Tuesday, January 08, 2008


Happy New Year!

Dry Mill Filling Up
The folks at Jhai Coffee would like to wish one and all a happy 2008! We are close to collecting all of the parchment for the arabica harvest and have a few days to reflect before we begin the robusta harvest. We are happy to say that the season has progressed well, with just a few bumps, and a couple big success stories.

The customer list this year is French and New Zealand and we will ship three boxes of arabica instead of the planned four. The main reason for this change is the need to fund the new washed robusta project that starts in the next week or so. Our harvest funding partner, Rabobank, limited the JCFC to a credit line of $140,000 for the season and this can only finance four boxes.

A Rare Thing - High Elevation, Washed Robusta
The good news is that we get to start the washed robusta project - finally. NZ Aid approved the project and started funding in October. The project is being managed by the JCFC with the guidance of Bioglobal, a NZ based consulting firm. Bioglobal's team, Chris and Jenny, have loads of experience in agriculture projects and organic certification, so they are a great match for the project.

We hope to build the washed robusta production to ten boxes (a box is a 20' container, the standard shiping unit for coffee) in the next three years. The facilities are in place to handle that goal and we have our first customer this year with the trader/roaster John Burton, Ltd in Auckland. Chris completed the application for organic certification for the JCFC Co-op and expects to have a certification inspection in February. If successful, the JCFC will be able to sell organic coffee in Aus/NZ this year. Organic certification for the US and Europe will follow.

Winning this grant from NZ Aid is a big for us - and for me. It is a confirmation that we have built a sustainable cooperative with growth potential. It provides us with the resources and expertise necessary to grow, gain new certifications and new markets. And it gives the farmers what they want: improved robusta prices, since robusta makes up 80% of their plantings. It also allows me to end my role as the sole financial support for the JCFC. That is a good thing.

Real Estate Mogul
The JCFC has lots of new facilities this year: a new office in Pakse, a new dry mill in Paksong and new washing stations in every JCFC village. The office is newly painted and ready for certification inspectors and coffee buyers to pay us a visit, bottle of rice whiskey standing by. The dry mill is a beautiful old rice barn that can hold over 100 tons. We have built a processing station in front with a grading machine. Our staff is currently at the Vietnam border to pick up a new hulling machine and density separator. We now have the capacity to ship 6-8 boxes of both arabica and robusta in any season.

Great Job, Bertrand!
The French government funded project on the plateau has been the driver behind building the washing stations; they have built stations in over 30 villages including most of the JCFC villages. The genial and tireless Bertrand Sallee, the technical advisor on the French project, should be congratulated for this effort. Hours upon hours of paperwork to satisfy both French and Lao bureaucrats have resulted in empowering coffee farmers for a generation. He has also been helpful in securing the dry mill equipment for the JCFC at Wall Mart prices.

The stations are simple affairs with cement tanks for washing, pulping and fermenting the coffee cherries/beans using inexpensive Vietnamese pulpers. We have built an additional two stations in villages that were not included in the French project.

While the stations are simple to operate, there is still a lot of training that we must provide to ensure the farmers follow the quality requirements of specialty coffee. In this coming off season, we will be conducting seminars in each village to help them develop a good system for managing the flow of coffee through the station. While the farmers understand how to make specialty grade beans, they don't always understand how to create the small factory necessary to automate the process.

A Project Within a Project
The microlending project continued this year, growing from $7,000 in farmer loans to $15,000. The farmers use the money for basic essentials - school fees, food for the rainy season, repairs to the tractor. If we are successful with repayment, we expect to double agian the money for next season. We charge 1.5% per month; our funding comes from the Rabobank credit line (8% p.a.)and the balance covers non-payment (2% last year) and expenses. We hope to see other microlenders enter the market in Paksong. We would happily hand over our loan book and customer list to any qualified organization.

