Oikocredit and IDB help Latin American farmers combat volatile coffee prices

Oikocredit has teamed with the Inter-American Development Bank (IDB), Fair Trade USA, Keurig Green Mountain and Catholic Relief Services for a unique three-year capacity building project to support smallholder coffee farmers facing volatile markets.

The Sustainable Agriculture, Food and Environment (SAFE) Platform, a multi-stakeholder alliance initiated by the Multilateral Investment Fund (MIF) and coordinated by Hivos, is enabling the promotion of outcomes from this initiative.

Vision and mission: Aldea Global was the first of Oikocredit’s coffee partners to engage in offset hedging for protection from volatile coffee prices

The project’s objective is to equip 16 coffee producers’ organizations in Honduras, Guatemala, Nicaragua, Colombia, and Peru with the skills and tools needed for price risk management best practices, including stock management and offset hedging.

Price volatility ranks alongside climate change as one of the most significant risks faced by smallholder coffee farmers in Latin America. Fair Trade USA case studies show that cooperatives with price risk management strategies have increased farmer incomes by more than 20 per cent over a one-year period.

The project is preselecting coffee producers’ organizations according to their business performance and social impact. The organizations involved in the project are expected to represent 5,000 members, most of whom are smallholder farmers. These farmers each typically cultivate up to five hectares of land and produce an annual average of 15 quintals (680kg) of coffee per hectare. The average yearly gross income of the poorest farmers is less than US$ 2,500 per hectare.

A unique opportunity for coffee cooperatives

Oikocredit will lead the capacity building programme, which has four components:

  • Organizational strengthening: training for managers and board members for implementing price risk management strategies
  • Development of a price risk management toolkit: stock management skills, training materials, a risk assessment tool and a web-based price risk simulator
  • Apprenticeship programme: a peer-to-peer learning opportunity to be hosted by two cooperatives with considerable experience in price risk management
  • Options financing: Oikocredit will provide financing to cover costs related to price risk management

Harvesting coffee berries: Oikocredit is leading a programme to strengthen 16 coffee producers’ organizations with strategies for price risk management

This multi-year project is the first such programme in Latin America. Price risk management training programs in the region to date have either been one-day trainings focused on operations or one-off programmes led by importers working with their clients. The direct link to Oikocredit’s financing facility is also unique and provides further incentives for coffee producers’ organizations to continue to strengthen their price risk management strategies.

Sustainable commitment to price risk management

The training materials and tools that will be developed during the project will be publicly available. The project also aims to oversee the establishment of a price risk management platform offering training and advisory services for coffee producers’ organizations across Latin America. Oikocredit, Fair Trade USA, Keurig Green Mountain and Catholic Relief Services also aim to adapt and replicate the trainings in other countries in which they operate.

Frank Rubio, Oikocredit’s global head of agriculture, said: “This is a fantastic step towards improving the livelihoods of smallholder coffee farmers in Latin America. Oikocredit is proud to be working with IBD, Fair Trade USA, Keurig Green Mountain and Catholic Relief Services on this special project. We hope to create a sustainable commitment to price risk management among cooperatives — and it’s exciting that there’s scope to expand this beyond coffee in Latin America.”

Read more about this project on the SAFE Platform website.