The price of coffee in Peru

Author: Jarik

We met Grandma Thomase during our stay with the Andean family in the Peruvian highlands. Actually, we stayed in her house and on her farm as we were hosted by her daughter and her family. No one is sure of her age, but everyone agree that she is around ninety. She and her husband have been part of the activities on the 6ha farm perched on the forested slopes for as long as anyone can remember (seventy years or so). They started as hired hands in their twenties, working the coffee, cocoa and pineapple plantations and staffing the kitchen of the hacienda. Around fourty years ago, they became the owners of the land – purchased through hard work. They have invested a lifetime in these steep fertile slopes.

When we were introduced to Grandma Thomase, she was busy skinning coffee beans with the manual husker/grinder. She was processing her harvest that she hand-picked earlier in the morning. Later the afternoon we saw her wash and select yesterday’s harvest that has by this time fermented and is now ready to be dried in the sun for a couple of days. She produces about 50kg of dried coffee beans per week during the harvest season – 100% Organic – because there are no other means available. The bag of raw coffee beans is taken to the local market in Quillabamba once a week by hitching a ride on the back of a pick-up.

Coffee merchants purchase bags of coffee from the subsistence farmers, making up larger parcels. These are transported to larger centres and changes hands a few times until it reaches Lima where it is acquired by export merchants and roasters that make the precious produce available to espresso and latte drinkers all over the world.

Globally, coffee consumption has risen 18% over the past 10 years, reaching 9.1Mt in 2016. Being a globally traded commodity, new and cheaper production capacity, mechanisation and concentration of production has driven coffee prices lower and global inventory higher regardless of increase in demand. Improvement in yields and input costs are required to satisfy the requirement for returns to the investors. One strategy producers are following is to differentiate to extract higher prices – speciality roast, flavour selected, single origin, fair-trade and now even barrel aged (similar to wine and whisky courtesy of Nestle).

Grandma Thomase gets ~USD80 for her 50kg bag of coffee. The price has been higher in the past but without direct access to the market, she is at the mercy of the merchants and transporters. Her land is not conducive to mechanisation and she has no access to capital.

I was very encouraged to stumble upon a government sponsored agricultural expo during our stay in Chachapoyas. It showcased very basic equipment and opportunities for mechanisation and yield improvements clearly aimed at the small-scale farmer. This, as well as infrastructure development to improve access to markets and reduce transportation costs are required to remain competitive. To stimulate this, investment is needed.

Grandma Thomase gets just more than USD0.01 (yes one cent!) of the USD3.50 for a cup of coffee we buy, yet she has invested seventy years in its production. Transition is never without cost, whether it be physical, emotional, or in the case of Grandma Thomase’s coffee in Peru, economical.

–  Jarik –