THE FUTURE

OF COFFEE

GLOBAL COFFEE
PLATFORM
for a sustainable coffee world

A QUICK SCAN ON IMPROVING

THE ECONOMIC VIABILITY
OF COFFEE FARMING
 VISION
A thriving and
sustainable coffee world.

MISSION
To improve the livelihoods,
ecosystems and resilience of
coffee farming communities
and the sector as a whole.
 TABLE OF
CONTENTS

Foreword 4
Objectives of study 5
Global Opportunities 6
Brazil 7
Colombia 8
Ethiopia 9
Honduras 10
Indonesia 11
Kenya 12
Nicaragua 13
Perú 14
Tanzania 15
Uganda 16
Vietnam 17
Acknowledgements and sources 18
 FOREWORD

Key stakeholders in the coffee sector and

the Global Coffee Platform have identified
the economic viability of coffee farming as
a key issue to address towards long-term
sustainability of the sector.

While a lot of data has been gathered over

the years, it is often inconsistent and difficult
to draw common conclusions with which to
galvanize collective action. GCP together with
Technoserve have developed this quick scan
on small-holder coffee production to focus on
potential actions to improve profitability at
the farm-level by improving productivity and
price and reducing costs.

The study worked with the existing national

platforms as well as global organizations to
gather data and proposals covering eleven
countries: Brazil, Colombia, Honduras,
Nicaragua, Peru, Indonesia, Vietnam,
Ethiopia, Kenya, Tanzania and Uganda.

We hope that this quick scan will catalyze

action to address the root causes of issues
facing the economic viability of coffee farming
families around the world. Together through
public-private dialogue and coordinated
action with key stakeholders we can help
ensure thriving livelihoods, conservation of
nature and long term supply of quality coffee!
 OBJECTIVES DR
AF
OF STUDY T
OVERALL
Identify opportunities for potential benefits to coffee
farmers from improved farm profitability and increased
efficiency along the supply chain

1 Understand overall farm-level
financial benefits for the domi-
nant farmer type in each country
and how they compare to other
countries
DETAILED
2 Describe the main green coffee
supply chain in each country at
a high level to understand supply
chain efficiency
3 Highlight key opportunities to
increase farmer profitability in
each country and explore next
steps to increase value add for
farmers and the industry

GLOBAL OPPORTUNITIES
Yield Quality Cost Supply chain
improvements improvements reduction efficiency

|| Yields could be increased
(from 10% in Vietnam to
100% in Peru) by improv-
ing agronomy practices
(e.g., rejuvenation/prun-
ing, weeding, mulching) in
many countries including
Peru, Nicaragua, Tanza-
nia, Ethiopia, Kenya, Indo-
nesia, and Uganda
|| Achieving these yield in-
creases across the 11 coun-
tries in the study would add
2.5 million MT of annual
production by 2027 and
generate $2 billion addi-
tional farmer income an-
nually at current price levels
|| Training of smallholder
coffee farmers, delivering
hands-on instruction to
small groups on a month-
ly basis, offer lasting im-
pact on yield and farming
practices
|| Arabica farmers at high-
er altitudes can increase
incomes through quality
improvement, with op-
portunities for the great-
est number of farmers in
Ethiopia and Indonesia
|| Achieving quality im-
provements across six pri-
ority countries in the study
would generate $200
million additional farmer
income annually
|| Changes to trading sys-
tems are required to in-
centivize quality improve-
ments in some origins
(e.g. Indonesia, Hon-
duras, Peru) and some
farmers require access
to central wet mills to im-
prove quality (e.g. Ethio-
pia, Tanzania)
|| There are opportunities || Government policies that
in Vietnam to implement stimulate competition
cost reduction strategies, and reduce costs for pri-
especially in irrigation vate sector players will
and fertilization, with increase the share of the
minimal impact on yield. export price captured by
Lower production costs farmers
would raise net income
for farmers
|| To increase yields, farm-
ers in other countries will
bear additional labor
and non-labor costs,
though production costs
on a per pound basis will
decrease
 FCALL
T FOR NEXT STEPS
RA
D Common
production
indicators
|| There is a wide disparity
of understanding on ba-
sic production indicators,
even within origins. Hav-
ing access to basic produc-
tion benchmarking data is
essential to enable industry
stakeholders to make fact-
based decisions.
|| The ability to review an-
nual indicators and to
understand the drivers
of annual variance, is re-
quired for a benchmark-
ing exercise to be useful.
|| Decisions are required on
whom should contribute
to this benchmarking ex-
ercise, which key produc-
tion indicators to include,
and the methodologies/
definitions for indicators.
Regulatory
environment
|| National and regional
policies have driven many
of the differences in sup-
ply chain efficiency.
|| In cases where there are
opportunities to increase
supply chain efficiency,
we encourage stakehold-
ers to assess removing
controls and liberalizing
the sector.
|| Creating effective reg-
ulation and support for
inputs (e.g., fertilizer), as
needed, is critical.
Extension
services
|| Both extension services
and technical assistance
are essential to improv-
ing farmers’ awareness
of and adoption of local
best practices.
|| Training programs fea-
turing community trainers
and hands-on instruction
delivered to small training
groups on a monthly basis
offer lasting impact on yield
and farming practices.
Research
|| In order to ensure the
continued financial at-
tractiveness of farming,
stakeholders must com-
mit to piloting new tech-
nologies and systems.
While all innovations may
not be appropriate for
each country, price volatil-
ity requires that we ensure
coffee farming remain a
viable option for farmers
over the long term.

