unionroasted blog

Series about Union Direct Trade

In previous post about Union Direct Trade we’ve talked about how we’re gathering information from smallscale coffee farmers in Huehuetenango in Guatemala. This work has been undertaken by Pascale, a masters graduate in Development Economics from Wageningen University as a research project to define how Union can have a positive impact on the lives of coffee farmers.

Pascale has been in Huehuetenango for five months and now reflects on her experiences as she completes her first period of work there and prepares to move on to Costa Rica.

Emigration was one of the coping mechanisms to deal with the coffee crisis in the late 90s. It has become the major reality of rural economies Central America.

Of the 87 households I’ve interviewed here in Huehuetenango. I discovered that 72% have or had migrant family members. The majority immigrated to the United States
(89%) and 11% to Mexico. In 40% of the cases it was the farmer (head of family) who went to the United States. The reasons for migration are: earn money to pay off debts, buy land to cultivate coffee, buying a car, or construct a house.

Although migration and the money earned from this have positive effects, such as lower poverty rates there are many social costs; broken families, a reduction in labour supply, the risk of death, injury or imprisonment from illegal border crossing, and a reduction in knowledge and skill transfer since producers are not there to teach their children how to cultivate coffee. (Steven has previously talked about the impact on the women who are left behind – Abandoned in Guatemala)

Listening to the women farmers at Todos Santos

Fair and reasonable coffee prices and long-term commitment is therefore very important for coffee producers. As the groups I interviewed indicated, knowing that they have a committed buyer such as Union Hand-Roasted Coffee gives them just and spirit to keep on working to produce high quality coffee. The previous unstable markets impeded producers from investing in their coffee fields because prices hardly covered the cost of production, it also does not make any sense investing in high quality coffee if there was no premium for quality coffee. Quality coffee requires extra labour and money investments. Only ripe cherries must be picked and traditionally pickers get paid by piece (per
quintal (46Kg) of coffee harvested). A disadvantage of paying by quintal is that workers will pick as much as possible, to earn more. To incentivise pickers to only select the ripe coffee cherries, farmers pay day labourers a higher price per day.

Although these producers in Huehuetenango are on the right track, it is important that low interest credits to fund paying for the harvest becomes available to producers.  This will reduce their cost of production increasing the profits.

Guatemala is a beautiful country, colourful, rich in culture and tradition and inhabited by a population which is generous, hospitable and hard-working. Yet, Guatemala faces many difficulties. The country is very unsafe and Huehuetenango bordering Mexico is a collection of drug traffickers. Bad road conditions, landslides and (violent) demonstrations on the roads make it difficult or sometimes impossible to travel from one place to another. Especially during the harvest this is a serious problem for those preparing their coffee for export. Hence, I have the highest respect for those working under these conditions. The farmers of La Libertad and Todos Santos have faced many barriers, but they never gave up. “For every problem there is a solution” is their motto. I believe that the fair and transparent relationship that Union Hand-Roasted Coffee has with the organizations that form these co-operatives will contribute to the development of towns in La Libertad, Chanjon and Tuiboch (Todos Santos).

boarding the bus to agronomy classes

Transparency and traceability are two important aspect of a company’s business model. Only by being transparent in the whole coffee chain, can both buyer and producer be sure that the benefits really reach the producers.

Almost Integrated into Guatemala Culture !

My next stop is going to be Costa Rica; there I anticipate the situation with farmers will be completely different. Besides the fact that the country is much more stable and is classified as a middle–development country, Costa Rica has embraced a “micro-mill revolution” which Union has talked about before and I will describe more in my next post.

Last time I introduced our Union Direct Trade and what the benefits are from working this way with our coffee sourcing. In this follow up, I want to describe the steps we are taking to address one of the main weaknesses which is lack of accountability or verifiable claims that we make.

How do we tackle this weakness?

We realise that one of the main weakness of our Union Direct Trade, was that any claims we make about the benefits of our ethical sourcing are not verifiable. Essentially we are asking our customers to take us on trust. But I wanted to see how we could take a more transparent approach to support any views we express or indeed reveal short comings that we could learn from.  We’ve addressed this in a couple of different ways. Firstly we joined the Ethical Trading Initiative  (ETI) in 2003.  This organization is made up of three types of members:

        1) Trade Unions,

        2) Non-Governmental Organizations

        3) Companies. 

Even though Union Hand-Roasted Coffee, is the smallest company within the ETI organization, I have found it a useful experience that has provided access to established learning—particularly how to implement an Ethical Trade programme. It is from the ETI that we created our Union Code of Conduct for Ethical Sourcing. This document sets out our expectation of working conditions and labour standards at the farms we source from. We directly educate and inspect coffee producers against our criteria for labour standards. And as a trained Social Auditor, when I visit producers, I actively monitor working conditions of hired labour in farms and dry mills. If I observe poor conditions (non-compliances) at a farm, my approach is to engage in communication with the farm or cooperative managers to find solutions. It is far more productive to create a corrective action plan together, rather than stop working with this producer group.

