Buon Ma Thuot Coffee Festival, Coffee Outlook Conference
(Warning - long post)
I approached the 2013 Coffee Outlook Conference with equal parts skepticism, curiosity and hope for Vietnam's coffee future. The country faces many issues ranging from overproduction, poor processing, soil depletion, environmental degradation, drought and climate change, aging coffee trees (many planted in the 1990s), and high loan interest rates. Economic sustainability seemed to be the largest concern, as with most producing countries, coffee farmers are struggling to break even. Some have abandoned coffee in search of more lucrative crops (various other fruits and vegetables are easier to grow, harvest, process and bring to market. Coffee is a labor of love). Vietnam's government, however is beginning to take heed and is getting involved in many coffee initiatives to better support producers. This isn't pure altruism, as the country has a lot to gain from its status as one of the top coffee producers. There are many steps that coffee takes on its way to the port, and that means tax and fee revenue for government institutions. When the coffee crop suffers, so does this revenue stream.
The conference was divided into four sessions: Overview and Outlook for Coffee Sector, Innovation and Institutional Reform for Commodity Sector, Sustainable Coffee Production, and Processing to Add Value.
The Overview and Outlook segment pointed to the fact that Vietnam's level of production may have peaked last year, due to the aforementioned issues. Though this year's harvest is looking to be a big one, interested parties were forced to acknowledge that aging trees and fewer returns from the stressed-out soil are inevitable. More than one speaker said that measures must be taken to promote sustainability and add value to the country's output in order for growers to have viable income to continue.
Among the speakers was Carl Carvone of TechnoServe Ethiopia. His presentation was focused on East Africa's relatively low yield (compared to the rest of the coffee-producing world), laying out opportunities to increase the yield and the consequences of inaction. East Africa has 1.5 million hectares, while only producing 600,000 tons. This is an average of just over 400 kg of green coffee per hectare, compared to the world average of 1,250 kg/ha. He pointed to the age of the trees, with most nearly 30 years old and many more being well over 50. Most of Ethiopia's semi-forested and forested trees are over 80 years old, with many over 100! "Most farmers are not actively managing their coffee - they just harvest it."
Carvone's presentation presented some good arguments in favor of helping farmers to manage their coffee plants, namely by employing Good Agricultural Practices (GAP). The major challenge in this regard is the initial investment. Growers won't see a return on their investment for three years, he posits, as equipment investment would be about $28 (pruning shears, hacksaw, hoe), while year two would result in a yield-based loss of $78, and $40-60 for replanting and inputs for the first three years would be required. According to Carvone, the payback timeline wouldn't be realized for 7 years, "longer than many farmers are willing to wait."
"Good returns are possible for financiers who are willing to take a long-term view," he says, leading to a 25% return in 10 years, a very attractive investment. This model isn't without difficulty, either, as traders couldn't be sure that all of the volume increases will make it through their channels (side-selling, etc.). Bankers would struggle to work in remote areas and understand coffee specifics, while the Ethiopian government has a mixed record for transparency and financial management. A multilateral approach is feasible, but would require buy-in at the top levels.
A solution he proposes is to pay the farmers to invest and replant, and recoup costs through a sales levy and a scheme wonderfully laid out in detail during this part of his presentation, which I won't rehash here (feel free to ask, and I'll be happy to share the numbers).
The last part of the presentation was titled "Consequences of Inaction," in which farmers, government and coffee roasters would feel the loss in big ways. For farmers, coffee isn't a competitive source of income and they would be better off switching to other farming and non-farming activities. The government would feel the pinch through the loss of foreign revenues, the loss of jobs and the impact on the local economy. Coffee Roasters would have a hard time finding 10 million bags of East African Coffee, as most other regions are experiencing declining yields as well, while larger producers (such as Vietnam) just aren't producing the fine Arabicas to replace this huge void in the Specialty market. "Co-investment is the only option," he says, with required cooperation between Farmers, Governments, Roasters and Financial Players. Roasters can help by expressing clear purchase needs and committing, combined with co-investment (donors, public-private partnerships, etc).
Other speakers went on to highlight Vietnam's current challenges while proposing solutions toward sustainability (economic more than environmental). The presentations were very numbers-heavy, information available via some Google searching if one is so inclined.
The second segment, "Innovation and Institutional Reform for Commodity Sector," included solutions for increasing domestic coffee consumption and institutional support for Farmer's Unions and distribution of resources on sustainable production practices. There was discussion of the need for a Coffee University, such as the one in Italy, where one can attend and gain a much broader perspective and deeper understanding in many areas of the coffee production chain.
As the day went on, the conference began to run behind schedule, causing the moderators to combine segments three and four, which worked well together anyway: Sustainable Coffee Production and Processing to Add Value.
The need to improve processing at every level was acknowledged by every presenter, and greater participation in this step by growers was encouraged. Of course, infrastructural investments by government agencies were deemed crucially important.
Speakers addressing the issue of Sustainability raised some good points, particularly in the realms of certifications. Representatives from the 4C Association and UTZ were present to speak about the benefits of certifying, especially concerning access to markets. A representative from a farmer's association challenged the certification model, saying it is unfair to put the cost of certifying on the grower, who sees the least profit along the production chain. His concerns really shook some of the panel into silence until Wim Spieringhs, of UTZ, highlighted the fact that certified coffee sees markets that others don't. Gaining access to these value-added markets was a sure way to ensure visibility and a higher price for a grower's coffee. These certification logos help a product to stand out on the shelf, and are worthwhile investments in the short and long term, according to Spieringhs.