SIGNIFICANT POTENTIAL TO INCREASE

NET INCOMES POSSIBLE ACROSS ORIGINS
Potential increase in net income (US$ per farmer) by number of farmers (millions)

179
+ Total value add (Mio. $ US)

Yield improvements

521 133
Quality improvements

Certification
390
48
104 19
573 76
114 55

ET ID VN PE BR UG TZ CO KE HN NI

|| Yield improvements are the most || Quality premiums fluctuate with the || Certification offers some opportuni-
significant way to improve farmer NYC price, over which farmers, as ties to farmers, but is not as critical in
incomes; opportunities are lower in price takers, have no control profitability improvements
countries with relatively smaller farms
(e.g., KE, UG) as compared to larger
farms (e.g., ET, ID, VN)

See appendix for detail on data sources.

6
 DR BRAZIL
AF
POTENTIAL OPPORTUNITIES T
Potential for yield Improved Supply chain Other
improvements processing efficiency opportunities

Potential annual value add of $133m across 129k farmers

|| There is modest potential
for value add from yield
increases of up to 30%
over five years for small
Arabica farms, up from 27
bags / ha currently
|| Key practices for this
subset include optimized
fertilization, concentrated
planting densities, prun-
ing, and tree cycle man-
agement / stumping
|| Production costs have been
increasing over the past
decade; improvements
in yield can amortize fixed
costs. Mechanization or
outsourcing of on-farm
processing may reduce la-
bor costs. A detailed study
is necessary to understand
the level of productivity is
financially viable based on
a break-even analysis
|| There is modest oppor- || Farmers receive a high || Though this scan focuses
tunity for value add from portion of the FOB price on non-mechanized Ara-
improved post-harvest (85%). Farmers are able bica smallholders largely
practices and attaining to independently access in Minas Gerais, there is
access to specialty market services such as process- also opportunity for value
ing and financing add in other farmer seg-
|| Centralized milling, im- ments. Productivity and
proved infrastructure, and levels of technology vary
access to machinery (e.g., from region to region
dryers, hullers) may be
alternatives for farmers || Investments in efficient
without sufficient financial use of water in irrigation
resources to make invest- presents an opportunity
ments themselves for some farmers in Cerra-
do/MG, Bahia and Espíri-
to Santo
Note: assumes that three interventions are separate and independent.
Source: TNS (2014), USDA (2016), CNC (2014), stakeholder interviews

POTENTIAL REVENUE INCREASE FROM

HIGHER YIELD AND PRICE PREMIUMS

+ =
Net income from Net income from Total net
yield improvements price premiums income increase
($ / ha) ($ / ha) ($ / ha)

+30% +2% +32%

CURRENT POTENTIAL CURRENT POTENTIAL CURRENT POTENTIAL

|| Yield is high at 27bags green / ha
|| There is potential for yield improve-
ment of 30% over five years, though
this will require investment and addi-
tional fixed and variable costs. Farm-
ers will need to perform a break-even
analysis for their own situation
|| Key issues are technology use, agri-
cultural practice adoption, and cli-
matic adaptation
|| Though the specialty market in Brazil has
been historically small, there is potential
to achieve premiums if farmers are able
to make necessary investments
|| Up to 20% of the coffee produced
by family farmers does not meet the
café duro quality level
|| There may be more opportunity for
value add for larger farms with high-
er yields
|| There is significant potential to increase
net income through improvements in
yield, given currently high yields
|| Value of access to specialty market for
Brazil coffee farmers may be an area
of additional study moving forward
|| Profitability can be unpredictable due
to external factors, such as price, cli-
mate and FX

Note: assumes that three interventions are separate and independent.

