According to a recent study conducted in Colombia, small producers base their financial decisions on personal opinions when it comes to coffee production, marketing, savings, investment and consumption. Unfortunately, this approach does not necessarily lead to the maximization of profits on the capital invested.
The case study “Economía Familiar Cafetera y Decisiones del Hogar” (Economy of Coffee Farming Families and Household Decisions), conducted by the Sustainable Trade Platform and supported by the Global Coffee Platform, focuses on five small coffee households and provides a deep understanding on how their daily activities may affect their decision making and consequently, the running of their coffee farm.
The study observes that farmer households spend large proportions of their income to purchase food, which is their priority. Faced with the uncertainty of their activity due to factors such as fluctuations in climate, prices and presence of pests and diseases, farmers prefer to reduce risks, rather than maximize revenues.
Improving coffee farmer’s livelihoods is a priority to the Sustainable Trade Platform and GCP, that is why this study aims to tackle one of the biggest issues in the industry: need for more research. The analysis sets a precedent by exploring small producers’ economic rationality (surviving rather then thriving) and seeks to suggests improvements to policies or programs that may not reach effective results and hinders the sector’s expectations.
These are some of the most relevant findings:
|Model of subsistence family coffee||Consolidated Family Facilities|
|Coffee is the main source of household income. Despite the presence of different sources of diversification such as bananas or chickens, coffee dependence causes total income to fluctuate with the coffee harvest cycle.||The structure of household income is diversified, centered on agricultural activities, with income from external and occasional work.|
|If families had to pay for family labor, the production of coffee on the farm would be unfeasible for the household since for them the coffee activity is profitable if it allows them to acquire assets that improve their quality of life, fulfilling their needs. expectations of realization.||The practices, labors and investments that the producer decides to implement on his property are the result of the planning he does to maximize the income.|
|If families had to pay for family labor, the production of coffee on the farm would be unfeasible for the household since for them the coffee activity is profitable if it allows them to acquire assets that improve their quality of life, fulfilling their needs. expectations of realization.||Its logic is different because it goes in search of surpluses to make investments or improvements in housing, improve the conditions of the home, or the accumulation of assets.|
|Only hired labor for the collection and the market, the work of coffee cover 98% of family wages, a part of these goes to the work in the banana crop, to be interspersed with coffee.||The producer sees coffee growing as a profitable activity that does not depend on fortuitous factors such as a rise in coffee prices or a reduction in the inputs used in production.|
|The use of farm products is essential, livestock production has a dual purpose of generating income through the sale of products to neighbors and for self-consumption.||In his opinion, the profitability depends on the effort of the coffee grower to keep the crops in good condition, achieve high productivity and plan the activities and investments with a long-term vision.|
|All household income comes from the production on your own farm.|
|The economic decisions of the household are taken with the criterion of guaranteeing food and covering basic needs.|
|The realization of cultivation practices different from those of sustenance (such as renewal or fertilization) depends on the fact that it generated surpluses the previous year after making household expenses.|
|In other cases, when the consumption of food from the farm itself is quite low, and commercial crops such as coffee and plantain predominate, productive liquid assets are lacking, which can be resorted immediately to any eventuality and the only option is to reduce their needs for more pressing expenses, such as fertilizing the crop, to guarantee the purchase of the basic basket.|
The whole document is available in Spanish:
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For more information on the study, please contact Adriana Silva.
Find out more about the National Coffee Platform in Colombia here.