What Is A Coffee Cooperative?

What Is A Coffee Cooperative?

There are people in many countries who grow coffee, process it, and sell it to cooperatives.

But what are cooperatives? How do they work? And how do producers work together to produce individual coffees with traceable origins?

The Minasul cooperative in Brazil has 6,000 members and covers four of the six production regions in the Brazilian province of Minas Gerais - the largest cooperative in the world. In fact, it produces more coffee than even the whole of Vietnam, which is one of the top producing countries in the world, so this is no small feat.

In this article, we look at how cooperatives work and how they fit into the supply chain of fine coffee.

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Coffee Cooperative

As the name suggests, a coffee cooperative is a group of coffee farmers who form a cooperative in order to gain access to better resources such as better marketing resources, business opportunities, staff training resources, etc.

All members of the co-operative pay a membership fee and then use the money to invest in the local community, making the pooled money more productive than if it were used alone. In addition, many large co-operatives have full-time staff working in a range of areas including management, marketing, personnel education, research, and so on.

Co-operatives are not for-profit organisations, everyone participates voluntarily and our job is to make it easier for members to access resources when producing or supplying coffee.

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The supply chain is not just about fertiliser and pesticide spraying, but also about cash flow, information integration, and the use of technology. We must provide producers with the resources and knowledge to sell their coffee.

What Do Cooperatives Give To Producers?

Andreia Nogueira Foresti has been a member of the cooperative for 35 years and is the owner of the Fazenda do Lobo farm in Brazil, which is about a medium-sized farm.

The aim of the cooperative is to promote the products and services of its members to the market on more favourable terms than if we were to sell them ourselves, and they also provide us with services," he says. For example, the co-operative has a team consisting of a technical department, an agricultural department, and a produce preservation team. We have a bank that offers us better credit rates so that we can finance our coffee growing. We have full support here.

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In fact, the scope of the cooperative's business can be very broad, encompassing but not limited to the following.

  • supplying producers with pesticides and fertilisers
  • Providing technical support to producers
  • offering lower interest rates on bank credit
  • buying and selling producers' products on their behalf
  • linking producers directly to buyers
  • Assistance in obtaining certification
  • Education and training support
  • Business advice and training

Different Farms Have Different Needs

Co-operatives may find that different producer members have different production patterns, and it is important that they incorporate this into their planning for producers.

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The co-operative wants to work closely with producers and understand their expectations," says José Marcos. Through research, we have taken them from small scale, all the way up to medium and large scale. Everyone is important but has different needs, so we try to cater to each one.

A large producer might need a $300,000 harvesting machine, while a small producer might only need a $300 mãozinha harvester (a hand-held device that vibrates the coffee tree to shake the loose and ripe fruit off the branches). And it is the responsibility of the cooperative to ensure that everyone's needs are met.

However, it is not simply a matter of size, as producers may have different needs depending on the climate of the farm. Producers may require a range of educational training in coffee harvesting and management or the education of the producer's children. These needs are many and varied.

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Why Not Just Work Independently?

Of course, coffee producers don't have to join a cooperative, they can work independently, negotiate with traders and exporters, certify themselves, and so on. However, there are many processes involved, from sales to intermediaries, to direct trade with buyers, and so on. So, what are the details that producers need to consider?

Firstly, not all producers have the capacity and resources to work independently. Smaller producers may not produce enough to deal directly with exporters or roasters, forcing them to sell fine grade coffees to the export market. There may also be a lack of resources for marketing and community outreach, let alone time spent negotiating with potential customers or travelling abroad to coffee shows.

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On the other hand, producers may wish to differentiate themselves from other producers or develop a set of direct trade partnerships, and it is particularly important to note that there are differences in how well each cooperative handles this aspect. In the case of the Minasul co-operative interviewed for this article, they link producers with quality roasters so that they can trade directly and present the coffee with good technology. In this way, the traceability of the coffee is preserved. However, in smaller cooperatives, producers produce coffee that may be processed and sold together, so the focus is on the group rather than individual needs.

Another important point to note is the marginal effect. As mentioned earlier, co-operatives are non-profit organisations that focus on the individual producer and the development of the producer, which means that if the co-operative is to run well, it has to come back to the producers doing well.

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This is why co-operatives often sell fertilizers to producers, allowing them to reduce costs and provide low-interest credit, for example. Co-operatives can also buy and sell large quantities of produce, but then the producer will only be in a position to pay off debts rather than make a profit.

Other organizations, however, may have stakeholders such as shareholders to share the profits. As independent producers are often smaller than co-operatives, the cost of farming for these producers is higher. This is because the cost burden is not only the cost of materials (gross margin) but also the cost of marketing.

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Of course, not all cooperatives are as good as their members, but in general, coffee cooperatives are what their name implies: producers working together to improve the quality of their coffee and strengthen their position in the supply chain.

Coffee farming is a challenging business, and with global warming and fluctuating coffee prices, it is never easy. The cooperative is committed to providing assistance to its members, overcoming difficulties, building infrastructure, education, and financial planning, forming direct trade lines with exporters and roasters, etc.

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