Every time I visit a coffee village I hear the same question: why is the price of coffee to us farmers so low? Why is there no relation between the costs of production and a reasonable (if any) profit and the price we get for our beans? These questions apply to 99% of the coffee in the world, fortunately not ours. But here is the answer, from my perch atop a waterfall in northern Peru:

In New York City, half an earth away  from the coffeelands, a room full of overcaffeinated young men (who’d probably never heard of Yirgacheffe or Atsabe) are shouting themselves hoarse bidding down the lifeblood of rural coffee farmers. In the middle of this room is the circular trading floor of the New York Board of Trade (NYBOT), known to its denizens as “The Ring.” Here, investment houses, banks, financial speculators and large coffee companies bid on the future price of coffee. For the companies, the goal is to insure a future supply at a known price – a necessary planning tool for a business based on an agricultural commodity. But for the rest of the frenzied traders the point is to make a profit on the “float” between what they pay for coffee futures and what they hope to sell them for later. For two centuries, coffee had been a dull commodity, traded on a somnambulant market. Yet somewhere in the last decade, it had morphed from a morning brew into a raging speculative commodity on the trading floor.

In this wired world, these Lords of the Ring are supplied with up-to-the-minute financial, political, meteorological and other data from an army of consultants. An early frost in Brazil? The flowers necessary for the budding coffee fruit to develop could wither and die, shrinking the coming harvest. Supply down, price up; bid two cents more for March deliveries. A rumored peace deal in Colombia? Easier deliveries in three months; hold off and let the price drop. The rumors and intelligence are translated into Buy and Sell orders, little slips of paper carried across the floor by the Runners, the traders-in-training. Their street clothes covered in tunics carrying the colors of their houses, the Runners grab the slips from the phone and computer banks owned by the Lords and race them down to their warriors in the Ring, who scream out their offers to buy for a penny more or sell for a penny less. These players make the prices rise and fall in an incestuous system unrelated to the true cost of growing and processing the crop, and with no consideration at all for the needs of the growers to feed their families and keep their kids in school. As one trader told me:

“Traders are not guys with moral fiber when it comes to the conditions of the farmer’s lives. We’re seeing money and we’re making money."

It always amazes (and angers) me that when the market price determined by the Lords of the Ring goes up, roasters and retailers are quick to raise their prices to the consumer. “We have to charge the replacement value of the coffee” one broker told me. But when the world prices go down, these same brokers and buyers never drop their prices.

To me, Fair Trade is not just a formula to keep the price at a level sufficient for the farmers to rely on to improve their lives, it is a deeper commitment to social change that challenges the basic assumptions about the market and the human relations that lie beneath the surface.

While I sat above that waterfall, the market price dropped below 60 cents per pound - the price it costs a farmer to grow and harvest the coffee. From that day forward, each pound produced would drive the farmer who grew it deeper into debt and bewildered despair. For half a decade to come, farm families would suffer malnutrition and infant mortality would soar. At the same time, corporate profits were about to rise to historic heights, as the Lords of the Ring made their killing.

(Dean is currently in the field in Peru. Stay tuned for a new blog upon his return. In the meantime, here is Dean's Beans' 2009 Year in Review and a sneak peak of what's in store for the year to come...)

We don’t have to tell you how rough 2009 was. All of us had to struggle with a decimated economy, lost jobs and demolished savings, a polarized political system and a swine flu epidemic. Whether it was people’s desire to brew coffee at home instead of paying a tuition’s worth for a cup at those chain stores, or folks looking for a company that reflected their values and they trusted, we actually grew in 2009. In recognition of our good fortune, we gave away over a thousand pounds of coffee to folks who you told us were having a rough time due to the economy and otherwise. We committed to supplying all the coffee needed all year long to the overburdened Amherst Survival Center. We even got our coffee back from those Somali pirates.

At home we started a new program with Somali refugee women in Massachusetts to create an economic base for them. Our reusable grocery tote project was so successful that we had to suspend it after a week. We will be back on it as soon as “the ladies” (as they call themselves) crank out more bags made from the burlap bags our coffee arrives in. After twenty years of false starts, this is the first successful economic development program in this community. Congratulations, Walaalo Sisters!

