Agroforestry Systems 53: 205–213, 2001. © 2001 Kluwer Academic Publishers. Printed in the Netherlands.
Productivity and profitability of multistrata organic versus conventional coffee farms in Costa Rica A. E. Lyngbæk1, R. G. Muschler2, * and F. L. Sinclair1 1
School of Agricultural and Forest Sciences, University of Wales, Bangor, Gwynedd LL57 2UW, UK; Agroforestry Project CATIE/GTZ, Apdo 126, CATIE, Turrialba, Costa Rica; E-mail:
[email protected] (*Author for correspondence)
2
Key words: Coffea arabica, labor, net income, premium, variable costs, yield
Abstract In areas where traditional multistrata coffee systems have been transformed to systems with patchy or no shade at all, often dependent on high chemical inputs, ecological and socioeconomic degradation has become an increasing issue. During the 1990s, rising environmental and health concerns have promoted the interest in organic production systems and their environmental services for natural resource conservation. This study compared productivity, profitability, producer-defined constraints, and goals and research priorities between ten individually paired organic and conventional coffee farms in Costa Rica. Although five of the organic farms matched or exceeded the production of their conventional counterparts, the three-year mean yield of the organic farms as a group was 22% lower than that of the conventional farms. However, excluding organic certification costs, mean variable costs and net income (NI) were similar for both groups, mainly because organic price premiums received by the farmers compensated for lower yields. If current organic certification costs are included, the price premiums paid to organic producers would have to increase to 38% in order to equal the NI from conventional coffee. Conventional farmers indentified low and unstable prices as the main constraints to sustained production and stated further intensification of production as their main goal. In contrast, the key issues for future development of the organic group centered on farm diversification, agroecological self-sufficiency, and agronomic practices that permit organic farm management.
Introduction In many parts of Central America, traditional multistrata coffee systems, known for their structural and functional diversity (Perfecto et al., 1996), are being replaced with unshaded coffee or coffee shaded by a single species (Rice and Ward, 1995; Beer et al., 1998). Besides having lower biodiversity, these latter systems, here referred to as conventional, generally require high levels of external inputs and have been linked to soil degradation, environmental pollution, and human health problems (Rice, 1991; Boyce et al., 1994; Fernandez and Muschler, 1999). Particularly
for small and medium scale producers, relying on purchased inputs and a single source of income from monocultural coffee also creates serious economic risks due to high variable costs and low as well as unstable world market prices for coffee. In contrast, organic coffee production, based on diversity, recycling, biological processes, and mimicry of natural habitats (IFOAM, 1996; Figueroa-Zevallos et al., 1996), can generate multiple products while having less external impacts than conventional systems. While growing markets for organic produce, particularly in Northern countries (BIOFACH, 2000), suggest that organic agriculture can be
206 economically viable, little is known about the productivity and profitability of organic coffee production systems. Previous comparisons of organic and conventional coffee farms are of uncertain validity because they did not consider variations in agroecological conditions and farm size between organic and conventional farms (Akkerman and van Baar, 1992; Boyce et al. 1994; Alvarado-Soto and Gonzáles-Mora, 1996). The objective of the present study was to compare organic vs. conventional coffee farms in Costa Rica in terms of their productivity, labor use, production costs, net income, farmer-perceived constraints, farmer-defined goals, and research needs for the future.
Materials and methods Selection of case study farms and data collection Ten farm pairs, each consisting of one organic and one conventional farm with less than 7 ha of coffee, were selected in five regions of Costa Rica with varying agroecological conditions. Each farm pair shared a similar biophysical and socioeconomic environment due to their proximity (for details refer to Lyngbæk, 2000). Since there were fewer organic farms than conventional farms, organic farms were identified first, followed by selecting comparable nearby conventional counterparts. In order to be elegible for selection, organic farms had to: (a) have a history of at least three years under organic management (selected farms actually ranged from 3 to 13 years); (b) be subject to active management using organic principles; and (c) have the majority of coffee plants in production. The last criterion was also applied to conventional farms. The conventional farms were selected primarily for proximity to their respective organic counterparts and the similarity of altitude and area under coffee. Data were collected for a three-year period (1995 through 1998) through repeated semi-structured interviews with producers and were corroborated by farm visits and review of farm records. Of the 20 farms studied, 16 had between nine and 34 tree species planted within coffee, and 18 farms had between two and five tree strata (Lyngbæk, 2000).
