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Tuesday, May 30, 2006

The 96-Cent Daily Grind

Globe and Mail -- Perhaps you're reading this over a cup of coffee. Maybe a Starbucks coffee. Maybe you even paid extra for Shirkina beans, a fair-trade variety that sells for the conscience-soothing premium price of $10 (U.S.) a pound in North America.

The employees of Ethiopia's largest coffee processing factory and the small family farmers — all 86,762 of them — who grew the Shirkina beans would like to thank you.

Here in one of the poorest countries in the world, coffee is responsible for a quarter of the gross national product, and 55 per cent of all export revenue. More than a third of the 78 million people in Ethiopia earn their livelihood from some phase of coffee production.

And in recent years, the lustre of organic certification and fair-trade agreements — long more common in coffee-producing nations in Latin America — have made it to Ethiopia, offering the promise of additional earnings for a commodity priced at just 40 per cent of what it was a decade ago. Two weeks ago, for example, the Rainforest Alliance certified 678 small coffee farms; their beans can be sold at a premium price because their production is being done in a way that conserves forest ecosystems and puts profits into schools and clinics.

But Ethiopia's coffee industry provides a blunt reminder that while fair trade and conservation products may make Western consumers feel better, all things are relative.

The women who sort the Shirkina beans, for example, earn 7.5 birr for each nine-hour day in the dim, clamouring factory — that's 96 cents (Canadian). The men who load the sacks of hulled beans on to trucks for export to North America earn $2. And while the bean-picking ladies are glad to report that their wages are up from 5 birr a day two years ago, and they're very glad to have a job, they would like you to know it's really not very much money. “I'd do anything else,” said one sorter, a high-school graduate in her 20s. “If there was anything else.”

The farmers, meanwhile, are earning a premium for their fair-trade green beans — $1.60 (U.S.) a pound for green beans, compared with 60 cents a pound if they were selling without the fair-trade agreement.

“The fair-trade market is making a difference for coffee communities: Comparatively the fair-trade buyers are paying a better price, especially when the market is down — fair trade means a minimum guaranteed price that will at least cover your cost of production,” said Asnake Bekele, general manager of the Sidamo Coffee Farmers Cooperative Union.

The co-operative grows beans for Starbucks' fair-trade products. “But we don't deserve this price: Fair trade is better than conventional but I can't say fair trade is fair.”

Coming out of years of socialist dictatorship in the late 1990s, Ethiopia relaxed the rules governing coffee production, and allowed farmers to organize into co-operatives and make their own deals for exports, instead of selling all production to the state. Co-ops such as Sidamo, in turn, have allowed farmers to bypass the export middlemen and seek out their own international markets, especially those willing to pay the fair-trade premium.

And they're feeling the effect: “It contributes — they improve their flow of income,” Mr. Bekele said. School enrolment is up among children of the fair-trade coffee growers; they spend the extra money on food and clothes.

Nevertheless, a typical Ethiopian coffee farmer still receives less than 1 per cent of what Canadian consumers pay for their lattes. (The farmers sell red cherries for 1 birr, or 11 cents per kg, it takes six kg of cherries to make one kg of green beans, 1.2 kg of green beans to make 1 kg of roasted beans, and each kilo of roasted beans makes 60 cups, sold for an average of $3 each, or $180.) And unlike the other main African producers (Ivory Coast, Uganda and Kenya), the vast majority of Ethiopian coffee is grown by small farmers.

“They are selling below the level of production costs because they don't count family labour,” Mr. Bekele explained. Farmers' children do much of the picking; there is no line item in the accounts for their wages.

Mr. Bekele figures that only a price at $2 a pound of beans or above would cover real production costs, and maybe allow a little profit. But fair-trade prices are moving the other way. Two years ago, the Fairtrade Labelling Organization paid $1.26 a pound when the conventional market was offering 60 cents a pound — but last year when the market hit $1.30 a pound, fair-trade buyers still insisted on $1.26, he said, claiming: “We are you friend in bad times and you have to do us a favour.”

Coffee growers here are earning 10 cents a pound above the conventional price for organic beans. In truth, most Ethiopian coffee production is organic — the family farmers who grow most of the beans can't afford agrochemicals — but the process of getting certified costs about $2,600 and is beyond the reach of small producers.

Ethiopia has a storied love affair with coffee — this is the country where the tree was first domesticated, and a third of the production is consumed domestically, making this the biggest coffee-drinking nation in Africa. But the government realizes that the country's dependence on the bean is a problem, and is pushing diversification into other agricultural exports such as cut flowers and pulses. The government also wants to see more coffee processing done at home — in 2003, for example, Ethiopia exported 126,100 tons of beans, but just 115 tons of that was roasted and milled coffee.

Yet grabbing more of the value-added agroprocessing industry is easier said than done: Foreign investment remains virtually non-existent here, in large part because the government maintains an impenetrable bureaucratic environment. There is not a single foreign-owned bank in Ethiopia, for example.

“Things are better,” Mr. Bekele said, standing amid thousands and thousands of 62-kg burlap sacks of beans from his co-operative and the tangy smell of green coffee. “They're definitely better. But there is still a very long way to go.”

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