Source: TNS (2014), USDA (2016), CNC (2014), stakeholder interviews
7
 FT COLOMBIA
RA
D POTENTIAL OPPORTUNITIES
Adoption of
Potential for yield Access to improved post- Certification
improvements specialty market harvest practices premiums

Potential annual value add of $76m across 235k farmers

|| There is high potential for || There may be potential || There is limited potential
|| There is some potential
value add through yield for value add through for value add through
for value add through
improvements of 20-25%. premiums for specialty certification premiums.
better post-harvest prac-
coffee.
|| Best practices have been tices. 80% of defects || Colombia already has
well-established by actors || Demand for specialty cof- occur post-harvest, but a high proportion of
such as FNC and Cenicafé fee has increased and 10- incentive structures are sustainable coffee pro-
20% of exports are sold as not strong enough to en- duction (~60%); sales of
|| Increases in productiv- differentiated. However, courage change in exist- certified coffee have yet
ity will allow farmers to farmers must receive suf- ing practices to absorb production vol-
spread costs over higher ficient incentives through umes
volumes and offer com- || Addressing this quality
the supply chain to make
petitive prices for UGQ gap could bring signifi- || Important to consider to
this differentiation profit-
quality levels compared cant added value to pro- what degree certification
able
with other countries ducers, particularly as premiums allow farmers
current extension services to absorb social and envi-
are focused on improving ronmental costs
yield

Source: Potts et al (2014), FNC (2016), www.procolombia.co, Innovakit (2016), stakeholder interviews
Reviewed with the following: Solidaridad

POTENTIAL REVENUE INCREASE FROM

HIGHER YIELD AND PRICE PREMIUMS

+ =
Net income from Net income from Total net
yield improvements price premiums income increase
($ / ha) ($ / ha) ($ / ha)

+87% +2% +89%

CURRENT POTENTIAL CURRENT POTENTIAL CURRENT POTENTIAL

|| Potential increase in yield of 20% || Though farmers may receive price || There is significant opportunity for val-
(from current yield of 2,016lb/ha) premiums from improvement in post ue add through yield improvements.
through: harvest practices and access to spe-
cialty market, size of the market is un- || Though specialty coffee production
|| Optimized fertilization clear and is estimated to be only 10% may also be another opportunity for
|| Integrated pest management of the current production volume. value add, though supply/demand
dynamics and price premiums will
|| Effective shade mgmt. need to be explored further moving
|| Targeted rejuvenation forward
|| Best practices are well-estab-
lished but not fully adopted

Note: assumes that three interventions are separate and independent.

Source: Solidaridad (2014), IDH and TechnoServe (2014); FNC (2016), USDA (2016), García et al (2014)
8
 ETHIOPIA DR
AF
T
POTENTIAL OPPORTUNITIES
Potential for yield Demand for Certification Supply chain
improvements washed coffee premiums efficiencies
Potential annual value add of $548m across 2m farmers
|| There is high potential for || There is modest potential || There is limited potential || Farm-gate price is ~60%
value add through yield for value add through for value add through of the FOB price, suggest-
improvements. Yields are processing improve- certification premiums. ing that there is potential
low at 378 kg green / ha ments, primarily through for improving efficiencies
and there is potential to conversion to washed || Though demand for sus- in the supply chain
double yields. coffee. tainable coffee globally
was 40% in 2012 and 95% || Recently announced po-
|| Key levers include farm || Conversion to washed of Ethiopian production is tential reforms of the Ethi-
rejuvenation and adop- coffee presents a signifi- organic, only 10% of the opian Coffee Exchange
tion of best practices, sug- cant value-adding lever Ethiopian coffee supply is will impact coffee farm-
gesting need for training for both farmers and the traceable and thus eligi- ers.
for smallholder farmers industry, but requires in- ble for certification*
vestments at scale for wet
milling.