Productivity and profitability evaluation Productivity was calculated from farmers’ harvest records. Since coffee plant density differed in some cases between conventional and organic farms (ranging from 3,000 to 7,400 plants ha–1), yields were expressed both on a per-area and per-plant basis. Farm net income (NI) from coffee was calculated as gross income minus variable costs including hired and family labor, which were both set at US $ 8.25 day–1. Fixed costs could not be included since these were neither recorded nor could they be estimated by the majority of the producers. Estimated costs of certification and inspection of organic production were based on current national fees. They consisted of: an application fee of US $ 8; a base fee of US $ 150; an inspection fee of US $ 100; travel, accomodation and subsistence costs estimated at US $ 21.4 day–1; 0.5% of gross income (Eco-LOGICA, 1997), and a registration fee of US $ 29 levied by the Ministry of Agriculture. The base fee can be shared by members in producer groups. The inspection fee is likewise lower for groups, and is shared by the number of farms inspected in a day. The inspection costs for producer associations were calculated assuming ten producers in a group and three farm inspections per day. Producer-defined constraints, goals, and research priorities In order to complement the three year production and mangement data and get insight into the farmers’ perspectives, the producers were asked to describe the main constraints to sustained coffee production, what their goals were for the future, and what research they considered essential to alleviate these constraints.
Results Coffee productivity The three-year mean yield ha–1 of the organic group was 22% lower than that of the conventional group (Table 1); expressed on a per-plant basis, organic yield was 17% lower. Interestingly, this yield depression was not uniform across farm
207 Table 1. Mean yield of fresh coffee berries of ten paired organic and conventional coffee farms in Costa Rica. Year
Organic (t ha–1 yr–1) (± SE)a
Conventional (t ha–1 yr–1) (± SE)
Organic conventional × 100
1995/96 1996/97 1997/98 3-yr mean
6.8 4.6 6.6 6.0
7.7 7.4 8.0 7.7
89 62 84 78
± ± ± ±
1.3 0.7 0.9 0.8
± ± ± ±
1.2 0.9 1.2 1.0
a One metric ton of fresh weight coffee berries is equivalent to 3.92 Costarican fanegas or approximately 180 kg of green coffee beans with 11% moisture (255 kg fresh berries/fanega or 46 kg green coffee/fanega; Carvajal, 1984).
pairs. While five organic farms produced only between 42 and 66% of the yields of their conventional counterparts, the other five organic farms actually had slightly higher three-year mean yields ha–1 than their conventional counterparts (Figure 1). For five farm pairs, the organic vs. conventional coffee yield ratios calculated on a per-hectare basis differed markedly from those expressed on a per-plant basis (Figure 1). Costs and labor use During the coffee year 1997/98, the mean variable costs were US $ 1,470 ha–1 yr–1 for organic and US $ 1,403 for conventional farms, i.e., 4.5% higher for the organic group (Figure 2). The predominant cost in both systems was labor for
harvest and plantation management. However, on average, the conventional group spent more money on harvesting (a cost directly proportional to productivity), while the organic farms spent more on labor for management, including weed and pest control, fertilization, planting and pruning of coffee (as well as of shade trees), and soil conservation (Figure 2). The conventional farms had higher costs for fertilizers and chemical plant protection agents, particularly herbicides, followed by fungicides and nematicides. However, if the cost of labor for preparing organic fertilizers on organic farms were included in the fertilizer cost category (rather than in ‘labor for management’), the total cost for fertilizers would be similar to that of the conventional group. Excluding labor for harvest, mean labor use in 1997–98 was substan-
Figure 1. Mean coffee yield per hectare and per plant over a three year period (1995–1998) for ten organic coffee farms in Costa Rica relative to the mean yield of their conventional counterparts (100% = yield of conventional counterparts).
