coffee is limited, therefore by economies of scale of production costs will tend to be higher. That’s why I believe that our key differentiator in El Salvador has to be our quality. You see traditionally many farms in El Salvador had always been planted with Red Bourbon, Caturra, and Pacamaras which are all susceptible to coffee leaf rust but cup great. After the 2012 rust epidemic, many of these farms that had never seen rust before were affected, and when replanting, many of these farmers were so afraid to plant these traditional varietals that they decided to switch the team or hybrids which, in my opinion, don’t cup as great as the traditional ones do.

This allows me to move one point like third and last point. Because there’s no coffee research institute in El Salvador, us farmers are alone. We have to do all this research by trial and error, which is very costly. For our farms, for example, for Magaña coffee, we used WCR’s coffee varietal catalog in order to help us find varietals that had the following characteristics highly productive, rust-resistant and very importantly cup quality. From research, we found two varietals that met our criteria. We found the Centroamericano and the Millenium. That’s why this year we decided to import 50,000 plants from Guatemala from a certified plant nursery as a trial just to see if this works. We’re not sure if this is going to work, but we believe it’s worth the risk.

I want my family’s farms to be here for another six generations, but for that to happen, we need more information. We’d better information. Information that is not only going to help us produce more and better coffee, but information that is going to help us be profitable at the end of the day. That’s why we’re thankful to be part of WCR’s global research program in which, for example, in our case, we have selected three scientific plots, and we’re evaluating one traditional varietal compared to two other varietals. We’re trying out different agronomical approaches to see which one leads to more profitability.

Peter Giuliano: Enrique is showing a picture of young coffee shrubs growing under tree shade.

Enrique Magaña: This year is our one-year-old trial at Finca El Cerro in Ahuachapán in El Salvador. Here to tell more about the project is the program’s Director, Danielle.

7:30 Danielle Knueppel on why current Arabica crops are not offering farmers a sustainable or reliable income and farmers are moving away from arabica production.

Danielle Knueppel: Thank you, Enrique, for sharing your experiences with us. We don’t often get to hear from producers themselves. For us to be able to directly address meaningfully the challenges that producers are facing, it’s so important to listen to them. The challenges that Enrique mentioned are not unique to him alone. In fact, coffee farmers everywhere are experiencing exactly the same things. So, we all know that climate is changing in often unpredictable ways and diseases and pests are spreading to new locations and the varieties that coffee farmers have been growing over the past decades are no longer suitable in the areas where they’re growing and so we’re seeing farms like this that are producing much lower than they could be producing.

Peter Giuliano: Danielle is showing a picture of coffee trees affected by disease.

Danielle Knueppel: As a result, we’re also seeing farmers that are moving out of Arabica production and into Robusta production because it’s a better bet for them in their particular climates.

Peter Giuliano: Danielle has a graph of Indian coffee production that shows arabica production moving down year on year while robusta production moves up.

Danielle Knueppel: And in other places like this valley in Vietnam that used to be full of Arabica trees, farmers are leaving coffee altogether and moving into other crops.

Peter Giuliano: Danielle’s photo shows a mountainside that has been planted with crops other than coffee.

Danielle Knueppel: But what we don’t know is if farmers can be profitable growing Arabica coffee in these areas and farmers themselves don’t know. They’re going on information that’s outdated and they themselves aren’t able to test the new varieties and practices because it costs a lot of money and so farmers really are shouldering all of the risk.

 

9:30 An explanation of the Global Coffee Monitoring Program and how it works. The trial data will monitor and track weather patterns and pest spread globally, which growing variables affects cup quality and farmer profitability. 

Danielle Knueppel: So, what can we do? I’d like to tell you about a program that was started in 2016 by World Coffee Research called the Global Coffee Monitoring Program and in this program, we partner with private sector coffee industry partners to place a network of trials in farmers’ fields and typically, coffee research or agricultural research is done in research stations in conditions that don’t often mimic farmer’s field. So, while this information is well-intended and informative, farmers often don’t find it as useful and don’t take up these new approaches. and so, we’re placing these trials directly in farmer’s fields and were able to use their perspective, and we’re able to really address the challenges that farmers are facing. We’re not demonstrating the best practices we’re actually scientifically testing that some of the best approach that farmers could be using. I mentioned partners and partners are very important because the information coming from these trials is meant to get out into the networks and into the supply chain of our partners and our partners typically are roasters, exporters, importers and others that work directly with farmers. And so now we have 150 of these trials globally in Central America, South America, and East Africa and as I speak today, we’re planting even more in Uganda.

Peter Giuliano: Danielle’s photo shows an aerial view of a coffee farm with nine distinct squares. Each square contains roughly 150 coffee trees.

Danielle Knueppel: Looking a little bit closer at the trials. This is an aerial view and it nicely shows the different plots of the trial. This one here is 3000-meter square and our trials typically range from 1000 to 5000-meter square. We placed them in the diverse types of farms ranging from smallholder to large estate farms and we put the trials in different elevations and different topography from steep to flat terrain and for over five years, we collect information and collect data and generate information from these trials. So, what exactly is included in these trials? First of all, we have three different coffee varieties. We have two improved varieties that are tested against a control variety, going in one direction and then in the other direction we’ve got three sets of agricultural practices, and so we’ve got two improved sets of practices tested against a control set.

