GET MAD [Episode 1] with Vera Espindola Rafael, Coffee Economist

Hey friends! 🎙️ The GET MAD blogs will be a mix of quotes from our Youtube video interviews (also available as a podcast on Spotify), show notes and more. If you’re a curious person who is passionate about issues of injustice, this is the place for you to learn alongside us with experts in each field. Be Blessed…

MEET VERA! 

Vera Espíndola Rafael is a Development Economist with a focus in agricultural products. She serves as an advisor for the Mexican Secretary of Agriculture on specific coffee related activities such as living and prosperous income and has served on the Board of the SCA and the Coffee Science Foundation.

She worked at the research arm at ANACAFE and subsequently as Regional Manager Latin America at UTZ, now called Rainforest Alliance. From 2016 to 2018, Vera worked for the Mexican Secretary of Agriculture focused on harmonizing the elements of sustainable coffee production in the national coffee program. She was also part of the Mexican delegation to the ICO and the Mesoamerican program PROMECAFE.

Vera leads KUANU, a consulting agency focused on strategies for different sector actors to improve the resilience of coffee farmers. She is also leading the Strategic Initiatives of Azahar Coffee Company, specifically the research behind “A Sustainable Coffee Buyer’s Guide”(1), a new pricing tool, and initiating export operations in Mexico. She has published with the Specialty Coffee Association, “A Business Case to Increase Specialty Coffee Consumption in Producing Countries” and also with the Instituto Interamericano de Cooperación para la Agricultura (IICA) on “El Mercado del Café en la región Mesoamericana, oportunidades y limitaciones comerciales intraregionales”.

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Michael: Thanks for being here, Vera! Wow, for me to learn from someone like you who has done this kind of work, on the ground, after having just been to Oaxaca…yeah I’m excited to experience the full circle. What’s the story of how you got into coffee economics?

Vera: Both my parents are from agriculture, and I always had the need to want to understand how it worked. I asked, why was there not enough prosperity on these lands…they were producing and feeding us, but why was there not prosperity?

My background is international business, business development, and I wanted to relate to agriculture. So I applied for a masters program…it was an opportunity to understand what was going on globally, nationalism and how it impacts producers. During that time I got a value chain analysis study…with Ana cafe. We dissected everything to understand the full supply chain, who does what, and how much does each contribute to the price? 

The study found 7-9% of consumer price (of supermarket coffee) ends up with producers. Seeing so much effort going into one part of the supply chain, with the risk (for farmers)...so much is out of your control with climate change etc, and no resources to make things better. It was almost 15 years ago, and I’ve been doing it since…how can I make things better for the producers?

Michael: Why is coffee farming so risky? 

Vera: So we have to explain…What does it mean to farm coffee? A producer, if it goes well, sends coffee to someone who is buying it for X amount. But when you are growing it, you do not know if someone is going to buy it, and how much he will buy it for. No one would normally work under those circumstances! You need some certainty in life. There is such a lot of risk. One producer told me, “If I would at least know that half my coffee would be bought for X price, I would be happy.” 

In Colombia where Azahar is based…there are changes and you can adapt. But there is never an action you can take, it is always a reaction to what the weather, etc brings. You can’t prepare for what you don’t know. Coffee plant disease, labor shortages, fertilizer costs increasing, etc. The brunt of the risk [of coffee farming] is borne by people who have cushion to deal with risk.

“The brunt of the risk [of coffee farming] is borne by people who have cushion to deal with risk.”

I feel peace being back in Mexico, and being part of giving back to the coffee industry there. NGOS and institutions I used to work for economic development were deciding about things in countries that they weren’t even living in. And it was not helping the problems…it’s so easy for someone from the outside to say “you should do this…” If I create change, I want to do it with the people who live there! 

Michael: What is the lifestyle like of most farmers in Mexico? What are their needs and wants?

Vera: The majority of coffee in Mexico is produced in the four southern states (85% of coffee in Mexico). There is a higher degree of poverty in these regions. Countries that produce coffee are most likely to be on the lower level of the poverty development index. This is a fact. If your country produces coffee, you have a higher chance of being at the poverty level of the development index. That simple fact is already striking. …Coffee should contribute to the economic development of the country, versus not right? That’s not the case. When you zoom in on a country like Mexico…the majority of the states that produce coffee are also the poorest. That also for me is so striking.

“Countries that produce coffee are most likely to be on the lower level of the poverty development index. This is a fact. If your country produces coffee, you have a higher chance of being at the poverty level of the development index. That simple fact is already striking. …Coffee should contribute to the economic development of the country, versus not right? That’s not the case.”