* Source: ICO (2014)

Reviewed with the following: [local stakeholders]

POTENTIAL REVENUE INCREASE FROM

HIGHER YIELD AND PRICE PREMIUMS

+ =
Net income from Net income from Total net
yield improvements price premiums income increase
($ / ha) ($ / ha) ($ / ha)

+92% +22% +114%

CURRENT POTENTIAL CURRENT POTENTIAL CURRENT POTENTIAL

|| Production is below potential with || Sales prices will increase by switching || While there is significant opportunity
yields averaging 378kg green / ha from unwashed to fully washed cof- to increase incomes through yield,
fee through wet milling price premiums are also an import-
|| Key lever for yield improvement ant component
include: || Quality improvements at hulling sta-
tions for unwashed coffee can also
|| Rejuvenation by stumping lead to higher prices
|| Adoption of best practices such
as weeding, composting, and || While 95% of production is organic,
shade management regulations limit volume that is certi-
fied as such

Note: assumes that three interventions are separate and independent.

Source: TNS (2014), Agr-Logic (2016), stakeholder interviews
9
 FT HONDURAS
RA
D POTENTIAL OPPORTUNITIES
Potential for yield
improvements
Potential annual value add of $104m across 96k farmers
|| There is modest potential for value
add through yield improvements.
|| Honduras has seen an increase in
production in the past several years,
but there is potential to improve
yields by 44%. Prior to the outbreak
of La Roya, Honduras was on track to
become a top Arabica producer
|| Key issues for farmers moving forward
would be mitigating the risks of coffee
rust and climate change, as well as
access to finance to do so, especially
as farmers are reporting higher inci-
dences of coffee leaf rust.
POTENTIAL REVENUE INCREASE FROM
HIGHER YIELD AND PRICE PREMIUMS
Net income from
yield improvements
($ / ha)
+31%
CURRENT
|| Honduras has seen an increase in
production the past several years, but
there is still potential to improve yields
by 45%.
|| Managing risks of coffee rust and po-
tential droughts will be key in farmer
livelihoods in the next few years.
Note: assumes that three interventions are separate and independent.
Source: TNS (2014), USDA (2016), stakeholder interviews
Price premiums from Supply chain
improved processing efficiency
|| There is limited potential for value || Farmers receive about 75% of the
add through improved processing. FOB price. By selling in dry parchment
and/or selling directly to exporters,
|| Most of Honduran coffee is grown at farmers are able to capture a greater
altitudes of 2,900 feet above sea level share of the margin.
or higher and is well-placed to access
the specialty coffee market. However,
because the majority of farmers sell
their coffee in wet parchment and sell
to intermediaries, they are not able to
capture this premium.
Reviewed with the following: [local stakeholders]
+ =
Net income from Total net
price premiums income increase
($ / ha) ($ / ha)
+6% +37%
POTENTIAL CURRENT POTENTIAL CURRENT POTENTIAL
|| There is potential to attain price pre- || There is potential to increase net in-
miums by accessing the specialty come to farmers through yield im-
coffee market. The majority of farm- provements.
ers (84%) grow coffee at altitudes of
2,900 feet above sea level or higher, || By drying coffee on farm and selling
making them eligible for specialty as dry parchment, potentially directly
coffee. to exporters, farmers will be able to
capture a greater share of the mar-
|| However, farmers often sell coffee as gin.
wet parchment, which prevents them
from capturing this premium.
10
 INDONESIA DR
AF
T
POTENTIAL OPPORTUNITIES
Potential for yield Improved Supply chain Other
improvements processing efficiency opportunities

Potential annual value add of $521m across 507k farmers

|| There is high potential for || There is modest potential || There is limited potential || Growth has been fo-
value add from yield im- for value add from im- for value add through cused on Arabica and
provements for Robusta proved processing. supply chain efficiency. soluble exports in the past
smallholders in Southern several years, suggesting
Sumatra. || Industry experts estimate || Farmers receive a high potential for value add to
as high as 20% of value is portion of the export price farmers, though outside
|| Yields are low (700 kg lost through post-harvest- ( 80%). However, the the scope of this study.
/ ha) in comparison to ing. However, currently supply chain is quite frag-
Vietnam with potential to farmers are not incentiv- mented due to involve-
double ized to improve process- ment of local collectors.
ing as they are often not Further efficiencies within
|| Farmers use low-yielding paid for quality. the supply chain may be
techniques to minimize possible at the collector
labor costs, fertilizer us- level.
age, and irrigation. Effec-
tive pruning and stump-
ing would improve yields,
but impact short-term
cash flow.
Reviewed with the following: [local stakeholders]

