Friday, September 29, 2006

 

Travelling Willbury

I've been hitting the road hard in the last month - Dubai, San Francisco, Bangkok, Laos and back to Dubai in a couple days - and we're almost ready for the harvest. The trip was all about getting demand contracted for the coming season, and, as usual, Thanksgiving came through. In addition to the two containers of arabica they have ordered, we are talking with the good folks at AlterEco in France about an additional container. Visiting Thanksgiving is always a pleasure partly because of the great people but also because of the beautiful drive through northern California that takes me to their corporate HQ in Ft. Bragg.

I can't say the same thing about the painful, traffic clogged drive to the East Bay, although the people I drove out there to visit at InterAmerican are great fun to hang out with. They are also on board this year as the import agent and have offered to help the JCFC make inroads in the UK and European markets for the following year. I was able to get some great surf in during the trip. I took a few on the head and kooked out for the first couple days (as Alex helpfully observed), but eventually muscle memory returned and I had some fun.

We are still waiting on word from the financing partner, Rabobank, and on the Fair Trade certification annual review. Hopefully both of those important details get scheduled early next week. The focus here in Laos is on getting the seven JCFC washing stations prepared for the harvest which starts shortly. Ariya and Sin are working with the French development specialists to make sure they are not getting to bogged down by Lao bureaucracy. In two days we have a meeting with all staff from the JCFC President on down to get prepared for the next three months. If we limit the Beer Lao and the rice whiskey, all should go as planned.

Coffee prices are always a worry - when they spike during the season, farmers are tempted to sell away from the co-op. This year we have contracted with the farmers in advance at an effective price of $1.07/lb paid directly to them. I'm pretty sure that beats the majority of co-op payouts to farmer members any where in the world (i know, a bold statment, but the NY December contract is $1.07 today).

There is a huge hurricane on its way directly at us in southern Laos; we dont expect too much damage but it will pass through Vietnam first and we are hoping it leaves the coffee fields in Vietnam untouched. World wide coffee stocks are at a ten year low - about 3 months supply - so any shock to the system and prices will scream.

For those of you unfamiliar with Fair Trade I thought I would give a better view of how the program works. I think most consumers see Fair Trade as a subsidy program for poor farmers around the world. If you buy a Fair Trade product, you know the farmer that grew it/made it received a fair price. For coffee, any international trader that wants to buy coffee and market it as Fair Trade must pay a minimum of $1.26/lb or 15c above the world market price, whichever is higher. The co-op must show how it is using the money - coffee purchases, operating expenses, community development.

Some argue that this price support promotes additional coffee plantings, which should lead to larger crops and, in a free market, lower prices. I think it's important to understand that Fair Trade is built for the small scale farmer, not the entire market. Large plantations are not eligible for this program. It also requires the farmer to produce coffee at a quality level that justifies the permium, an effort not all farmers are willing to make.

Price supports, however, are just part of the program. By organizing farmers into a co-op, they can produce and sell directly to foreign buyers, avoiding the predatory pricing of local traders. The co-op gives them the scale of production necessary to fill the minimum shipping order of one container(18 tons). The farmers develop processing capabilities, training resources, and direct customer relationships - they effectively build a business. You can't imagine the excitement a small farmer with less then a half hectare of coffee gets when he can produce the coffee bean, instead of selling the cherry, and participate in a business with local prominence.

In Laos, where government resources are very limited, a successful co-op can improve its roads, schools and electric access. It gives the ethnic minorities a stronger voice in local govenrment and offers members equal participation. Some say it's a form of democracy, as they get to vote on co-op policies and officers, and some say it's simple capitalism, voting as shareholders to maximize their return. To me it's all the same: a stake in the system.

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