Crunch Time
The next few weeks will be busy. We will mill and grade three boxes of arabica, harvest and mill one box of robusta, and ship all four before the end of March. We have to have all the coffee revenues in before the Lao new year in mid April. Farmers can't throw a party without their coffee money! We will close our loan books, close up the dry mill and start working out of the Pakse office. Need to buy a beer fridge... and then head to Bali...

Monday, August 13, 2007

Keep Buying Cafe Lao...

It's been more than four months since the last post and, thankfully, I can say that we have made good progress. We have added new customers for the green beans, leased a new dry mill, and the micro credit program has doubled its loans. We are in the final stages of winning the NZ Aid contract and have seen the build out of the new washing stations funded by the French development agency. Most importantly, the staff is getting more training, more responsibility and more autonomy. I think we might be ready to scale this puppy.

We did ship two containers of coffee this year to California, but we had a french wholesaler, AlterEco, approach us asking for coffee after we had already shipped. After some consultation with Thanksgiving Coffee, we were able to send one of the containers on to France in June. We officially have two customers now, and we have received a commitment from a third and are waiting on news from a forth. The good news about Lao green beans is beginning to get out and now or biggest problem will quickly become keeping up with demand.

Last year we made about 55 tons of arabica green beans, with some sold in the local Lao market to our partner, Lao Mountain Coffee. This year we expect to almost double that production to over 100 tons, all sold at Fair Trade prices. If the robusta program has some success this year, then we can expect to add another 40 tons. This potential of 140 tons would make an enormous difference in the JCFC economics, easily covering our costs and improving an already high price paid out to the farmers.

Our old dry mill has been purchased by a Vietnamese company so we found a classic old rice storage building and we are building a processing facility next door. The Vietnamese, flush with money, are buying everything in sight in Laos, establishing large plantations on the Plateau. There presence will change the Paksong coffee farming community - more migrant laborers and higher crime rates on one hand, but maybe also a bit of technology transfer in farming techniques.

We are in the middle of the rainy season but the GM Ariya is out in the villages making loans against the coming year's harvest. We expect to make about $14,000 in loans this year, each averaging about $50 to over half of our farmers. Our goal is to reach all farmers by raising the credit facility to about $40,000 and reaching all 750 farmers we expect to have in 2009. Without question, this is one of the most important parts of the JCFC in the eyes of the farmers; money for food and school fees at fair rates.

The French funded development project on the plateau is building washing stations in 36 villages on the Plateau, including 11 of the original 12 JCFC villages. This is going to be an interesting experiment; Lao farmers tend to be a very independent lot. We will watch the participation rates closely and have our own washing station program in the villages as a backstop.

We still have a great deal of work to do with the farmers to determine how they want to use the processing stations and how they want to get paid for their coffee, within the limits of the JCFC's resources. The upshot is that it take a couple years to work out the kinks, but the overall quality of Lao coffee will only get better.

We are still waiting to hear about the NZ Aid funding proposal, but the latest word is that we have a commitment and are simply waiting on the contracts. Our partner in this effort is an NZ company called Bioglobal and they will provide all of the technical consulting we need. The money from this program will allow the JCFC to pursue organic certification, train up a new group of staffers for the villages, complete all of our equipment purchases and build out the washed robusta program, all over three years.

With the JCFC approaching the volume necessary to cover financing its own growth and the further support of the NZ Aid and Bioglobal, it looks as though our little home made development program might just hit the big leagues after all. I'm am due back in Laos in early September and then again in October for the start of the harvest - dragon boat races, farmer meetings, coffee processing, the end of the rains and a great time for trekking and riding dirt bikes.

Tuesday, March 06, 2007


Buy Some CafeLao

Season Stats: Shipments, Strained Backs and Subprime Loans
The last couple of months have been action packed - we finished up the harvest, and I toured the northern part of Laos and attended a couple weddings. We are still in the process of making the final payment to the farmers and have yet to ship our first washed robusta order, but within the next month we should have clear decks and can start planning for the coming harvest.