Internationally, we kept our promises and our programs with our farmer partners. This was not easy. The dollar fell to record lows internationally, which actually forced up the price of coffee. In most of the coffee world that didn’t mean more money to farmers, only to the exporters. But for us it meant more money for the farmers themselves and no passing it on to the consumer. That’s how we do business regardless of convenience or cost.

Here is an update on some of our People-Centered Development work in the coffee lands:

• Peru – We are working hard with both our partners in Peru, Pangoa and Oro Verde. In Pangoa, our Restoring the Sacred project keeps growing, having reforested with local trees and local knowledge a large part of the deforested sacred lands of the Ashaninkas peoples. Our Women’s Loan Fund continues to offer the only credit available to coop women, and our latrine program (with our logo on the doors! Talk about off the wall marketing!) continues to, uhh, blossom. Additionally, we have supported the travels of General Manager Esperanza Castillo to international events so that she can tell the story of women in coffee to the world. Powerful stuff.

• Colombia – In Colombia we have dedicated our program to supporting indigenous self-determination and the maintenance of sacred knowledge.  We have helped start a land re-purchase program that brings communal land back into the fold after years of government programs that saw the land base shrink. We are also supporting a new initiative to bring Elders of the four tribes of the Sierra Nevada together to walk the sacred spots around their mountains (the “Heart of the World”) and teach the knowledge to the next generation. Additionally, through the Coffeelands Landmine Victims Trust, we are supporting meaningful job training for coffee farmers disabled by explosives in the on-going violence in this country.

• Guatemala – We continue to support the great programs of APROS, the women’s health collective on Lake Atitlan, including new programs with the women’s teen daughters. This is the first girls-training-girls program in Central America and is powerful and successful in self-esteem building and small scale income generation for scholarships.

• Nicaragua – Our work with Prodecoop continues as it has for sixteen years. Last year we worked on the design and funding of a farmer-owned café/roasterie, modeled on our successful project in Leon, Nicaragua that supports land mine victims. We also sent volunteers down to assess educational needs, which we will continue to do this year as we evolve a new program for needs assessment on the farm level and how best we can participate.

• Kenya – We keep struggling against corruption and inefficiency in the government to help farmer coops get fair trade and organic certification. We established an organic demonstration plot in Embu so that the farmers could see the real results of going organic. We held a training in Fair Trade and organic techniques that drew a roomful of farmers representing ten thousand coop members. We are designing an Internal Control System with Rianjagi Coop to help it become the first Kenyan coop to get organic certification. At the same time, change comes very slowly in Kenya.

• Rwanda – Our groundbreaking Men Overcoming Gender Violence trainings last year were so successful that the UN funded some of the farmers who had received the training to go share their work with other cooperatives in Rwanda. This is a groundswell of work in a land so torn by gender violence. We have also begun a weaving project with women genocide survivors at COOPAC cooperative, starting with coffee canister sized baskets with “Dean’s Beans” woven into them! Available soon!

• Ethiopia – This year we brought water directly to the new school in Negele Gorbitu. We also paid the salary of the new teacher at the school (three times the salary of the government supplied teacher, but three times the quality as well!). We are still in the planning stages of a farmer owned and operated well drilling company.

• East Timor – Working both with and against the system in East Timor, we managed to create the first direct relationship in the coffee industry with a village level farm coop, in Atsabe, Ermera District. This has allowed us to be able to put our profit share and development assistance directly into the farmers’ hands and assure accountability and impact. Our first project was to supply 200 fair trade soccer balls to the President’s Youth Anti-Violence Initiative, giving young Timorese their first insight into progressive business and hope. We are working to establish a recording studio for young Timorese musicians and a farmer owned and operated café/roasterie. We hope our example will lead other companies to buy directly from farmers in East Timor.

• Papua New Guinea – This is one distant and difficult place to work! We continue to provide organic certification and training to farmers we buy from, as well as to fund the microloan program.

Some of our really exciting new programs for 2010 include:

• The creation of a Bulletin Board, where farmers post their needs (“experienced electrician”, “English teacher”, “computer help”, etc.) and our customers (that’s you!) step up and volunteer to help out. Still working out the many bugs in this one but it will be the best thing we’ve ever done!
• Dean’s Constitutional Convention – help us design the progressive company of the future! (I ain’t getting any younger!). No progressive founder has ever left a company that really sticks to its ideals. Can we?
• Coops Supporting Coops – We are putting together a program where our cooperative customers can choose which projects they’d like to support from their purchases. It will be a great way for coops here to connect directly with coops there.