POTENTIAL REVENUE INCREASE FROM

HIGHER YIELD AND PRICE PREMIUMS

+ =
Net income from Net income from Total net
yield improvements price premiums income increase
($ / ha) ($ / ha) ($ / ha)

+88% +15% +102%

CURRENT POTENTIAL CURRENT POTENTIAL CURRENT POTENTIAL

|| Production is low at 700kg / ha with || Farmers sell in unsorted green beans || There is potential to increase value
potential to double yields (asalan), normally after paying a fee add to farmers from improving yield.
hull their coffee. Investment in proper Farmers currently prefer low-yielding
|| Key levers for yield improvement are: drying can increase incomes for farm- techniques that require less costs and
ers, but current price structure allows inputs. Pruning and stumping lower
|| Adoption of good agricultural prac-
little incentive to improve processing. production and directly impact short-
tices (key issue is low skills of farmers)
term cash flows, which inhibits adop-
|| Low farmer output and the dispersed tion
|| Farm rejuvenation (trees tend to be
production base make certification
old with high tree density)
and sustainability programs expen-
sive

Note: assumes that three interventions are separate and independent.

Source: TNS (2014), USDA (2016), stakeholder interviews
11
 FT KENYA
RA
D POTENTIAL OPPORTUNITIES
Potential Reduced Reduced processing Price premiums
for yield production costs costs and improved from processing
improvements at the farmer level supply chain improvements
Potential annual value add of $55m across 571k farmers
|| There is high potential for || There is moderate poten- || There is moderate po- || There is modest potential
value add through yield tial for value add through tential to increase value for farmers to attain price
improvements. Yields are reduction in costs (esti- add to both farmers and premiums through pro-
low at 300 kg green / ha mated 10% of input costs cooperatives through re- cessing improvements,
and could be increased saved). duced processing costs. as current quality is quite
by 65% on average. high, though there is
|| Production costs are high. || Smallholders can only
room to improve process-
|| Production volume is In particular, farmers tend process through coop-
ing and minimize loss of
decreasing as the sector to buy and use more erative wet mills, which
quality.
faces competition from agro-inputs than neces- have relatively high cost
housing developments sary, which leads to high structures, which may
and other enterprises production costs. limit farmers’ share of the
in the traditional coffee FOB price
growing areas
|| Timeliness of payments
to farmers could help
them avoid cash short-
falls

* Source: ICO (2014)

Reviewed with the following: [local stakeholders]

POTENTIAL REVENUE INCREASE FROM

HIGHER YIELD AND PRICE PREMIUMS

+ =
Net income from Net income from Total net
yield improvements price premiums income increase
($ / ha) ($ / ha) ($ / ha)

+138% +6% +144%

CURRENT POTENTIAL CURRENT POTENTIAL CURRENT POTENTIAL

|| Production is low at 300 kg green / || There is modest potential for farm- || There is significant potential to in-
ha, with potential for a 65% increase ers to attain higher price premiums if crease yields in Kenya at a net re-
in yield on average. This potential wet mills could achieve better quality duction in production costs, as most
may be higher for regions with poor- through improvements in processing farmers in Kenya tend to use fertilizer
er soil and older trees, such as East of practices.* inefficiently.
Rift.
|| There is modest potential for value
|| Key levers for yield improvement in- add through processing improve-
clude farm rejuvenation and more ments.
efficient use of inputs.

* Cooperative-level investments beyond the scope of this study; only increase in price for farmers modelled.
Note: assumes that three interventions are separate and independent.
Source: TNS (2017), Agr-Logic (2016), SSIR (2014), stakeholder interviews 12