208
Figure 2. Mean distribution of variable costs of ten organic and ten conventional coffee farms in Costa Rica (1997-98). ‘Labor for Management’ includes weed and pest control, preparation and application of fertilizers, planting and pruning of coffee and trees, and soil conservation practices. ‘Other’ includes transport, fuel for agricultural machinery and coffee roasting (US $ 1 = 280 Colones, May 1999).
tially higher for the organic than for the conventional group (Table 2). Fertilization, including the collection, preparation, and application of organic materials, was the most time-consuming activity for the organic group, requiring on average five times more labor than in conventional farms (287 vs. 55 hours ha–1 yr–1, respectively), which relied almost exclusively on chemical fertilizers. The extra time spent on fertilization in the organic group accounted for the difference in total labor use between the two groups. In contrast, on conventional farms, most labor was allocated to coffee pruning followed by weed control. Despite the use of herbicides combined with manual weeding, the conventional farms spent 29% of their total labor expenditures on weed control compared to 19% for the organic producers (Table 2), which relied only on manual weeding and indirect weed control due to shading from the associated trees. Net income and organic premiums Despite lower mean yield and slightly higher mean variable costs, the average NI of the organic group (US $ 1,448 ha–1 ± 359) was similar to that of the
conventional group (US $ 1,483 ha–1 ± 393). Three of the organic farms even generated higher NIs than their conventional counterparts, and two pairs were similar (Figure 3). Four of these five farms sold their coffee at a premium price, while the fifth was more productive than its conventional counterpart, possibly due to, at least partly, the advanced age of the conventional producer who had difficulties performing heavy agronomic practices such as tree pruning. The lower NIs of the remaining five organic farms were due to lower yields (Figure 1) and an insufficient premium for organic coffee (one farm) or lack of a premium altogether (four farms). The mean price premium received by the ten organic farms was 20%, including four farms which received no premium (Table 3). The six farms that did receive a premium had a mean of 40%. The mean premium for farms processing coffee themselves (case study 4), or in association with other producers (case studies 8 and 10), reached 50%, as opposed to only 20% for the farms that sold unprocessed coffee to organic coffee processing plants (case studies 1, 2 and 7).
209 Table 2. Mean labor use for management of ten paired organic and conventional coffee farms in Costa Rica (1997–1998). Activity
Organic group
Conventional group
Labor use (hours ha–1 yr–1)
Proportion of total labor (%)
Labor use (hours ha–1 yr–1)
Proportion of total labor
Mean
SE
Mean
Mean
SE
Mean
Fertilizationa Pruning of coffee bushesb Weed control Soil conservation Pruning of shade trees Planting of shade trees Replacement of coffee bushes Pest controlc Other
287.2 157.1 131.9 048.1 033.2 016.7 013.5 003.8 000.0
± ± ± ± ± ± ± ± ±
095.5 031.0 017.6 011.9 015.2 011.8 005.7 002.7 000.0
041.6 022.7 019.1 007.0 004.8 002.3 001.9 000.6 000
054.8 200.3 144.2 028.9 042.6 000.4 007.7 013.8 002.5
± ± ± ± ± ± ± ± ±
08.1 55.7 35.9 10.4 16.3 00.4 02.5 07.6 01.7
011.1 040.5 029.1 005.8 008.6 000.1 001.5 002.8 000.5
Total
692.5
±
115.9
100
495.2
±
76.0
100
a Includes collection, production and application of organic material for the organic group and application of fertilizers for the conventional group. b Pruning of old and excess non-bearing orthotropic shoots. c Pesticides are often applied together with foliar fertilizers; part of the labor use for pest control is, therefore, included in the activity ‘Fertilization’.
Figure 3. Net income (NI) of ten organic and conventional coffee farms in Costa Rica in 1997–1998 (US $ 1 = 280 Colones, May 1999). Bars on the means are SE.
210 Table 3. Premium prices for organic coffee required to make the adjusted net incomea of ten organic farms equal to that of their conventional counterparts in Costa Rica (1997–98). Organic farm number
Reference price (conventional)
Price received (organic)
Price required (organic)
(US $ Mg–1 fresh coffee berries)b
01 02 03 04 05 06 07 08 09 10
420 371 287 392 343 350 350 378 392 350
490 455 287 578 343 350 406 547 399 547
Present organic premium
Required organic premium
(% above the price received by conventional counterpart) 504 501 394 482 343 785 499 578 519 399
Mean ± SE
17 23 00 47 00 00 16 45 00c 56
020 035 037 023 000 124 042 053 032 014
20 ± 7
038 ± 11
a
Adjusted net income ha–1 = (gross income) – (variable costs + costs of certification, inspection and registration for organic farms). b US $ = 280 colones, May 1999. c The price difference between paired farms no. 9 is the effect of selling coffee to two different conventional processing companies.
