31 Oct 2022

With a new Living Income Reference Price for coffee from Uganda, some reflections on what we've learned

By Carla Veldhuyzen van Zanten, Fairtrade International Senior Advisor for Sustainable Livelihoods

Biira Zirian of Kabonero Mountainous Coffee Growers Co-operative Society Ltd, Uganda

Today Fairtrade is launching a new Living Income Reference Price for coffee from Uganda. A farmgate price of 11,640 Ugandan shillings per kilo of parchment coffee is needed to enable living incomes for Arabica coffee farmers in Uganda. Also a proxy reference price of 7,150 shillings was calculated for a kilo of Fair Average Quality (FAQ) Robusta coffee.

The good news is that Arabica coffee currently sells at 10,000-11,000 shillings and even reached 12,000 shillings over the past months on the Ugandan market – more than double the price from 2019 during the coffee price crisis – which shows that sustainable prices are in fact within reach!

Better still, the Dutch company Fairtrade Original has already committed to paying the Living Income Reference Price to their Ugandan supplier, Ankole Coffee Producers Cooperative Union (ACPCU), even if the market price falls.

Fairtrade convened local stakeholders in Uganda, including producers, technical staff of producer and support organizations, coffee researchers and industry representatives, to jointly analyse farm economic baseline data and define realistic targets for each of the key income drivers. The resulting Living Income Reference Prices were then validated by these local experts. Details of the targets and reference price calculation can be found here.

ACPCU’s projects officer, Derrick Komwangi, participated in the stakeholder dialogue and commented: “The establishment of a Living Income Reference Price has been mind-blowing to us as an organization. Key things have stood out: viable land size and sustainable production. And this has shown that in order for us to make a decent living as farmers, we need to work on productivity and the Living Income Reference Price does exactly that. It gives farmers leverage on their quality of coffee and enough revenue to invest in order to get the right volumes for them to sell.”

Different origins require different approaches

With this third reference price, an African coffee origin is added to the list, following Colombia in 2021 and Indonesia earlier this year – a good time to reflect on some differences and similarities across the three coffee origins.

An income gap analysis, which forms part of the reference price discovery process, reaffirms the enormous diversity of coffee farmer realities across origins, requiring tailored approaches and strategies to achieve living incomes.

For instance, farm size: while a farmer with three hectares of productive coffee in Colombia could make a living income from selling coffee alone, farmers in Indonesia and Uganda have relatively small plots of land, and often grow other crops among their coffee bushes or diversify their income sources in other ways.

Also, while coffee farmer families in Colombia and Indonesia typically have four members, the average household in Uganda is twice as large. Extended households in combination with coffee plots of less than an acre (0.4 hectare) make it all the more necessary to complement coffee income with other income sources to reach a living income.

Farm productivity also varies widely. A target yield of 1800 kg of dried parchment coffee per hectare might be quite feasible for conventional coffee farmers in Colombia, while organic farmers in Indonesia and Uganda set their sustainable target yields lower at 6000 kg cherry (equivalent to 1200 kg of parchment) and 1600 kg parchment per hectare respectively, based on their coffee growing conditions. Even so, Ugandan and Indonesian farmers will have to make considerable effort to almost double their current yields in order to reach those targets. The farm investments needed to reach these productivity targets are factored into the Living Income Reference Price calculation.

An interesting finding from our Uganda baseline analysis was that many farmers underutilize the adult labour force in their household, who could spend more of their time working on their farms to implement sustainable agricultural practices and save on hired labour costs. However, the uncertain return on their labour investment due to price instability demotivates farmers to make the extra effort.

At the same time, hired labour becomes scarce as young people abandon agriculture in search for more attractive livelihood opportunities elsewhere. This in turn leads to neglected, low yielding farms and creates a vicious cycle of low income and low investment.

Where we need to go from here

There are low-hanging fruits that can improve the incomes of coffee farmers. For instance, significant productivity improvement and savings could be made in Indonesia if organic compost wasn’t so hard to get. Colombian producer organizations already show important results from setting up local bio-fertilizer factories to provide for its members at low cost.

But in Uganda, the gaps are huge. To attain the target yield. To diversify farm revenues. Today the market price is close to the Living Income Reference Price. If farmers could rely on these prices to be sustained, they would be encouraged to invest in their farms and make them more productive.

Farmers also need long-term sourcing relationships with committed commercial partners such as Fairtrade Original to secure a decent return on their investment.

According to Lotje Kaak, Fairtrade Original Business Development Manager, “Living income is a journey and therefore it is important to establish long term collaboration with our partners, like ACPCU. We want to achieve living incomes for coffee farmers by paying them the thoroughly-researched Living Income Reference Price and developing projects to further improve their incomes. This way we take the lead in bringing about the highly needed change in the coffee industry.”

In order to close the gaps and make living incomes a reality, all actors in the supply chain need to assume their responsibility. Shoppers also play a role by choosing products that contribute to living income goals. Come and join us on this journey!