POTENTIAL OPPORTUNITIES
Potential for yield
improvements
|| There is high potential for value add
through yield improvements.
|| Yields are low at 1,151 lb green /ha,
with potential to increase yields by
35%.
|| Key levers include farm rejuvenation
and adoption of best practices, sug-
gesting a gap in smallholder farmers’
access to credit and training pro-
grams
|| Production is recovering coffee rust in
2013/14 that reduced coffee produc-
tion by 25%
POTENTIAL REVENUE INCREASE FROM
HIGHER YIELD AND PRICE PREMIUMS
Net income from
yield improvements
($ / ha)
+64%
CURRENT
|| Productivity is low at about 1,151 lb
green /ha.
|| Key issues are:
|| limited access to credit that dis-
courages farmers from using in-
puts or renovation
|| Lack of adoption of GAP
|| Production is recovering coffee rust in
2013/14 that reduced coffee produc-
tion by 25%
Note: assumes that three interventions are separate and independent.
Source: TNS (2014), USDA (2017), stakeholder interviews
NICARAGUA DR
AF
T
Price premiums from Supply chain
improved processing efficiency
Potential annual value add of $17m across 42k farmers
|| There is limited potential for value || Farmers receive only about 49% of
add through improved processing the export price and the supply chain
involves a number of intermediaries
|| Nicaraguan coffee is shade-grown
and is well-placed to qualify as spe- || By selling in dry parchment and/or
cialty coffee. However, farmers are selling directly to exporters, farmers
not currently incentivized to invest in are able to capture a greater share of
quality improvements as they are the margin.
unable to capture the associated pre-
mium
Reviewed with the following: [local stakeholders]
+ =
Net income from Total net
price premiums income increase
($ / ha) ($ / ha)
+17% 81%
POTENTIAL CURRENT POTENTIAL CURRENT POTENTIAL
|| There is potential to attain price pre- || There is potential to increase net in-
miums by accessing the specialty come to farmers through yield im-
coffee market, as a significant portion provements.
of coffee is shade-grown at high alti-
tudes. || There is potential to increase net in-
come to farmers through improved
|| However, current supply chain processing and access to specialty
doesn’t incentivize farmer to invest in markets, though farmers may not be
quality as they are unable to capture incentivized to do so currently.
price premiums
13
 FT PERÚ
RA
D POTENTIAL OPPORTUNITIES
Potential for yield
improvements
Potential annual value add of $233m across 144k farmers
|| There is high potential for value add
from yield improvements. Yields can
be doubled at minimal cost, primarily
through adoption of good agricultur-
al practices such as fertilization and
pruning.
|| Cost of production for smallholders
tend to be high due to low productiv-
ity. Improving yields can offset fixed
costs and increase profit.
POTENTIAL REVENUE INCREASE FROM
HIGHER YIELD AND PRICE PREMIUMS
Net income from
yield improvements
($ / ha)
+562
CURRENT
|| Yields are low among smallholders in
Peru at 1,200 lb green / ha. In combi-
nation with high production costs, this
translates to a low farmer income
|| There is potential to double yields
from adoption of good agricultural
practices, particularly fertilization and
pruning, and selective harvesting.
Note: assumes that three interventions are separate and independent.
Source: TNS (2014), USDA (2016), stakeholder interviews
Improved
processing
|| There is modest potential value add
from processing improvements.
Most smallholders process coffee on
farm, leading to significant loss in
quality
|| Improving processing and selective
harvesting can allow farmers to attain
price premiums for specialty coffee
Reviewed with the following: [local stakeholders]
+ =
Net income from
price premiums
($ / ha)
+27
POTENTIAL CURRENT
|| There is potential to attain specialty
coffee price premiums as 75% of the
production is grown above 1,000 m
above sea level
|| Currently, farmers process coffee on
farm and sell in dry parchment, which
leads to a significant loss in quality.
|| Quality can be improved through se-
lective harvesting and proper drying
and strorage.
14
Supply chain
efficiency
|| Farmers receive 85% of the export
price, though there is variation across
regions.
|| Though outside the scope of this
study, there may be some potential
to improve supply chain efficiency by
organizing farmers into cooperatives
to collectively process and aggregate
coffee; others may prefer to remain
independent.
Total net
income increase
($ / ha)
+589
POTENTIAL CURRENT POTENTIAL
|| There is high potential to increase net
income to farmers through yield im-
provements.
|| By improving on-farm processing,
farmers would be able to achieve
price premiums for specialty coffee.
 TANZANIA DR
AF
T
POTENTIAL OPPORTUNITIES
Potential for yield Price premiums Opportunity
improvements in from improved Supply chain in Robusta
Arabica processing efficiency production
Potential annual value add of $134m across 220k farmers
|| There is high potential for || There is moderate poten- || Though this study focuses
value add through yield tial for value add through || Farmer share of the on Arabica smallholders,
improvements. improved processing. export price is low at there is also potential to
55-60%. Taxes are also improve yields and in-
|| Yields are currently low at || Tanzanian Arabica coffee relatively high at 10-20%. crease value to farmers
449 kg green / ha for Ara- has potential to achieve There is potential for val- in Robusta production,
bica smallholders. higher premiums for ue add through improve- which accounts for 40-
quality, but lack of consis- ments in the supply chain. 50% of the production.
|| Key levers are farm re- tent quality due to home
juvenation, adoption processing is an obstacle.
of best practices, and
access to climate smart
planting materials and
affordable inputs. The
Tanzanian government
is implementing its cof-
fee sector strategic plan
to increase production to
100,000 MT by 2020.