Producer-defined constraints, goals, and research priorities Both producer groups identified low and unstable coffee prices as the major limitation to sustained coffee production. The organic farmers considered that the premium prices offered were lower than a competitive market rate because of the scarcity of organic processing plants. Low incomes from the conventional farms forced the producers into a loan and debt cycle and/or to minimise investment in production. The latter effect of low incomes was also true for many of the organic farms, where low investment hindered the development of the organic systems in terms of diversification and biomass production, leading to a lack of on-farm recyclable organic material on several of these farms – a factor mentioned as a major constraint by many organic producers. Future farm goals of both groups focused on increasing farm output. While conventional farmers envisioned achieving this through further intensification, the organic producers focused on increasing plant diversity, nutrient cycling, soil conservation, and shade management as means of improving farm performance. The development of
on-farm coffee processing plants and alternative marketing schemes for organic coffee were also priorities for the future. The research topics suggested by the conventional producers focused on alternative marketing (nine producers) and stabilization of the international coffee market (three producers) to control low and fluctuating prices. While the topic of marketing was also suggested by three organic producers, the topics most frequently mentioned by the organic group related to organic coffee production techniques, particularly geared towards weed and pest prevention/control (six producers), and nutrient management (two producers).
Discussion Coffee productivity The variability of coffee yields during the three years (Table 1) may have been partly due to climatic differences and the biennial yield pattern of coffee (Maestri and Santos-Barros, 1977). The lower per-hectare productivity of five of the organic farms compared to their conventional
211 counterparts was largely caused by the lower productivity of individual coffee plants (Figure 1; farm pairs 2, 3, 7, 8, and 10) and, in some cases, also lower coffee plant densities (farm pairs 2, 3, 8, and 10). The majority of the organic farms had about twice the number of tree species interspersed in the coffee fields and at least 50% higher tree densities than their conventional counterparts (Lyngbæk, 2000). The resulting higher competition between trees and coffee plants for water, nutrients, and light, coupled with the lower levels of external nutrient inputs and pruning of coffee and shade trees compared to the conventional systems, is likely to have reduced per-plant productivity. Furthermore, as a result of the higher tree density on organic farms the average number of coffee plants was lower for this group: 5,280 plants ha–1 as opposed to 5,730 plants ha–1 in conventional systems. The large differences between per-plant yield and per-ha yield for the farm pairs 4, 6, and 9 are due to large differences in coffee plant densities: in farm pair 4, the organic farm had 48% more plants ha–1, while in farm pairs 6 and 9, the organic farms had 25% and 46%, respectively, less plants ha–1 (Lyngbæk, 2000). Costs and labor The lower labor costs for weed control on the organic farms were probably mainly due to more effective weed suppression due to the higher shade levels (Staver et al., 2001), but may also reflect a higher tolerance to weeds by organic relative to conventional producers. Since the majority of the case study farms depended largely on family labor, it is likely that the extra time used for fertilization on the organic farms reduced the time available for pruning and other management activities; this may also have contributed to the lower per-plant productivity on the organic farms. Although fixed costs, which could not be assessed in the present study, could have been adapted from a 10-ha mechanised farm model of the National Coffee Institute of Costa Rica (ICAFE), the discussions with farmers suggested that the level of fixed costs reported by ICAFE (29% of total costs in 1998; Rojas-Cubero, 1998) was not representative of coffee smallholdings. Since small farms have little infrastructure to
maintain, the fixed costs are likely much smaller, possibly insignificant. They were, therefore, not accounted for in the present study. Net income and organic premiums Fixed costs for organic certification, inspection, and annual national registration accrue only for organic farms. These costs were not included in the calculation of NIs since they were not directly paid by the organic farms in the years studied. The reasons were: (a) farms were not certified due to a lack of organic processing facilities resulting in selling the coffee as conventional (four farms) or as organic but not certified (one farm); (b) the cost of certification and inspection was covered by supporting programmes (two farms) or by the organic processing plant (three farms); and (c) the registration with the Ministry of Agriculture in Costa Rica had not been enforced. However, the cost of certification and inspection was probably borne indirectly by the three producers who sold their coffee to an organic processing plant, since the premium they received is likely to have been lower than if the producers had processed their own coffee and obtained their certification independently