Extended droughts, higher temperatures in coffee producing areas and the outburst of plagues among other climate change impacts, make price volatility one of the most significant risks that small coffee farmers face. Even small variations in coffee prices can have huge consequences for small farmers who depend on coffee sales for their livelihoods. Farmers are also dependent on the performance of their cooperative: at the end of each harvest, farmers can earn a dividend or “second payment” from their cooperatives that can range from 5-30% of the total price received per pound of coffee. If cooperatives end up with a loss at the end of the harvest, second payments are reduced or absorbed to cover the organization’s losses, resulting in less income for farming families. For these reasons, it is critical that farmer cooperatives have an understanding of price risk and develop the in-house capacity and empowerment needed to directly implement strategies in price risk management (PRM).
This project brings together a diverse group of organizations for the creation of a unique PRM project that aims to transform the profitability, credit-worthiness, and competitiveness of 16 selected cooperatives from Honduras, Guatemala, Nicaragua, Colombia, and Peru over a three-year period. The project includes the development of a PRM training process under a multi-year approach to refining the fundamentals and learning about PRM with a strong evaluative component that engages the cooperative’s Board and Management with tools tailored to the coffee cooperative context. A simulation-based program and a PRM toolkit will be created to provide experiential learning in the use of hedging instruments. Finally, through Oikocredit, the executing agency, the project will have a pre-approved lending facility that will provide liquid, flexible, unsecured PRM financing to cover all costs related to PRM implementation.
Oikocredit, Catholic Relief Services (CRS), Fair Trade USA, and Keurig Green Mountain
Direct and Indirect Beneficiaries
The main project beneficiaries will be 16 coffee cooperatives in LAC, including Board Members, people in management positions, financial and commercial managers, and financial staff. Through the implementation of PRM strategies at the coop level, the approximate 5,000 smallholder farmers represented by these cooperatives will also become project beneficiaries.
Honduras, Guatemala, Nicaragua, Colombia, and Perú