Brazil's Model Farms Program

The following article written by George Howell describes an ambitious and critical educational project in Brazil that aims to demonstrate to farmers the economic benefits of focusing on quality.  The project has been a success for both Brazilian coffee producers and specialty coffee importers.  It should serve as a model for other coffee producing nations.

Model Farms Program

It was determined by the NPSC that a Model Farms Program would have the best chance to improve quality and thereby the economic conditions of small-to-medium coffee growers. 

Again:  In Sul de Minas, where there are over 24,000 small farmers, the terrain is often hilly, labor very expensive, and the weather often uncooperative during the harvest.  Most farms use very primitive processing. Yet quality potential of this region is excellent, given the proper controls. 

The program would endeavor to demonstrate the “return-on-investment potential” and to provide a field methodology for incrementally developing sustained quality within the farmer’s resources.  We decided that to rigidly target the US Specialty Market (or even any Specialty Market!) was self-defeating, especially where the small farmer was concerned.  The objective was to raise the quality bar each year through affordable incremental investments (so long as the improvements proved profitable!).

Each model farm’s production was to be recorded by lot, by cup quality, and by price received against the benchmark Brazilian “internal market price”.  All costs, including depreciation, were to be tracked by a professional agronomist (Guy Carvalho) hired by the Brazil Gourmet Project.  The first year for each farm was to be the one before improvements had been made.

The Model Farms Program would attract farmers by directly benefiting participants with expertise in what improvements to make and how to make them on an individual-by-individual basis at no added cost to them.

The NPSC determined that Brazil’s share of funding for The Gourmet Project would be earmarked for the Model Farms Program.

It was relatively easy to sign up farmers planning to make quality-enhancing improvements.  At times, in fact, I feared that Project resources would be over-stretched by the number of farmers wanting to participate.  Each farm was an added cost.  The great travel distances between some of the farms could easily compound these costs.  The HPSC, however, made it clear that number and diversity of farms were important to the Model Farms Program’s success.  Experience has borne out its wisdom.

The number of participating farms settled down to ten from three states, representing four coffee regions, after initially rising to fourteen farms in four states.  Eight farms actually made improvements. 

All the Model Farms produced BICA the first year.  The eight farms then made improvements before the second harvest year leading to differentiated qualities.  These separations ranged from pulped naturals, BICA and sweepings to the wider range of pulped naturals, naturals, greens, sweepings and residue - depending on improvements made.

The Gourmet Project’s first report has just come out at the end of March 2000.  It reviews results from the first and second year.  I have not had enough time to carefully review it in detail. 

The Model Farms Report compares actual prices paid in the second year for differentiated 60-kg bags of each farm’s lots to the same day’s BICA price.  The difference is called the differential.   An example follows:

Fazenda Passeio has 54 producing hectares of coffee. In year one it produced 92% BICA, 6% sweepings and 2% triage.  The second year, after 35,800R of improvements, it produced 37% pulped natural, 34% natural, 15% green, 12% sweepings and 2% triage. Its yield was an amazing 70.2 60-kg bags per hectare.

In the second year, lot #1 consisted of 200 bags of natural floaters, which sold for the BICA price of R216 per 60-kg bag. The differential was zero.  Lot #9, on the other hand, consisted of 200 bags of pulped natural coffee and sold for R238 while BICA for that day was selling at R182 per bag.  The differential was R56.  The farm produced 43 lots in total.  The differential paid, when all lots are included, was R13.43 per 60-kg bag.

Once all costs are tabulated, including maintenance, interest and depreciation for all investments, results show that Fazenda Passeio made R943.25 more per hectare than if it had not made the improvements.  Comparing numbers further, profitability comes out at 12% better than it would have been, had improvements not been made and all lots sold as BICA (with interest, depreciation and interest for relevant investments removed).

With the first year of post-investment harvests in, results are promising. While more time is needed to analyze the report which has only just come out the following initial observations have been made by the Project’s agronomist, Guy Carvalho:

·        Processing costs tended to decrease while investment costs increased.  Other costs were unaffected.  Overall costs increased slightly, which confirms the need for better product remuneration. 

·        All eight farms showed improved differentials per bag comparable to Fazenda Passeio, varying from 5% to 10%.

·        Success with the premium depended a lot on when and through what channels the coffees were sold.  Some farmers had better connections than others had.

·        Farms that pulped a larger proportion of cherry were the ones that obtained larger average premiums.

·        Profitability increased at all the properties, even if an overall increase in production cost was observed; the added value to the product guaranteed the profits.

·        Profitability increases comparing BICA against differentiated coffee production varied from 10% to 45%.

·        Investments in quality improvement need to be planned according to production capacity; investments that are not proportional to production area will bring lower returns.