rather than through the processing plant. It is likely that the remaining farms will also have to pay for certification in the future. If current costs for organic certification, inspection, and registration are included in the organic farm budgets, the price premiums received by organic producers would have to increase to, on average, 38% above conventional coffee prices in order to generate a similar NI for organic growers as for conventional growers (Table 3). The premium received by organic producers will depend on the buyer, the quantity and quality of coffee, and the number of middlemen. Farmers processing their own coffee are likely to obtain a higher premium than those selling to a centralised plant for processing and resale. Since the number of processing plants for organic coffee in Costa Rica was still very low (less than 15 in the year 2000), many producers that sell coffee to centralised plants had little leverage to demand higher premiums. Producers or producer groups with larger amounts of coffee have more bargaining power, generate less costs for the processing plants, and are therefore likely to receive higher
212 premiums than smaller producers. Finally, in many cases, producing organic coffee under shade can markedly improve the organoleptic attributes of the roasted coffee (Muschler, 2001) and direct marketing schemes should result in additional price upgrades. Producer-perceived constraints, goals, and research priorities For both farmer groups, marketing of the coffee represented the biggest issue. Most conventional producers considered low and unstable prices as the main limiting factor. The focus of the majority of organic producers on production issues illustrates the general lack of basic information about the ecology of organic systems and the currently inadequate or completely missing extension support for organic farmers. The goals of the conventional farmers focused on increasing farm output through further intensification. In contrast, the goals of the organic farmers focused on increasing diversity, organic matter, nutrient cycling, and soil conservation, as well as the development of on-farm coffee processing plants and alternative marketing schemes.
Conclusions and recommendations Despite lower mean yield and slightly higher variable costs for the organic group, the difference in NI between the organic and conventional producers was minimal mainly because of the premium prices paid for organic coffee. Organic farms processing their own coffee, alone or in association with others, received a higher remuneration than those selling to a centralised organic processing plant. However, there is an urgent need to investigate the costs and benefits of small producer-run processing plants. Such information is currently incomplete in Costa Rica. When the costs for organic certification and registration are included in the farm budgets, the organic farms would, on average, require a price premium of almost double that currently received in order to match the NI of their conventional counterparts. However, considering the investments needed to develop farms according to organic principles, ensuring that organic farm NIs
merely match conventional farm NIs may not be sufficient to motivate further conversion to organic systems. Higher income for organic production may also be desirable in a policy context as an incentive for farmers to reduce environmental externalities due to unsustainable practices of conventional production. It is reasonable to argue, and increasingly accepted, that present generations (consumers and society at large) should pay the real price of production, a cost that otherwise is passed on to future generations in the form of contaminated and degenerated natural resources. Both farmer- and researcher-controlled studies are needed to assess the effects of biophysical and agronomic factors on coffee health and productivity, and to increase our knowledge about the ecology of organic coffee systems. Further research is needed on shade trees and their management and on biological options to control coffee pests and diseases. Furthermore, studies to compare the productivity of alternative management systems along agroecological gradients from marginal to optimum conditions for coffee could help establish guidelines as to where organic production would be more likely to have a comparative advantage. Crop diversification and spreading of economic risk are becoming more important for many small-scale conventional as well as organic coffee producers. The degree to which income from other crop species such as fruit trees in multistrata systems compensates for coffee yield reductions also merits further investigation.
Acknowledgements This work would have been impossible without the cooperation of the participating producers all of whom shared their time and knowledge generously, the CATIE/GTZ Agroforestry Project, and other staff at CATIE. Funding for this research was provided by a University of Wales Research Studentship Award; Torben and Alice Frimodt’s Fond; and Frøken Ellen Backes Legat Fond. Assistance was also provided by ANAO, Beneficio Gatun, Beneficio Lomas al Rio, Caraigres, CEDECO, Eco-Logica, Fundación Ecotropica, Fundación Friedrich Ebert, Fundación Güilombé, ICAFE, the Ministry of Agriculture in Costa Rica, and La Nueva Alternativa. We also
213 thank two anonymous reviewers and John Beer for the invaluable comments to improve the manuscript.
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