An essential cultural asset deserves a fair price

Fair commodity prices are the key to providing millions of farmers in Ethiopia with a Living Income. GIZ works with different stakeholders in the coffee value chain – from shelf to field– to achieve higher incomes for coffee producers.

Coffee is life

The importance of coffee for Ethiopia’s economy and culture cannot be overestimated. Coffee is the country’s number one export commodity and omnipresent in Ethiopia. Customers in small coffee shops and people at home are always enjoying freshly brewed Bunna (Amharic for coffee). Almost exclusively grown on small scale farms, coffee directly contributes to the livelihoods of about 5 million producers and their families.

In the Nono Sale district of Western Ethiopia, many lives are closely connected to the annual cycle of the coffee plant. In the dense rainforest region, coffee grows naturally under the shade of big trees. During harvest, farmers search the forests and plants for the red coffee cherries. The cherries are spread on drying tables and turned over repeatedly until they reach the correct moisture content.

“Coffee means everything for me”, says Sitina Usman, a coffee farmer from Nono Sale. She estimates that coffee alone contributes to more than 60 percent of her income, making the fluctuation of the coffee price the most important factor for her earnings. Sitina is also the chairperson of a women’s cooperative which buys coffee from female farmers in the vicinity. Coffee therefore also means empowerment and proves she can successfully maneuver in a male-dominated sector and motivate other women to follow her example.

Farmer Shenkoru Gudata's livelihood also depends on coffee. The activity of processing red coffee cherries to green coffee beans is the essence of his everyday life. Shenkoru collects wild grown coffee cherries and sells them to the cooperative he is a member of. The cherries are dried and sold to the Sorgeba Union (the regional cooperatives umbrella organisation). These sales are the most important source of income for his family.
 

What is a decent income?

Unfortunately for most coffee farmers in the area, the money they earn from coffee does not provide a decent income and barely covers basic costs. Shenkoru explains “A decent income is what you need to cover the cost of basics such as food, clean water, clothing, housing, school etc.”. He adds that the income required fluctuates from area to area. Beyond basics, a decent income should also allow people to make their own decisions about issues that affect their lives. Sitina says: “In the future, I would like to improve farming practices, increase the coffee area, start modern beekeeping and build a new house”. Even though the coffee price has surged in Ethiopia this year, she does not have enough income for such investments. Given the high inflation and skyrocketing prices for basic products she adds: “I don’t see that the increased coffee price this year has a positive impact on our life at all”. This shows that farm-gate prices must not only increase in absolute terms but also relatively to the everyday costs of basic goods. How much higher would the coffee price need to be so that farmers could have a decent standard of living?

The coffee price and a Living Income

A Living Income is the income required for a household in a particular place and time to afford a decent standard of living. Just like Shenkoru, the approach considers certain elements such as food, water, housing, education, healthcare, transport, clothing, and provision for unexpected events as a precondition for a decent standard of living. If these costs are accumulated, this results in a Living Income benchmark of EUR 2,400 per year for an Ethiopian household. As prices increase, the benchmark must be adapted to inflation and increasing costs.

Even with this year’s exceptional high coffee prices, the average income for coffee farmers like Sitina and Shenkoru is only EUR 1,970 per year. Thus, the farmers are facing an income gap of EUR 430. To close the gap, the producers must receive more for their coffee. Buyers would need to pay the Ethiopian smallholder farmers EUR 5.20 per kilogramme of green coffee beans as the so-called Living Income Reference Price (LIRP).
 

The path towards a Living Income

To promote a Living Income, the “Sustainability and Value Added in Agricultural Supply Chains in Ethiopia” (SUVASE) project supported by GIZ works with different actors along the entire value chain.

Low coffee quality is one factor for low prices. To face this challenge, the project has strengthened the existing agricultural extension services and provided training for the farmers. The relevance of good management practices is stressed by Sitina:” I will put all my effort into improving coffee quality so that I will get more income from coffee.” But high-quality coffee must also be sold to high-priced markets. This is where the cooperatives and the Sorgeba Union come into play. With support from the German cooperation, cooperatives like Shenkoru’s were successfully certified according to the EU organic standard and a traceability system was established. This makes it easier to sell coffee to international markets. The channel to do so is the Sorgeba Union, trained in marketing by the GIZ-implemented project. Last year, as a novelty, the union sold coffee to international buyers. For the first time consumers abroad could enjoy coffee which started its long journey in the forests around Nono Sale.

However, export is no guarantee that coffee is sold at high prices and that farmers receive fair shares. Reliable buyers taking responsibility to pay fair prices are needed.

Here, the LIRP provides an important and clearly communicable goal. The involvement and commitment of international coffee buyers is needed to tackle the challenge from both sides of the value chain. Therefore, the Sustainability and Value Added in Agricultural Supply Chains project cooperates with international coffee buyers, jointly working to improve the income of forest coffee producers. Such partnerships provide new marketing opportunities for the cooperatives and are an important step towards a living income for farmers.

About the Sustainability and Value Added in Agricultural Supply Chains in Ethiopia project

On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), the Sustainability and Value Added in Agricultural Supply Chains project supports from the shelf to the field, cooperating with global companies to make the coffee supply chain fair, sustainable and deforestation-free.

Author: Lars Stetter
Photographers: ©GIZ/Silas Koch
Publishing date: 27 April 2022