The eight farms that made improvements are:

#	Farm	Region	Ha.	Investment	R	Diff.
1	Faz. Luma	Cerrado	66	Density Separator	6,000	7%
2	Faz. Passeio	Sulminas	61	Carts,Pulper,Dryer,Structure	35,800	7%
3	Faz. San Antônio	Sulminas	7	Density Separator, Pulper, Structure	17,000	8%
4	Sitio Renascença	Sulminas	12	Density Separator,Pulper, Structure	9,000	7%
5	Faz. Cachoeira	Sulminas	175	? – Investments made year before -Interest, Depreciation included	?	5%
6	Faz. Paraiso	Sulminas	50	? – Investments made year before -Interest, Depreciation included	?	10%
7	Sitio Tiki	Sulminas	3	Cart, Pulper, Structure	? mostly hand made	8%
8	Faz. Canto do Rio	Bahia	75	Mill Shed, Mill Machinery, Patio, Pulper Shed	48,800	11%

It was too early for Model Farms to produce exemplary quality coffees, i.e. Competition winners, but in time this may well come to pass.  Nevertheless Illycaffè purchased lots produced by some of these farms – a clear endorsement of Model farms quality potential.

Finally, a Quality Production Handbook, based on the Model Farms experience, has been written in Portuguese.  I am scheduled to receive a copy next week.

The Model Farms Program requires several more years to become really meaningful.  Standardizing the reports and determining more fully the benchmarks by which to measure and judge success will be the next stage.  Members of the BSCA (Brazil Specialty Coffee Association) and other prominent people in the Brazilian coffee trade are deeply interested in continuing the program and extending it to other farms in other regions.  Financing for this is being discussed.

Producer education must underpin the Model Farms Program and the Exemplary Coffee Program.  Producers must be an informed group that is able to capitalize on the lessons, opportunities and models produced by the Brazil Gourmet Project’s two complementary programs. 

The Education Program

Cupping workshops for farmers is a promising new venue.  In 1998 Marcelo Vieira set up two cupping workshops for farmers and their cuppers.  The first was held in Alfenas, Sul de Minas on August 15, 1998 and the second on December 9, 1998 in Patrocinio, Cerrado.  About 10 farmers attended the first one and about 25 the second.  These workshops were very successful.  They clearly generated a lot of enthusiasm by providing a forum for farmers to compare their coffees in a noncommercial, low competitive environment.  They encourage the farmer to cup and compare his or her coffees to those of others in a professional setting.  The seminars allowed everyone to come closer to a genuine consensus of what quality really was. The second session started at 9 AM and did not end until well into the evening.  This workshop concept needs further development.

The Brazil Gourmet Project attended as many farmer conferences as possible in order to present educational seminars about quality markets and quality production.  In 1998, for instance Marcelo Vieira and I gave the following presentations:

1.      Patrocinio, Cerrado Region, Minas Gerais - May 13, 1998

·        Gourmet Coffee Project – Marcelo Vieira

·        Specialty Coffee in the USA  - George Howell

2.      Pinhal, Mogiana Region, Sao Paulo – August 12, 1998

·        Recommendations to the Grupo Tecnico de Certificação de Qualidade e Origem (Technical Group of Certification of Quality and Origin)

·        Gourmet Coffee Project – Marcelo Vieira

·        Specialty Coffee in the USA

3.      Alfenas, Sulminas Region, Minas Gerais – Sul Minas Association of Coffee Growers – August 14, 1998

·        Gourmet Coffee Project

·        Specialty Coffee in the USA

4.      Sao Paulo, Sao Paulo – December 3, 1998

·        Coffee Shops – Ideal Channel of Distribution for Specialty Coffees; - to The Coffee Roasters’ Association of Sao Paulo.  Twofold purpose: increase credibility, develop Specialty Market in Brazil to bolster demand for fine qualities.

5.      Franca, Alta Mogiana Region, Sao Paulo – December 4, 1998

·        Gourmet Coffee Project

·        Specialty Coffee in the USA

(My lectures were presented in Portuguese PowerPoint in Brazil.  I spoke in English while being simultaneously translated into Portuguese)

The key points we developed were:

1.      What The Gourmet Project is, - what its objectives are

2.      Explain our focus on the US Specialty Market

3.      The root of Specialty Coffee is quality

4.      Definition of quality and its effect on prices

5.      Quality must be very high and consistent

6.      Brazil naturals and pulped naturals (semi washed) are ideal for elegant espresso

7.      US Specialty espresso bars are expanding rapidly, a great opportunity for Brazil

8.      The proactive role of The Gourmet Project in the USA for quality Brazil coffee

Marcelo Vieira and I feel certain these seminars were a highly significant tool for preparing farmer willingness to consider change.  While the real world presses all but the most secure and visionary farmers towards expediencies that are obstacles to sustained quality, nevertheless - seeds are being planted which can, in time, bear fruit.  The positive results from the Competition, the Auction, and the Model Farms study, coupled with the Quality Production Handbook, all confirm our presentations’ theses.  Our words have been backed by the first wave of actions.  It is the cumulative, coordinated effect of all these efforts that counts.

Source: Final Brazil Gourmet Project Report 2000 by George Howell

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