We’ll keep providing great coffee at reasonable prices, great opportunity for the farmers and increased opportunity for you to participate in making the world a better place. Really.

Most people think that Fair Trade is just about a minimum price guaranteed to the farmers. That is a critical piece of the system, but Fair Trade provides many powerful tools for social change – something that no other label or system offers. One of the most significant is the requirement that farmers organize into democratic and transparent cooperatives.

In order to understand what this is about, it is necessary to appreciate why Fair Trade was founded in the first place. In the coffee world, the vast majority of farmers are small scale and indigenous. That means they have little access to information about prices, how the market operates, the needs of northern buyers, access to credit and more. They may not even speak their own national language, but rather their indigenous language. Therefore, they need middlemen to either provide the services for them or buy their coffee outright as cherries picked earlier that day. Since most are physically far removed from the major population or processing centers, they also have to rely on middlemen to get their coffee out of the mountains and into the stream of commerce. As you can see, they are not effective participants in the world market (even though economic models assume that they are), and are at a terrible disadvantage in trying to get a good price for their products.

By organizing into cooperatives, the farmers have the joint buying power to get better prices for farm inputs, they have joint processing power and a greater ability to get information about current prices and market conditions. They get to vote and have a real say (often for the first time in their lives) on the things that impact their families’ health and well-being. The requirement of transparency means that for the first time in their lives they know what they are getting, how much goes into the coop’s coffers, how much everyone else is getting and they can see the impact of the cooperative on their personal and joint bottom lines. Further, the coops provide valuable and often nonexistent social services, such as loans and health care (or at least money to obtain care).

Fair trade coops often pool their premiums together to have a powerful joint impact on their communities. This may take the form of building wells and schools (and believe me, most farming communities are in desperate need of both!) such as we have seen and participated in in Nicaragua, Ethiopia, Peru and elsewhere. Often, it takes the form of purchasing and building upstream capacity – that’s biz talk for buying the plants that process, grade, package and export their beans, thereby keeping that entire income stream in the local community, not giving it away to layers of middlemen. In Ethiopia, our Oromia partners have even created a national bank that takes deposits from non-members, makes low cost loans to members and has creatively diversified the income of the coop.

These are the unique, important and largely unknown benefits of cooperation in the coffeelands, and tens of thousands of farming families have gained better lives as a result. These are the reasons why we have focused on cooperatives and will continue to do so.

(Read Part 1 of Dean's trip to Kenya)

Later in the week was the launch of a new NGO, Fair Trade Organization of Kenya (FTOK).  Forty farmers representing ten thousand farm families came together for the celebration and a full-day workshop on fair trade and organics, presented by John and I, along with FTOK founder Sophie Mukua and President, Samwel Okwenda.  There were also representatives of Thika Mills (mills are traditionally the last bad guy in the farmer rip-off equation), which is now certified to process fair trade coffees (hmm, we’ll see), and Robert Thuo of the African Wildlife Foundation, which is saving elephants and helping farmers with a grant from USAID and Starbucks (it is great work, but I had to ask, wouldn’t it be betmter if Starbucks simply paid the farmers more for their coffee? Then they could put up their own fences and feed their families directly-what a concept!).

The farmer coops in attendance introduced themselves, and talked about the low price of coffee they receive and the terrible effects of the drought. They talked about how difficult it was to find direct buyers; even though they were allowed to do so by law, they didn’t know how.  John gave a wonderfully detailed description of the organic farming system.  Most of these farmers were raised on government information that was hopelessly out of date and more appropriate for large plantations, not small holdings of two acres or so.  We talked about interplanting and what crops farmers used in different countries to fix nitrogen into the soil, create soil stability and have more food for their families and the local markets.  We described natural pesticides and took a break for me to plant a muthega tree at the coop of Nobel Peace Prize winner Wangari Matthai.  The tree is used as a natural pesticide and it made a big impression on the farmers.  I spent about two hours describing why they don’t get decent money for their crop, how prices are determined in New York, not in the field, and how to protect themselves from thieves coming into the “second window”. We had to change shillings into dollars, pounds into kilograms, and coffee cherries into green beans (about seven to one in Kenya), which made for a head pounding, exciting translation of information for farmers who had never had access to this before.  After several intense hours of questioning, we called it quits, applauding each other heartily.  Elias Matenge, head of the Thiriku Cooperative came up to me and patted my shoulder forcefully. “This has been revolutionary!” he beamed. “This was the best workshop I have ever attended!” shouted Nelson Mwaniki from Rianjagi. We all walked outside the meeting hall in a good mood.  Then the most unbelievable thing happened.