On reflection, the challenges, setbacks and frustrations this year have been many. I have made a very quick progression from the peninsula to the full island, I'm sad to say, and there have been a few days when I temporarily lost my marbles. But we have made huge progress and I want to salute the JCFC management and staff for working hard and more importantly for putting up with me.

The end of the harvest was hampered by early rains on the Plateau - always a difficulty because we need to keep the moisture content of the beans within a certain range. The rains are good news for the coming harvest, though. We put two containers out to sea in early March and discovered that we were off by only a marginal amount on our harvest plan for the year.

We came within a whisker of meeting the contract terms on the coffee (we had a few extra bags of smaller sized beans in the mix). The usual round of thankyous goes to Thanksgiving for being the understanding partner that it is. After three years of random guessing at costs, yields and participation rates, we feel confident we now have the information needed to plan budgets with a reasonable degree of accuracy - we should be able to meet contract terms and run the co-op business at break-even.

JCFC workers stepped up big this year: we were forced to have our huller and grader in separate buildings, requiring the workers to load and unload 60 tons of coffee four times over three weeks. Each bag of coffee weighs about 60kg and each worker weighs about 55kg. I personally moved about 5 tons and will be in physical therapy for the rest of the year. We are in the process of finding a permanent dry mill. The local governor has committed to a new place that we should be able to occupy for the next three years. Next year we should have a real assembly line, one hand on the throttle, one on a BeerLao.

We have yet to collect all of the outstanding loans from the farmers. They were supposed to use coffee to pay back the loan, but some of the farmers decided to game the system a bit. So we sent out our president, Noumalla, who has a very menacing scowl, and we expect to recover 100% of outstanding loans by the end of this month. The micro finance experiment largely succeeded: the JCFC got the coffee it contracted for and the farmers were able to avoid the local traders and their 200% interest rate.

Selling Beans, Wedding Bells and Stupid Bets
After wandering around in the dark for the last couple years, the JCFC program is beginning to see some light. There seems to be a growing awareness of Lao coffee and now that we have built capacity and gained certification, we are ready to build the customer base. We have some Glengary leads, two French buyers in particular, and a major sample shipment program in the works.

In a memorable family celebration, two JCFC workers married each other. Both come from coffee farming families and have been with the JCFC since the beginning. The party, in the village of the JCFC President Noumalla, was a serious bash. I'm pretty sure we emptied all the rice whisky stores on the Plateau. Unfortunately, at the wedding, the JCFC management reminded me of a bet I made last summer. Now that the season has ended and we did ship two containers, I have to swim across the Mekong next month.

New Toys
We have a new addition to the JCFC equipment pile: a very used Honda XL250. I took it for a test spin with Charley (she had her own bike, thank you) in the northwest province of Xayabouri (see map link ) for the first annual Elephant Festival (http://www.elefantasia.org/docs/festival/). We rode out of Vientiane, through the beautiful mountains around Vang Vieng and into Luang Prabang. From there we caught a long tail across the Mekong and traveled a remote stretch of road to Hongsa, the working elephant capital of Laos.

We thought we might get a break on our "short cut" coming back to Vientiane, but we got lost, inhaled a ton of Lao dust and did a couple circuits around the mountains before coming back into the big city. We had some minor engine problems and I broke the luggage carrier on my rig (the north face bag is still going), but I was able to find a qualified welder in Paklay, along the Mekong. After the 1500km trek, the minor engine problem turned out to be major: we are waiting on a new engine from Bangkok.

Had the Coffee Yet?
Part of my personal deal with Thanksgiving Coffee is that I help them build awareness and sell some coffee in return for their support. Fulfilling my part of the deal starts now, so if you would, go to Thanksgiving Coffee (http://test.thanksgivingcoffee.com/cafelao/index) and buy ten bags of Cafe Lao. Drink some, give them to friends, spread the news. You will receive a note from me in the coming weeks to support this great program.