This “auditing” methodology can be a beneficial approach to take with coffee estate farm managers where the enterprise is managed to good working practices. But with smallholder farmers it certainly has limitations because, from my experience, they organize their farm work in a less formal way. Frequently, smallholders have had a limited opportunity for formal education beyond primary level, and tend not to run their farm as a disciplined business enterprise but rely on (unpaid) family labour. So we have to be realistic about what can be achieved in the short term yet still have ambitious goals for the future. Can we accurately and openly determine the benefits of Union Direct Trade for coffee farmers, and communicate this with clarity and transparency.

So, to create a robust and formal mechanism to measure the impact of our purchasing practices, we worked with students studying for their Masters’ Programme at the Institute of Sustainable Development, University of Wageningen, The Netherlands. They created a monitoring and evaluation system to record details about the lives of the coffee farmers and their workers that we trade with. This is designed as a longitudinal study (over several years) and will be investigated in the countries where we have developed Union Direct Trade. Similar published academic studies of this nature have mostly been taken for a limited time period that gives a brief snapshot. This can be misleading when analysed in isolation. We hope our approach, by gathering information over several years, and looked at in a wide frame context, may be useful to determine the impact (good or bad) of our relationships with producers, as markets and other local or world events change.

This study may reveal complexities with our relationship with these coffee farmers, that we’re currently unaware of. We cannot claim we’ll have solutions to the problems we expose but the knowledge is power and underpins the value we place on transparency. Not only can we learn about the farmers and their working conditions, but we can analyse the impact of the trading practices we undertake.

In my next blog post I’ll introduce Pascale, a Masters graduate in economic development who is now in Guatemala gathering research data for the Union Direct Trade programme

Not all coffee is born equal

The importance Jeremy and I place on our coffee sourcing reflects the essence of what Union is about. For this reason I thought it could be useful to write a very short series of blog posts describing our approach to the ethics of coffee buying.  

I am aware that the Fairtrade logo is one of the most widely recognised symbols to UK coffee consumers, even if people don’t specifically know what it means in detail. Ever since we started Union in 2002, our core ethos was to trade equitably with coffee farmers, because we believed it was the correct way to treat people and this would give us access to the high level of quality we demanded.

But over the years we found limitations in what official certified Fairtrade can achieve for us and also for the farmers we buy from, so we evolved our own coffee buying philosophy to go beyond just buying Fairtrade coffee. We call this Union Direct Trade and I want to explain what this means to us and why we invest so heavily and give so much importance to this purchasing model.

Teaching farmers at Tuiboch, Huehuetenango to cup their own coffee

What is Direct Trade?

Direct Trade is a phrase increasingly used by coffee roasters who buy (or maybe just claim to buy) their coffee straight from producers. This approach eliminates the “middlemen” who buy in the local market. In its truest sense it should also remove the traditional export and import agents although if pricing is transparent through all steps of the supply chain then local agents can indeed add value to the coffee and provide a useful service.   

As an advocate of Direct Trade we think the model can be successful because it creates mutually beneficial relationships between roasters and coffee farmers and co-operatives. We developed Union Direct Trade to endorse our authentic business relationships with coffee producers.

What does Union Direct Trade mean to farmers?

     *Enables farmers to freely negotiate price and opens up transparent costs throughout the supply chain.

     *Establishes baseline price with premiums for quality, rewarding farmers who innovate and improve the value of their coffee.

     *Develops long-term relationships enabling farmers to plan for their future.

     *Establish forward purchasing commitments so farmers can plan for successive harvests.

     *Foundation for personal relationships essential for timely knowledge about coffee quality, social and environmental concerns.

     *Supports forward financing, either direct or with specialized pre-finance agencies, for smallholders most in need.

     *Does not restrict us to certified coffee or co-operatives in the way that Fairtrade does.

     *Applies a code of conduct that addresses labour and environmental standards. 

     *Enables us to communicate the stories of coffee producers with authenticity.

     *Targets our financial resource specifically to the producers we buy from, in contrast to the general Fairtrade marketing levy.

These personal relationships enable us learn more about the nature of coffee farming from producers directly. We consider it as a code of conduct or structure which is not only beneficial to small producers, but provides the channel for us to monitor and evaluate the quality of the coffee. By nurturing these relationships, and investing through a transparent set of standards, it enables farmers to benefit financially and improve their coffee and environment. 

We believe this is the most effective way to expand economic opportunity and for smallholders to escape the commodity market by producing coffee with addded value.

Roy Solis Blanco with Steven Macatonia at San Jeronimo micromill

What is the weakness of Direct Trade?

There are many criticisms about Direct Trade purchasing particularly as it is a term that is being widely adopted with limited explanation. But apart from that the main issue is:-

• There is no external agency auditing claims that are made or checking labour and environmental standards to an accredited benchmark in the way that other certification schemes operate.

In my next blog post, I talk about how we have looked at addressing this weakness.