They live on a day by day basis. They have just primary, perhaps secondary school. It’s the minimalist living that they’re used to. They have different needs than urban areas… But they all want things like the internet, and many of them don’t have it. There is a lot of community support and that’s what you also see in coffee. They are trying to manage their activities with low income, low investment, it’s a hamster wheel. They need to find another job, figure out how to make a living. And that is just for school, medication, simple things. 

A producer told me, “The thing is, it’s not that I am asking for a very high price, I simply don’t want to choose between a school bag or a bag of fertilizer.” Something is off with this! It’s very easy for [people to say it's productivity versus price…but that’s easy for folks to say who haven’t been living in these conditions. But which comes first, the chicken or the egg?

“We have to be willing to give more, and get less, because we need to invest in coffee…or we will not have the coffees that we are looking for.”

Michael: Free market capitalism…we made this, yet we didn’t. What is the hope for change other than regulation (which people say they don’t want)?

Vera: The biggest five coffee companies are not in coffee producing countries. They manage 60-70% of the global market. There are a lot of brand names that are all hosted by one company. That is out of our control, but it is good to know. 

Michael: One of the most striking pieces from 2020, in the Coffee Barometer, the majority of the value is held in a country where coffee isn’t touched, which is Switzerland. Instead of focusing on what we can’t control, we need to focus on creating other ways of buying and selling coffee. 

Vera: One of the world’s largest traded commodities is coffee, but I have trouble with the term commodity. But in many places coffee is not an actual commodity product, it’s not even the same product with small products. We are asking so much from the producer without guaranteeing them anything.

And, there’s more research done for strawberries and watermelon than even coffee! 

“We are asking so much from the producer without guaranteeing them anything.”

The SCA (Specialty Coffee Association) scale of points is a great way to monitor quality. But I sometimes think that producers think that every time they have to score more. Consumers though don’t really understand the difference between 85 and 86, so why is there so much pressure for producers striving so hard for one more point? Just maintain your 85, I tell them! Keep what you have going. Getting a higher [SCA] score is not the only way (or even a way) to get out of poverty! And we need to ask them what they need and want to work on (drying, infrastructure, etc), not to tell them to score one point higher. 85 is so good, if you get 85 again next year, you should be very happy! 

“Getting a higher [SCA] score is not the only way (or even a way) to get out of poverty!”

In the west, roasters want all these creative, unique things but we miss the greatness of a good cup of coffee in our striving for new and different. 

[Vera tells the story of a buyer/roaster asking the producer to process the coffee naturally, but then it wasn’t good, because natural is very hard to do…and the buyer didn’t want it anymore. So the producer was left with coffee they couldn’t sell, just because they were trying to please the potential buyer.]

Michael: Where is the ability for us to educate consumers? From the consumer perspective, do we just vote with our dollars? 

Vera: What does it mean that “we pay well”? We need to be more fully transparent. The consumer doesn’t know how much the producer received. We have to share what it means that you pay a certain price to the producer… Is it related to a minimum wage, or poverty level, etc? 

If someone told me that we paid $91 to the producer, and X amount to the exporter…I don’t know what value, what benchmark to refer that to. Is that the poverty line? 

It’s the same in textiles, we know that certain companies pay very little to the producer. So then we have to stop buying from those companies.

If I pay $1 for a cup of coffee, what does it mean? Most likely, it’s not going very well for the producer. So I decide that I’m not buying that cheap coffee. 

There is a graph in the 2020 Coffee Barometer, and a voluntary sustainability list. If you get a one on that list, [that means] they basically do nothing. But when you go to their website, it’s all about the trigger words, they use sustainability, women-owned, blah blah blah. So people are allowed to use these trigger words to sell things, but don’t actually do anything for the producers, and how are consumers actually supposed to know?

“So people are allowed to use these trigger words to sell things, but don’t actually do anything for the producers, and how are consumers actually supposed to know?”

In the 80s they started the fair trade movement, and lots of good strides were made. But now what are the standards, what can we do to make a tangible change again? We were saying to consumers that everything is “certified” when we know it’s not….we need to clean our conscience. Claims have changed to “we guarantee no poverty” but how can you say that? You have to focus on good agricultural practices, and not claim something so big and so complex. 

And people think that they need to certify things so that they will get a higher price, but that’s not even necessarily true. 

So…the Sustainability Buyer’s Guide – we want to get away from this being a mission of Azahar, and into everyone's hand. We want to collaborate with others so that we can show their data. We want everyone to ask the question, “I know that this is the right price, how much has ended up with the producer?”

Michael: The book Coffeeland(2) paints the picture of how coffee is the way it is…colonialism, coffee planting, the 20th century boom of producing as much as we can with as little money as we can…And all of it being maintained with the upper powers. Also, Cheap Coffee(3) is a must read. 

