Coffee is the world’s 7th largest agricultural commodity by value and is grown by tens of millions of small to large producers in at least 50 countries worldwide. It’s the largest agricultural export for 12 countries and is the second most valuable export in developing nations.

Disparity in Incomes

Ironically, Europe is one of the regions in the world with the highest coffee exports by value due to its role in roasting and packaging the high quality end product. It’s the roasters who have the highest profit margins in coffee’s economic chain. Even though it’s an important commodity that provides the main income for an estimated 25 million farmers and their families throughout the world, the income to the farmer is often just subsistence wages, at best, and the price of coffee at the grocery store is 4-5 times the gate price. The high quality coffees may have multiples of markup after the sale from the farmer of much higher than that.

Cause of Disparities

There are a multitude of reasons for this disparity between gate prices and grocery prices, and most reasons have less to do with greed than with economics. Coffee is a very labor intensive crop to grow and the higher priced higher quality coffees such as the specialty and rare varieties of Arabicas are the most difficult by being the most subject to disease and crop failure. Also, these highest quality coffees produce the least crop production per plant. Often lower quality coffees are grown to reduce risk, increase the harvest, and have more ready access to buyers who are in the low quality coffee supply chains.

Washed Coffee

The community of Chimizal is composed primarily of farming families cultivating small coffee fields located further up the mountain. The average small grower in Honduras farms approximately 2.8 hectares of land in in the Chimizal area, primarily grows the higher quality Arabica cultivars. The farmers use the wet-process to separate the coffee bean from its fruit husk which is followed by drying. Coffee processed in this manner is called “washed coffee” and requires the use of substantial quantities of water. In the wet-process, the cherries are sorted by immersion in water and slightly fermented, which separates the coffee bean from the fruit husk. Coffee processed this way is usually regarded as producing a far superior tasting cup of coffee. As a result, the coffee bean produced through the wet-process has substantial additional value on the wholesale market and is an important way to increase the income of farmers who earn, on average, little more than $2-3 thousand USD per year.

Fair Trade?

Fair-trade coffee is often considered to be a popular, alternate way to increase the income of small-holding producers. Comprehensive market studies, however, indicate that consumers are typically willing to only pay a premium of $0.10 to $0.25 per pound for the fair-trade certification. Even in the case of high-end retail, where the fair-trade premium may even exceed $5 dollars a pound – a value differential that substantially higher than typical – the high compliance and auditing costs result in only a 25% increase in gross income to the farmer per pound. The farm-gate value of fair-trade coffee is approximately $1.40 per pound, compared to, say, $1.15 per pound for other kinds of coffee, which results in an important but limited increase of income for the average farmer in Honduras of approximately $700 per year.

How to Change

Increasing the quality of the coffee, on the other hand, can increase the “farm-gate” price per pound several times over that of lower-quality coffee. Rwanda, for instance, in the early 2000s, put in place policies and market assistance that significantly increased the quality of its coffee. The associated per-pound value of exported coffee rose 250% in the subsequent 8-year period. Rwanda is now recognized as producing some of the highest quality and most expensive coffee in the world. An informal survey of Rwandan coffee prices online indicates a typical retail premium of more than $5 dollars per pound over other Arabica coffees sold in the general marketplace. For some types of Rwanda coffee, the premium is many times greater than that.

There are many factors to increasing the quality of coffee, and one fundamental factor is ready access to water, especially during harvest time to allow for wet processing. Unfortunately, harvest time in Honduras occurs during the driest time of the year when water is scarce even for use in domestic activities. Most of the rainfall occurs between May and September during the growing season. During harvest, severe curtailment of all water usage is necessary for anything other than coffee washing, which exacerbates the already poor sanitation and the availability of water for cooking and cleaning.

Existing Groundwater Development

The development of groundwater resources is an atypical means for supplying water in rural Western Honduras.  This is in part due to a typically plentiful surface water resource in the valleys where the more affluent populations reside.  Water scarcity in Honduras is more related to high urban usage, poor quality, and/or geographic factors such as remoteness high in the mountains.  Due to both geologic and social circumstances, advanced groundwater knowledge exists for only localized alluvial aquifers along major rivers. There is limited knowledge on the capacity of stratigraphic aquifers and even less known about the groundwater flow between these aquifers.  It was surprising for the team during this investigation to find very few wells region-wide to evaluation and even greater scarcity of drillers nation-wide.

In Chimizal, it is the seasonality and the elevation where the coffee is grown and processed, that causes water scarcity to become a severe issue.