Sunday, January 07, 2007


Closing In on Season Two

New Programs Seem to Be Working...
As we close in on the end of the second harvest season as a Fair Trade co-op, we are excited by the farmers' enthusiasm and passion for producing their own coffee. The apparent success of the new microfinance program, while a bit surprising, is very encouraging. We re-established both our Fair Trade and financing status. The financing from Rabobank came through at the beginning of November and the folks from Fair Trade paid us a visit in early December to perform their annual review - the status of our certification looks solid.

Our equipment partners are still buried deep in paperwork, so we took the initiative of buying all the equipment needed to get seven village communal washing stations and seven private stations up and running. The JCFC provided the pulper, collection and storage bags, drying tables and washing equipment while the farmers built the station and harvested and processed their own coffee. The JCFC has staff members supervising production throughout the harvest.

Our business model for this year targeted 60 tons of dried parchment to produce 36 tons of quality green beans. We were able to offer early season harvest loans to farmers in September, two months before harvest. The loans totaled $10,000 and gave the farmers food on their table - and gave the JCFC a better ability to plan the harvest. We now have about 54 tons of parchment, and Ariya, the General Manager, is busy buying the final 6 tons this week.

A Merchant in Venice
We had the pleasure of sending members of the JCFC to the Slow Food conference in Italy in October. The Slow Food movement (www.slowfood.com) invites farmers, restaurantuers, and retailers to participate in their Terra Madre event every other year. I can't say I'm familiar with the program, but the general idea is to celebrate our relationship with growing and preparing fresh whole foods (?). The key is the farmers had a great time - their first visit to any place outside of Southern Laos in their lives. They returned with a better understanding of how their efforts as coffee farmers connect with the global economy and they cleaned up selling Lao arts and crafts to their fellow participants!

Coffee Economics
As expected, this has been a difficult financial year with a drop in the US dollar and an increase in world coffee prices. The drop in the dollar increased our coffee costs by about ten percent, about equal to our total operating costs. The change in world coffee prices is a challenge: we have to submit Fair Trade contracts to our harvest bank for the loans in September, and the coffee price the JCFC receives is fixed at this time. However, as world prices go up during the harvest, local coffee traders are free to raise their prices to our level or higher. This is great for the farmers but a real challenge for the JCFC. Fair Trade is aware of this shortcoming and will release a new pricing strtategy this month to improve the system.

Paksong Update
We had a great visit from the Kiwi/Aussie consultants interested in building a robusta marketing program for the farmers. They will submit their proposal to the folks at New Zealand AID in March with the hope of working with the JCFC to produce multiple containers of washed robusta in the next two years. This means expanded production and greater economic efficiencies for the JCFC and even better prices for the farmers.

The coffee business in Laos is getting new investors from Vietnam. In a move reflecting the recent increase in world coffee prices, the local governor has sold about 1500 acres of coffee plantation to a Vietnamese company. The land had been planted by the local villagers. They were compensated but because they never had title to the land, they had no say in the compensation. One benefit will be the paving of the main road through the JCFC villages in the south.

Land title issues for the coffee farmers haven't historically been a problem, but with the recent increase in coffee prices, many planting companies are looking around the plateau for new land. The farmers have title to the land in their village, but much of their coffee trees are in the forests and land surrounding the village, land that is owned by the government.

Traditionally, farmers have been allowed to farm these lands. The farmers have avoided pursuing titles in the past to avoid paying taxes, and they may have been expected to pay a purchase price of some sort to the local governor. We are looking at implementing a new effort to help JCFC farmers secure titles to their coffee lands.

Happy Holidays from the JCFC Staff and Famers!

Monday, October 02, 2006


While Rome Burns

Right. We're a week from the start of harvest, and our partner in equipment purchases still hasn't filled out the triplicate forms and doesn't have the requisite three quotes on the $4 plastic buckets sold in every store in town. As usual, our crack JCFC staff is on top of the situation with resources and ingenuity. Our washing stations will be operational by the 16th, with or without our partner.