Although this answer satisfied most of the attendees and panel, the farmers didn't seem satisfied with that offering. It's not difficult to see why having growers take on the cost can be a bit unfair, although many certification agencies charge some fee to every transaction along the chain. Organic Certification, for example, costs both the grower and the roaster, who must undergo regular, stringent inspections along with relevant fees (not sure about brokers and importers, and I imagine processors must undergo inspection and fees to some degree). Maybe this is a topic for another day, but wouldn't a non-profit certification agency make sense, funding itself through development aid programs, grants, etc. - rather than making money off of the very people they're designed to help? Some agencies may already operate this way - so the question "Why must YOU be a cost to the grower?" should be directed at them specifically. (I'll be doing some research about certification agencies, institutional and cost structure - for RFA, Organic, Fair Trade, UTZ, 4C, et al. Some info available through the SCAA). Perhaps agencies should work together with governmental departments of agriculture to find a solution?
The most exciting presentation was entitled "Sustainable Coffee Production in the Context of Climate Change in Vietnam," by Dr. David D'haeze of EDE Consulting (Dak Lak office).
The first section, "Challenge - Coffee Supply Endangered," begins with a graph that shows the continued, upward trajectory of Demand along the plateauing Supply. He reminded the attendees that the demand will only increase more dramatically as the global population grows, while climate change combined with a lack of appropriate support services will make coffee production more and more difficult.
D'haeze's second point, "Climate Change Predictions in Vietnam and the Central Highlands," outlines current meteorological predictions for the coffee producing regions throughout the country. By 2060, temperature increases of 0.8 - 2.7 degrees Celsius are expected, and by 2090 the country should expect 1.4 - 4.2 degrees C increases. During the rainy season, a 33% increase of rainfall is expected by 2090, with +2-14% more extreme rainfall events. A decrease in dry season rainfall is predicted to be at around 62%. River flows are expected to increase in the North while decreasing in the South.
For the Central Highlands, specifically, days above 25 degrees Celsius are currently around 80 per year. This is predicted to be at around 94 by 2020, 134 in 2050 and 230 in the year 2100. Evapotranspiration will also increase, +8.5% between 2040 and 2059; +14.47% between 2080 and 2099. Groundwater levels will begin to decrease by 2020, "due to overexploitation and the decrease in groundwater recharge.
He presented three slides containing maps of Central Highlands Land Suitability Predictions, which displayed regions suitable for coffee production. The changes between the three were rather dramatic, particularly between 2020 and 2050, with areas shrinking by half. The altitude migration (currently 300m+ asl to 600m+ asl by 2050) of coffee farms will lead to land scarcity for producers looking to continue growing coffee.
The next slide, entitled "Vulnerability of Coffee Production in General and in Vietnam," was a flow chart showing the effect of increasing Temperatures and Wind, and the changes in Drought and Rain. These variables will affect plant metabolism, the instance of pests and diseases, and soil health, which will in turn affect price, yield and production costs. The top of the chart was simply labeled "Income." If a grower can't see coffee as a viable crop, most will simply stop producing coffee and switch to other crops or industries. This fact was not highlighted in the earlier slide which showed the increase in demand for coffee along side the plateauing of supply. The other side of the plateau, sadly, will be a decrease.
He went on to give specifics concerning the interplay of these variables and the coffee plant. Rising temperatures and higher maximum temperatures will lead to Flower Abortion (leading to fewer fruits) and a higher evapotranspiration rate (increasing the demand for irrigation). Irregular and heavy, intermittent rains will lead to poor flowerings and fruit set, increased erosion and difficulty in drying coffee post-harvest, which will lead to lower quality.
This is where Dr. D'haeze began to show his stuff. "Recommended Adaptation Tools," his next slide, recommended short, mid and long-term adaptations. "No regret measures" for the short-term included the use of ground cover (with a picture of Professor Paul Olivier's favorite, Perennial Peanut) and more efficient irrigation techniques (he mentioned Israel's use of drip irrigation, among others).
For the mid-term, he recommended that the industry begin to experiment with Centralized Drying, Drip Irrigation, the application of Hydro-polymers (which, mixed with the soil, would retain water more effectively - although he warned everyone not to just start using it, as studies haven't been completed yet, and it may have adverse effects), along with Crop Diversification and Shade Trees.
In the long-term, he suggested that the industry interests begin to cooperate more effectively to help collect more data on climate, groundwater levels and pests - cicadas in particular, which have ravaged some of the forests and are beginning to attack coffee trees (I immediately thought about cicada killers, a wasp-like insect that thrived in the Texas Gulf Coast where I grew up. They seemed to keep cicadas in check without terrorizing humans or other animal populations).
"Further Information" included a collaborative website called "The Coffee & Climate Toolbox, an extensive resource for coffee growers and other vested interests. Always a work in progress, he asked everyone to visit the site, offer data and give feedback.
In the context of climate change, the coffee growing world comes together in sharing similar concerns.
My synthesis and ideas are really inconsequential, as I'm in the research phase right now. But I do think the answers lie somewhere between working to improve the quality of Robusta for the commercial market and going full-fledged specialty with the Arabica production, using the value-added approach to make its production worthwhile. Being better-suited for much higher altitudes, it's my assumption that there shouldn't be extreme competition for land between the two varieties, as Robusta can grow at much lower climates, tolerating more heat than the delicate Arabica family.
More to come! If you really want to keep reading, visit the Coffee and Climate Toolbox and engage the global coffee community. As I've said before, no single person or entity can do the good work that coffee requires. It takes many people and organizations (pretty much all of us) striving together to make this work. Collaborate!