Reviewed with the following: [local stakeholders]

POTENTIAL REVENUE INCREASE FROM

HIGHER YIELD AND PRICE PREMIUMS

+ =
Net income from Net income from Total net
yield improvements price premiums income increase
($ / ha) ($ / ha) ($ / ha)

+85% +7% +92%

CURRENT POTENTIAL CURRENT POTENTIAL CURRENT POTENTIAL

|| Productivity is average to low at 449 || There is potential to improve process- || There is potential to increase yields
kg green / ha for Arabica farmers ing and increase price premiums at a through good agricultural practices
and could be increased relatively low cost. and farm rejuvenation, suggesting
need for access to credit and training.
|| Key issues are: || Tanzanian coffee production has the
potential to yield high quality coffee, || There is potential to improve process-
|| Low adoption of good agricultur- but lack of consistent quality due to ing and thus attain higher premiums
al practices, such as fertilizer us- home processing tends to limit price for farmers.
age and pest/disease control differentials.
|| High number of older coffee trees

Note: assumes that three interventions are separate and independent.

Source: TNS (2014), Agri-Logic (2016), USDA (2017), stakeholder interviews
15
 FT UGANDA
RA
D POTENTIAL OPPORTUNITIES
Potential for yield
improvements
Potential annual value add of $74m across 1.16m farmers
|| There is high potential to value add
through yield improvements.
|| Yields comparatively low at 625 kg
green / ha and could be increased
by 86%.
|| There is potential for investments to
produce and distribute improved va-
rieties/seedlings, offer extension sup-
port, improve access to inputs, and
adopt improve agronomic practices.
|| Key levers include farm rejuvenation
and adoption of best practices, sug-
gesting need for additional training
for smallholder farmers
POTENTIAL REVENUE INCREASE FROM
HIGHER YIELD AND PRICE PREMIUMS
Net income from
yield improvements
($ / ha)
+63%
CURRENT
|| Production is higher than other coun-
tries at 20-25 bags / ha. However,
costs continue to rise quickly and
smaller, less mechanized farms may
struggle
|| There is potential to increase yields by
50%
|| Key issues are low use of technology
and low levels of good agricultural
practices.
Note: assumes that three interventions are separate and independent.
Source: TNS (2013), Agri-Logic (2016), USDA (2017), Omukwano (2010)
Potential for
improved processing
|| There is limited potential for value
add through hulling improvements
by improving conversion ratios.
|| Though not modelled in this study, if
farmers are able to hull independent-
ly through farmer groups, they can in-
crease revenue.
* Source: ICO (2014)
Reviewed with the following: [local stakeholders]
+ Net income from
price premiums
($ / ha)
+1%
POTENTIAL CURRENT
|| Though the specialty market in Brazil
has been historically small, there is
potential to achieve significant premi-
ums if farmers are able to make the
investment necessary, especially for
smaller farms in this archetype.
|| There may be more opportunity for
value add for bigger farms with high-
er yields.
16
Certification
premiums
|| There is limited potential for value
add through certification.
|| An estimated 20% of Ugandan sup-
ply is certified, but a relatively small
portion of the supply is sold as such,
implying that supply exceeds de-
mand
|| Though there may be some value to
farmers in certification premiums,
small farm sizes and high fixed costs
make the financial returns more diffi-
cult than in other markets
= Total net
income increase
($ / ha)
+64%
POTENTIAL CURRENT POTENTIAL
|| There is significant potential to in-
crease net income through improve-
ments in yield, given currently high
yields.
|| Value of access to specialty market for
Brazil coffee farmers may be an area
of additional study moving forward.
 VIETNAM DR
AF
T
POTENTIAL OPPORTUNITIES
Preventing
Lowering Certification Supply chain environmental
production costs premiums efficiency degradation
Potential annual value add of $390m across 573k farmers
|| Current farming practic-
|| There is moderate poten- || There is limited potential || Farmers receive a high es threaten long-term
tial for value add from for value add from price portion of the FOB price, sustainability of coffee
lowering production costs premiums. with farmer share around production from over-ir-
and increasing yields. 95%, making Vietnam the rigation. Reducing water
|| Certification premiums may most cost-efficient coffee usage and improving
|| Yields in Vietnam are very be an opportunity to add supply chain in the world. fertilization practices also
high, though there is po- value for individual farm-
mitigates long-term risk
tential for a 10% improve- ers. However, certifications
to coffee production and
ment in yield. However, are already quite prevalent
environmental degrada-
farmers tend to over-irri- among farmers, present-
tion
gate and over-fertilize ing a smaller opportunity
for sectoral change.