It started to rain.

(Read Part 1 of Dean's trip to Kenya)

Those of you who have read my book, Javatrekker, will remember how I got clobbered in Kenya trying to create fair and transparent trade a few years ago.  There was so much corruption and so little information or options for the farmers that It looked like fair trade and organics would never take root there.  Yet the coffee farmers of Kenya are a tenacious bunch. In spite of a year-long drought, election violence and market disruptions, they have continued to organize and seek help towards bringing more money and resources to their families.  They haven’t quit, so how could I?

I arrived in Embu with John Njoroge, the head of the Kenya Institute of Organic Farming, whom we had funded last year to come to the USA and receive certification as an international organic inspector.  Building organic capacity in Kenya is a key part of our strategy, so that farmers won’t have to rely on European and American inspectors to create and monitor their systems (very expensive and pretty darn colonial!).  The year- long drought in the area meant that every step raised a cloud of dust, and the crops were withered and sickly. I was greeted by the head of the Rianjagi Cooperative, Albert Mwaniki, who told me that he never forgot that I had said “if trade was not fair, then it was immoral”, and he was eager to continue the quest for fairness for the farmers. We immediately began laying out the program for Rianjagi to become the first organic certified coffee cooperative in Kenya, a three-year process that would demand a lot of work on the farmers’ part. We needed to set up an Internal Control System to document and monitor farm practices, set up training programs in water and soil conservation, build demonstration plots for natural pesticides and new practices, file with an international body for recognition and more. KIOF, Dean’s Beans and Rianjagi would sign a Memorandum of Agreement on who would be responsible for what, and most significantly, who would pay for all of this (guess who?). Just beyond the door of the coop office, women and men sang softly while they turned the coffee beans on their raised drying beds, bringing the moisture down to the required 12 percent before hulling, grading and bagging the beans for export. We worked late into the night designing the program, celebrating with a great dinner of everything grown on the farm of Molly Njeru, the Vice Chair of Rianjagi and a dedicated organic farmer.

We also talked about the big change in Kenya.  Before, farmers were forced to sell their coffee to the big processor, KPCU, which was theoretically owned by the coops, but was controlled by the government. At last the law had been changed to allow the farmers to find their own buyers and market their coffee directly. This was known as the “second window”. They thanked me for the small role I played in that change, as my whistle blowing on corruption inside KPCU pushed the changes along, they said. Well, I don’t know about that, but at least one minister and many KPCU board members were dismissed as a result. Some satisfaction for the incredible rip-off we experienced trying to buy Rianjagi coffee before. We also talked about fair trade coming to Kenya.  There were now three registered fair trade coops, although no certified organic ones.  Were the fair trade coops making better money? Nobody knew, and there are still enough Byzantine regulations and channels of commerce outside of the farmers’ control that I don’t think anyone will know for a while.

The next day we celebrated the inauguration of a new computer system that would allow complete transparency and accountability for the farmers. They could go on the computer and see exactly what they brought in, what it sold for, how much was added to their accounts and who the buyers were.  This was funded by Solidaridad, a Netherlands NGO along with Utz Kapeh, a self-certifying system for large European coffee importers. The claim to fame of the Utz system is transparency, but it doesn’t guarantee the farmers any more money. One of the board members commented sardonically that it was a good system, but they can’t eat computer paper.  The new Minister for Cooperative Development was there (the old one got canned after my debacle, although he is now the head of exports! It seems politicians know a lot about sustainability).  I gave a short speech about how impressed I was with the changes since my last visit, and how much more we had to go to insure fair treatment for Kenyan coffee farmers...

Read Part 2 of Dean's Kenya trip.