Altogether, we have nine different trial plots which contain their own variety and their own set of practices. and ultimately what we’re looking at here is which combination of variety plus a set of agricultural practices is most profitable for farmers. Looking a little bit closer at the varieties, how do we choose the varieties? We do this based on expert recommendations, what’s available locally. The elevation of the farm and then partner and farmer preferences based on cup quality, high yielding varieties or disease-resistant varieties and then for the agricultural practices we hold a workshop in each country before we do any planting and we discuss and determine what are the different farm types in each country and then make recommendations for each of those farm types in four different areas. First in planting, spacing of coffee trees. Second shade practices, so different types of shade trees and different spacing for those shade trees. Soil conservation practices.

So, using ground covers or grasses to preserve the soil and then fertilization practices, which is different types of fertilizer and quantities of those fertilizer and we put together a menu of options that partners and farmers can choose from, based on their specific challenges and constraints that they’re facing on their farm. Since these are research trials we’re collecting a lot of data. So, we collect data on soil properties, the growth of the coffee plants, rainfall and temperature, pests and diseases that are affecting coffee, the cost of productions, all the labor and the inputs going into each of the trial plots, the cup quality of the coffee yields. Yields not only of coffee but also of other crops that are growing together with coffee and we don’t just stop at yield, but we also look at a profit and that’s a really important distinction, because higher yields don’t always mean higher profits. A farmer could be planting a very high producing coffee variety, but it also requires a lot of inputs that go into the system, and so sometimes a farmer would be better off if they’re planting a variety that is lower-yielding but also has less demand in terms of the cost of production. On a global level, we are planning to put trials in over 30 countries and in each of these countries, we’re going to place between 10 to 17 trials and in each of the trials we have nine separate plots where we’re collecting data. So, what I’m getting at here is there’s a lot of data that’s coming from these trials. A lot of a rich data that’s contributing to this data set and so we’ll be able to do a lot of different things with this data.

On a global level will be able to monitor and track the weather patterns and the disease and pest spread globally over time and see how it affects coffee production. Looking at the farm level, we’ll be able to have a closer look at the different agricultural practices, elevation, the weather patterns and see how they affect cup quality and production of coffee and then looking closer at profitability, we’ll be able to aggregate trials in a certain area and look at the ones that are showing to be more profitable and get a better understanding of which variables then are related to making that trial more profitable. So, as an example of this, in 2016 World Coffee Research together with agronomists and scientists from the Catholic University of Bukavu in DRC had a closer look at cropping systems in the Kivu area of DRC. In this area, coffee farmers often grow coffee together with beans or legumes and beans and legumes have interesting characters thinking that they’re able to increase the nitrogen in the soil.

So, what we found was that in general, when coffee was growing together with beans and legumes, the coffee benefited and the coffee had higher production.

Peter Giuliano: Danielle has a graph showing income generated in the DRC trial when coffee is grown alongside ground nuts, common beans, soybeans, cowpeas, and just coffee alone. The point to note is that the cost of production is always higher than income, except in the case when coffee is grown alongside groundnuts. This produces a small profit for farmers.

Danielle Knueppel: And we wanted to look at the profitability of these systems and so, in orange, the orange bar, you can see the total cost of production of the system and in blue you can see the total income from this system and only one of these systems was actually shown to be profitable, only the coffee and groundnut system and the reason for this is because in this year, 2015/2016 the price of groundnuts was higher. So, this is important information for farmers to know that sometimes it’s not profitable to grow coffee alone but grow it with another crop but that crop also has to be a higher value crop for that farmer. So, we’re generating a lot of information from these trials, and a lot of it is still forthcoming but this data will be very useful for many different types of people, first and foremost for farmers. It’ll help them to understand which varieties and which agricultural practices will help to make them more profitable on their farm.

For organizations and institutions that are working directly with farmers doing training’s, this information can update their training material and can be disseminated into their supply chains. For investors and credit institutions they can rest reassured that their investments and loans are backed by solid plans for increasing profit and for nurseries and input suppliers they are able to grow their own businesses by providing the coffee varieties and the inputs that farmers in their area need and in general, for all of us here, this information is important. if we want to support farmers to continue to supply coffee.

20:30 The program’s next steps 

Danielle Knueppel: So, where are we in the timeline of this program? Well, so far, we’ve planted 150 trials. In this upcoming year, we’re going to plant 250 more to bring us to 400 and then by 2022 we’ll have over 1100 trials in place globally and our data is coming in each day and we’re preparing reports for each of the trials that go out to our farmers and partners. Once we get enough trials in a certain area will be able to create regional reports and global reports based on the data. But we can’t do this alone and so, if you’re interested in supporting this type of work that goes directly to farmers, please do contact us and if you have programs where you’re working directly with farmers, we’d love to hear from you to explore doing trials together in your supply chain.

Peter Giuliano: Danielle’s picture shows a landscape of rolling mountains and green trees.

Danielle Knueppel: This last photo is of the coffee growing area in El Salvador, where we have our trial on the Enrique family farm and the trial there is one year old. We’re testing three varieties, Bourbon, Marsellesa, and Centroamericano. We’re also testing different coffee spacing, fertilization and soil conservation practices. So, I’m hopeful that the information coming from this trial and all of our network of trials will provide information to keep the next generations of coffee farmers in coffee and profitable.

Thanks.

22:30 Outro

Peter Giuliano: That was Danielle Knueppel and Enrique Magana at Re:co Symposium this past April.

Remember to check out our show notes to find a link to the YouTube video of this talk, a full episode transcript, and a link to speaker bios on the Re:co website.

Re:co Symposium and the Specialty Coffee Expo are coming to Portland in April 2020. Don’t miss the forthcoming early-bird ticket release – find us on social media or sign up for our monthly newsletter to keep up-to-date with all our announcements.

This has been an episode of the Re:co Podcast, brought to you by the members of the Specialty Coffee Association, and supported by Toddy.

 

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