|| Beyond premiums, cer-

tification programs can
be a catalyst for other
levers of change, such as
yield improvements and
reduction of costs.
Reviewed with the following: [local stakeholders]

POTENTIAL REVENUE INCREASE FROM

LOWER PRODUCTION COSTS
Net income from
lower production costs
($ / ha)

+53%
+
Net income from
price premiums
($ / ha)

0%
= Total net
income increase
($ / ha)

+54%

CURRENT POTENTIAL CURRENT POTENTIAL CURRENT POTENTIAL

|| Yields are high at 2.4 tons / ha, but || Farmers can improve post-harvest || There is potential to increase net in-
there is potential to increase yields, practices to minimize defects and im- come for farmers by lowering produc-
particularly through new varieties. prove quality. tion costs
Appropriate timing of picking and
selling can also improve yields. || Though potential for certification pre- || There is some potential to achieve
miums is limited, farmers are able price premiums through certification,
|| Reduction in costs through improved to access training and reduce costs but given the prevalence of certifica-
practices in irrigation, fertilization, through certification programs. tion schemes already, there is less po-
and use of labor can improve profit- tential for overall value add
ability without adverse effect to yields.

Note: assumes that three interventions are separate and independent.

Source: TNS (2014), USDA (2016), stakeholder interviews
17
 ACKNOWLEDGEMENTS
AND SOURCES

Limitations on methodology
This scan is intended to initiate conversations between coffee origins, rather than to be an exhaustive study of farmer economics. The data in
this draft is drawn from studies executed by universities, non-profit organizations, government entities, and interviews with industry experts.

Since national averages of production indicators do not represent real farmers our scan focuses on one farmer type within each origin. These
farmer types are not representative of the national averages and opportunities may not be uniform within each farmer type.

As this is a preliminary draft, some key stakeholders have not had the opportunity to review the materials in depth. We look forward to
including input and data from additional stakeholders over the coming weeks. Please contact Juli Cho (hcho@tns.org) if you have additional
questions or comments.

Acknowledgments
Asociación de Cafés Especiales de Nicaragua, Bernhard Rothfos, Cafe Africa, Cámera Café de Perú, Coinca, ECOM, EDF Man, Enveritas,
Federación nacional de cafeteros de Colombia, Hanns R. Neumann Stiftung, Heifer International, IDH, JDE, Nespresso, Solidaridad, USAID

About the Global Coffee Platform

The GCP is the leading facilitator of the coffee sector’s journey towards sustainability. The GCP improves the livelihoods, ecosystems and re-
silience of coffee farming communities and the sector as a whole by enabling producers, international roasters, governments, traders, and
NGOs to align and multiply their efforts and investments, collectively act on local priorities and critical issues, and grow and scale successful
sustainability initiatives across the coffee world.

About TechnoServe
TechnoServe works with enterprising men and women in the developing world to build competitive farms, businesses and industries. A non-
profit organization operating in 29 countries, TechnoServe is a leader in harnessing the power of the private sector to help people lift them-
selves out of poverty. By linking people to information, capital and markets, we have helped millions to create lasting prosperity for their families
and communities.

18
 GLOBAL COFFEE
SUSTAINABILITY
CONFERENCE2017

SECURING THE ECONOMIC

VIABILITY OF COFFEE
Join the most important
coffee sustainability event of the year

4-5TH October Geneva, Switzerland

The Global Coffee Sustainability

Conference 2017 is your chance to:
The economic viability of farming underpins the entire coffee sector. • Network with top sustainability professionals

That’s why this year’s Global Coffee Sustainability Conference focus- • Build relationships and find partners to share the costs and
es on practical, concrete action - from improving farm profitability boost the impact of sustainability programmes
to price and margin distribution along supply chains and effectively
adapting to climate change. • Make your voice heard globally

• Showcase your sustainability work – or get started on your

journey

19
© 2017 — GLOBAL COFFEE PLATFORM

www.globalcoffeeplatform.org