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The Coffee Grind

It may take years for the hard work of growing fair-trade coffee to pay off for farmers. Unfortunately Manuel had only two weeks.

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Manuel needed $500 or he was going to lose his farm. Though it wasn't quite an acre, the land provided for him, his wife, and his nine children.

A Guatemalan coffee grower, Manuel had spent three years switching his crop from conventional to organic in hopes of trading on increasing demand for shade-grown, pesticide-free beans--beans that can bring farmers up to three times what they get for a conventional crop. But since the late 90s a global glut of coffee has driven down prices, and even the successful farmers only sell a fraction of their crops at the higher prices. Manuel isn't successful. Instead he has to sell his organic beans at conventional prices, which have dropped by half in the last five years.

In Guatemala, as in most developing countries, education isn't free, and by last year Manuel was having trouble keeping his children in school on his falling income. He took out loans to stay afloat, but when they came due he still had trouble. Something, either his children's schooling or his land, was going to have to give. Luckily, he was borrowing from a Guatemalan rural development agency, ASEDSA, which had canceled an earlier loan and given flexible terms on another. Banks aren't nearly as forgiving. But when he tried to have the current loan canceled, the agency said no. He had two weeks to pay.

As a last resort Manuel called Patrick Eccles, a graduate student in the University of Chicago's Latin American studies program who had interviewed him three months earlier for his thesis on fair-trade coffee. (Not all organic coffee is fair-trade coffee, but organic certification is usually a prerequisite to entering the fair-trade market.) Manuel asked Eccles for help.

"The same as any desperate person here, you have to beg," says Eccles. "At first I didn't know what to do. I have debt of my own and loans to pay. It wasn't like I could shell out the 500 bucks and say, 'OK, great, your problems are solved.'"

Instead, Eccles organized a party in his Lincoln Square apartment to raise the money and talk about why farmers like Manuel have to beg. "After several harvests in a row selling his coffee at normal market rates rather than premium prices, he has found it difficult to pay his debt," read the e-mailed invite. "If he does not settle the loan, the association will be taking his land along with his chances for preserving a less desperate peasant livelihood."

A handful of friends filtered into Eccles's apartment throughout the Sunday afternoon party, bearing small checks and rich desserts. As the afternoon faded, Eccles had only $350.

It's not that the crusading NGOs fighting the coffee crisis don't care about Manuel (whose last name is omitted here due to Eccles's research protocols). But there are just too many like him. About 200,000 coffee growers have lost their jobs in the last three years in Central America alone, along with 400,000 landless coffee pickers. When the bills come in faster than the money, some farmers leave for jobs as laborers on bigger farms, or in the city, or in the United States. Others start growing coca, a booming export crop that pays better than any other. The antipoverty group Oxfam warns of possible starvation among the displaced farmers. Meanwhile multinational coffee companies depress prices by sitting on stocks of beans, to the point where Oxfam is asking them to destroy 300 million surplus pounds.

It's a problem Eccles has been interested in since his undergraduate days at Loyola. He first heard of San Lucas Toliman, the town where Manuel grows his coffee in a farmers cooperative, from other students who had taken spring break trips there with the university ministry. The town's welcoming attitude toward North Americans comes from contact with generations of Minnesota Catholic priests, who took liberation theology's social justice mission into the village in the 60s. Congregants in the States funded community projects, building a drinking water system and housing developments, which bear the names of priests who never left.

In 1996, his junior year, Eccles took a leave of absence to spend nine months there as a parish volunteer, working on a reforestation project and helping out with coffee production. He returned to Chicago determined to compare fair-trade coffee, which guarantees farmers at least $1.26 per pound, to free-trade coffee, which flooded the market after the U.S. pulled out of the International Coffee Agreement (the OPEC of the coffee industry) in 1989 and production restraints failed. To compound the problem, in 1993 the World Bank and the International Monetary Fund counseled countries such as Kenya and Uganda to expand production just as Vietnam, the current number two producer, ramped up its output of low-quality robusta beans.

The fair-trade movement started in the postwar West, when church groups began retailing crafts direct from producers in Latin America, Asia, and Africa. The contemporary fair-trade pioneer is Equal Exchange, an 18-year-old worker-owned cooperative roaster that started out supporting Nicaraguan farmers devastated by the Reagan-backed contra insurgency.

Now the fair-trade designation is managed by Fairtrade Labelling Organizations, an international NGO that handles the labeling of everything from soccer balls to flowers. FLO inspects farms, and TransFair USA, which started labeling coffee five years ago, tracks the beans imported to the States to certify their lineage. Manuel's cooperative considered fair-trade certification, but FLO has a long waiting list, and its control over the designation is flimsy--it can't prevent unauthorized use of the term "fair trade" and depends on retailers' goodwill to prevent abuse of the mark or overcharging.

Needless to say that's not a foolproof strategy. In June the Wall Street Journal detailed how American corporations like Whole Foods are learning from European counterparts how to mark up fair-trade goods, reaping profits as high as 44 percent and paying pennies to farmers.