Aside from the equipment issues, we did have a very constructive meeting with our partner yesterday. For the first time ever, the Lao specialty coffee industry has a vision, a plan and the resources to execute. I suspect over the next three years, over 24 villages will have first class processing facilities and dry storage buildings - enough resources to produce the best that Lao has to offer.

The typhoon in Vietnam did some damage to the road system, so we're not sure if we can get the new pulpers that we hope to order. On the plus side, no coffee plantaions were impacted, and along with weekend rains for next year's Brazil crop, coffee prices tumbled four cents on Monday. God Bless.

Our resident rural development consultant, Emma, is visiting an ailing grandmother in the UK. Other than that the staff is well and anxious to get the payroll started for the comming harvest. I'm content with our progress and I look forward to the dragon boat festival that starts this week - the street will fill with shoppers and revelers, mostly Lao. This is a nice time to visit; the rains are still heavy but the tourists dissappear and all you see are the locals, doing their thing.

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.

Saturday, August 05, 2006


The Scramble Before Harvest

I'm back in Laos for a quick ten day review of the program's progress and, as always, I welcome the immediate relaxation that I feel on arrival. You just can't get stressed in this country! The rainy season is in full swing: lowland farmers are planting rice seedlings in knee deep water in the paddies, and the highland coffee farmers are relaxing and waiting for the sun to return to ripen the coffee cherries.

Harvest will be early this year and yields should be excellent. Ariya, Emma, Sin, the JCFC President Noumalla and I had dinner with the district governor on Friday night and he said his own Robusta harvest dropped 90% last year because of late rains and hail. Needless to say, the farmers are excited about a healthy crop this year.

The JCFC staff has been hard at work on the coming changes to the co-op's business. We will be working much more closely with the French development agency, AFD, as they implement new village processing stations in most of our villages. AFD has set up village funds on most of the plateau to provide loans for the farmers to purchase equipment. Our part of the partnership is to provide processing training and supervision in JCFC villages during the harvest to ensure quality, and market the production to Fair Trade roasters like Thanksgiving Coffee.

In the past, our centralized processing station limited our production capacity and the farmers involvement in their own co-op. With this new system, the farmers process their own coffee and maintain ownership until the coffee needs to be dry processed for export. It will also lower the co-op's operating costs, get the farmers much more involved and simplify the staff activities.

The staff can then separate coffee from all member villages and identify the best crop, processing technique and coffee care through cupping the beans. The village that produces the best coffee may be able to get a premium above the Fair Trade price and we can identify and help those villages with greater disease problems or poor processing technique. As the volunteers that support the development of the JCFC have limited funds, this arrangement is a blessing for the co-op. We are excited at the chance to grow JCFC production more quickly than expected.

With the help of our financing partner, Rabobank, the JCFC is also starting a new pre-harvest lending program. Many of our farmers run out of money towards the end of the rainy season. There is little food ready to eat from home gardens so this is known as the hungry season. The farmers will then have to pre-sell their coffee while still on the tree to local traders at half price. Rabobank has agreed to offer harvest finance a few months early, allowing the JCFC to give our farmers money at a competitive rate and still receive full price for their coffee. This year we will offer the funds in the middle of August and next year we plan to start as early as the first of July.

Finally, we are working with coffee industry consultants to land a grant from New Zealand Aid to develop a market for the washed robusta from the plateau. The application has made it through the first stage of the review process and the consultants will be in Laos in October to finalize preparations for the last round of review. The robusta from the plateau is one of the few in the world grown at a high elevation. The washed process adds a further step in making this one of the smoothest and cleanest tasting robustas in the world. Robusta represents over 70% of the coffee farmed in Laos, and the farmers will appreciate higher prices for this special product.

I had the pleasure this weekend of attending the engagement ceremony for Emma. We conducted very complicated negotiations over a few cases of beer lao and were able to secure two buffalos (a pregnant female and a bull), one ounce of gold and $300 for the bride to be. She is now engaged to Sin, a fine man from a coffee and tea farming family. Sok Dii!

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