So I’ll keep doing what I’m doing, looking at the cost of production. Consumer education, to convince people to vote with our dollars. But I’m so small as a small business, what can I do? Buying direct as a small roaster is real rough (and doesn’t even necessarily affect good change).

So what is the positive stuff that keeps you going? 

Vera: What gives me hope is the workshops with the producers, when we unravel the cost of production together. I enjoy seeing their interests sparking over five hours to understand what they are spending. I’m a nerd in that respect…everything is here and we just need to ask a few questions. They understand that what they know is valuable. They are valuable. Just because it’s not in an excel spreadsheet doesn’t diminish their knowledge. You could see their faces change, “holy fuck - that’s the number that my coffee costs? So I need x amount of price for my coffee.” But I ask…”is that the amount that you need to make, or is that what is covering your costs? Will that amount cover your costs? I don’t want to offer you a price because you don’t know your cost of production.” And it was a click for them. That’s [us working for] the interest of producers.

“What gives me hope is the workshops with the producers, when we unravel the cost of production together….They understand that what they know is valuable. They are valuable. Just because it’s not in an excel spreadsheet doesn’t diminish their knowledge. You could see their faces change, “holy fuck - that’s the number that my coffee costs?”

From the outside we have seen poverty in coffee communities for years. If the producer is saying I need this, then trust them! That’s the conversation we need to have. The cost of living has increased in all these countries, but coffee prices have not. People in the west think “they don’t need that much”. 

I don’t want to speak for the producers anymore. The producers can speak for themselves. And in 2022 there are enough tools to do that. If you catch me on a good day, I do see hope. But I think that we need to push harder. Ask for things to be produced in Spanish, not just English. 

“I don’t want to speak for the producers anymore. The producers can speak for themselves. And in 2022 there are enough tools to do that. If you catch me on a good day, I do see hope. But I think that we need to push harder.”

Michael: Yeah people from the West need to shut up a bit. One of the reasons I’m still a believer in free market is that individuals have the opportunity to put more effort into bettering their life. But then there are still monopolies that make certain things impossible, because they are all so small. 

Should I have a whole page on my website with a list of companies and their subsidiaries of places we shouldn’t buy? If there are companies that are marketing “specialty” but they really aren’t, what do we do?….the market share of specialty coffee has grown in the west, but production of it has been stagnant. So who all is selling non-specialty coffee as specialty? 

Vera: We need to think about the distribution of value throughout the chain, we should give more value to the producer. A lot of things can only change through policy. 

Michael: What is something you would leave listeners with?

Vera: Be conscious of coffee consumption, how you consume it. Ask those questions, how much do you pay to the producer? Sometimes when I’m in the US and they are asking where [the coffee] comes from, what are the flavor notes, what is the process, how it is brewed, etc…ask also the question of how much is paid to the producer. 

“Sometimes when I’m in the US and they are asking where [the coffee] comes from, what are the flavor notes, what is the process, how it is brewed, etc…ask also the question of how much is paid to the producer.”

Michael: We are talking about so much culture in every level of the supply chain. Teaching producers about the costs of production. How much we pay, how much the producers are paid, how much we consume (go read Coffeeland!). I try to drink no more than two cups. I want to embrace what’s in my hand, and not just do it in excess. 

We need to be more conscious, and that includes all elements of our lives…to create a better society and a better world. 

Now you can see why we’re mad…so GET MAD. 

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NOTES

(1) More on A Sustainable Coffee Buyer’s Guide. Here’s the price discovery tool developed through this research: 

p=i/v+c where P= The price necessary to achieve an income goal (i) for producers with specific, known costs of production (c) and volumes (v). 

Azahar (an exporting company) began collecting data from farmers’ cost of production and yields because they wanted to pay producers not just fairly but informed by cost inputs and factoring for actual profit for the farmer. A few years later, with help to fund the research from The Rudy & Alice Ramsey Foundation, Acumen Fund, and the Azahar team, the first version of the Sustainable Coffee Buyer’s Guide was launched. 

(2) Book, Coffeeland, One Man's Dark Empire and the Making of Our Favorite Drug by Augustine Sedgewick

(3) Book, Cheap Coffee: Behind the Curtain of the Global Coffee Trade by Karl Wienhold 

MORE FROM VERA HERE...

A Sustainable Coffee Buyer’s Guide - Vera Espindola Rafael 

Vera Espindola Rafael on Markets in Producing Countries | Re:co Symposium 2019 - Vera Espindola Rafael

​​Recently Published: A Business Case to Increase Specialty Coffee Consumption in Producing Countries, by Vera Espindola Rafael 

“Increasing In-Country Consumption with Vera Espíndola Rafael”, Boss Barista Podcast