Getting even those pennies can be tough. Most farmers can sell only 10 to 20 percent of their harvest at a fair-trade price, says Valerie Orth, the fair-trade organizer for the human rights group Global Exchange. Her group estimates that 200 million pounds of fair-trade-certified coffee had to be sold at market rate last year.

Increased demand would help farmers, but fair-trade types are split over how to stimulate it. Orth's wing says only corporations can drive it high enough to benefit lots of farmers. They're behind efforts to force Starbucks and the big four coffee companies--Procter & Gamble, Kraft, Sara Lee, and Nestle--to purchase fair-trade beans or at least increase the amount they buy.

On the other side of the debate are small roasters like Equal Exchange. They see the fair-trade model, which advocates the direct support of growers and their communities, being watered down by compromise. They chafe at the idea that their hard-earned label lets corporations claim social responsibility while buying a tiny fraction of their coffee at fair-trade prices.

Patrick Eccles's research would give ammunition to this faction, but worry about how his critique will be received has slowed his thesis writing. He's hoping to finish up next month but is reluctant to discuss his findings.

"There are instances where fair trade works extremely well," he says, "and there are instances where whether it works is a question."

Eccles returned to Guatemala last November. He met Manuel and other frustrated farmers at a daylong meeting of four organic coffee farming cooperatives nestled around the southeast tip of Lake Atitlan. They had been counseled to switch to organic beans and some had received technical help from the European Union in making the switch, but most were unable to sell their crops.

Coffee farmers don't think about bags of fragrant beans, says Eccles. They think about 100-pound sacks of coffee cherries, the raw, reddish fruit that requires multiple stages of processing--milling, pulping, husking, fermenting, drying, and roasting.

Though San Lucas Toliman is in a high-altitude region that produces premium arabica beans, making them salable is a losing proposition. Lacking a direct buyer for their cherries, farmers must pay middlemen to process, transport, export, and market their beans. The beans' quality, crucial in securing repeat buyers, can't be assessed until they are processed, and in Guatemala the farmers don't get paid until the beans are assessed and their pedigree confirmed. There may be months of lag time before the money arrives--if it ever does.

The village's mission sidesteps this problem by buying some local coffee, processing it on-site, and selling it to groups and stores in Minnesota and elsewhere. Farmers call this "fair-trade plus," in which a buyer develops a long-term relationship with a community of consumers and pays a rate factoring in local social and environmental needs. The mission pays even better than fair trade, sells the coffee on its Web site (juananacoffee.com) at $5.50 plus shipping for a 17-ounce bag, and doesn't take a cut.

Unfortunately, the mission can only buy a little from Manuel's cooperative, because every farmer in the region wants to sell to it. The rest is sent to a variety of roasters and processors, then sold to an export group that sells it on the international coffee market.

At the meeting, nerves frayed as co-op administrators outlined 45 requirements the farmers would have to meet to keep their organic designation. "You could look at their faces and see them say, 'Yeah, yeah, yeah, we're doing this and not getting the price,'" Eccles says.

Finally Manuel and others rose and demanded to know why farmers should work so hard, staying in their fields mixing compost until 11 at night, when the coffee they produce isn't bringing them any additional income.

"It's frustrating because they've gone through all these changes, put in a lot of effort and a lot of money," Eccles says. "In some cases they've received support in providing for an organic environment for their coffee--which involves growing certain trees and plants as a buffer to keep pesticides from migrating from other fields. So there's a lot of expense. It's only right they receive a higher price for it."

Matt Warning from the University of Puget Sound, outside Tacoma, Washington, is one of the few economists in the U.S. studying fair-trade coffee. He thinks Eccles shouldn't worry so much. "The optimistic take says that it's going to work for these farmers, it'll just take more time," he says. "In my mind it doesn't say anything is wrong with the model of certifying coffee, and farmers getting a good price for it, and consumers paying because they care about the farmer getting a good price. It's more of an implementation issue. How many systems are perfectly functioning after four years?"

Earlier this summer things were almost looking up for fair-trade farmers, but prices have tumbled again since a peak in June. Still, after years of huge surpluses, the oversupply of beans is slowly starting to shrink. The amount of coffee certified by TransFair almost doubled last year, although it still comprises less than one percent of the coffee the U.S. imports. Dunkin' Donuts had to scramble to certify new producers to meet demand for its fair-trade espresso drinks. Corporate-reform activists proudly took credit last year when Procter & Gamble, after years of pressure, started selling fair-trade beans online through its Millstone brand. But Equal Exchange, a pip-squeak roaster in comparison at three million pounds a year, still handles significantly more fair-trade beans. Gradual corporate reform, says Eccles, won't change the terms of trade that drove Manuel to the edge of disaster. And it certainly wasn't going to save Manuel's farm.

After his Sunday-afternoon fund-raiser Eccles kept making calls on Manuel's behalf, eventually scraping together $700 in donations ranging from $5 to $100. The extra cash will support the mission's infrastructure projects in the village. "Specialty coffee is a niche, and fair trade is a niche within a niche," Eccles says. "It does a lot of good things: it highlights traditional agriculture, it preserves coffee culture in these countries. My impression is that the market-based solution of fair trade is much more limited than most understand it to be."

Art accompanying story in printed newspaper (not available in this archive): photo/Godfrey Carmona.

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