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FARM PROFITABILITY REPORT ‘DEBUNKS’ POPULAR MYTH

FARM PROFITABILITY REPORT ‘DEBUNKS’ POPULAR MYTH



A report by the Specialty Coffee Association (SCA) reveals that increased yields on coffee farms tend to reduce profitability in the short term.

The SCA claims that the report “debunks the popular belief that high yields are a precursor to the economic sustainability of a farm.”

The report was launched at Avance, SCA’s new sustainability conference, hosted in Guatemala City by Anacafé, Guatemala’s national coffee association.

Authored by Dr Christophe Montagnon of RD2 Vision, the report was commissioned by the SCA based on the vision of its volunteer leaders, who selected the profitability of coffee farming as an area of strategic focus in 2015.

Key findings include:

  • Yields increase with higher costs per hectare showing that production yields are not necessarily correlated with farm profitability.
  • Increasing yields typically increases the cost per hectare to produce coffee, especially in the short term, and hence may decrease a farm’s profitability.
  • Lowering the input costs in a farming system can often be a better strategy for profitability than increasing yields in coffee production because low-input farming systems have low production costs.
  • Low-cost, low-yield systems generate a comparatively small amount of income for farmers, who diversify their income with other sources of revenue, but they are more profitable than a high-input, high yield system.
  • Good Agricultural Practices (GAPs) are effective tools for increasing yields but do not automatically translate into more profit for the farming system.

Kim Elena Ionescu, Chief Sustainability Officer at the SCA, said, “Our goal with this new report is to provide a framework that helps development practitioners as well as professionals in the private and public sectors understand the real costs of coffee growing.

“While the data is limited and further research is needed to validate our findings, we believe the report can help decision-makers invest in more effective programs to increase the profitability of coffee farming.”

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1 Comment

  1. Tobias

    I think this study sheds light on a rather disturbing development: in a world of rising costs (for example for labor) it may not pay for farmer to produce more coffee. Smallholders may find themselves in a trap in which the most rational thing to do for them is not to invest in their coffee farm – and staying with the little income they have.

    This trend is exacerbated by growing risks for farmers. Those may be price risks (how much money will I get for my coffee in six months?) or climate change related risks like disease shocks or extreme weather events. The latter we are tackling in the initiative for coffee&climate.

    We at HRNS develop our own agronomic advise based on cash-flow calculations to make sure that what we advise is actually advisable – I think it would be interesting to exchange on the different methods applied in doing so to come to an aligned understanding on what is optimal for smallholder coffee farmers in a world of volatile climate and prices.

    Reply

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