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FAIR TRADE AND ORGANIC CERTIFICATION FROM THE EYES OF A PRODUCER

In 1995 I closed a profitable business in the USA, sold a very nice house, packed some shipping containers and moved to Brazil to become a cacau farmer. The radical change of lifestyle was taken because my Brazilian born wife, youngest of a family of nine, was the last hope for saving a 2500 acre cacau farm that had been abandoned by other family members.

Our new enterprise consisted of +-60 workers, 26 living with families in free farm residences. There was no residence for the owners since it was customary to live in a distant city and rely on the farm administrator to deal with the disorganized mess. We moved into an 800 sq foot house intended for the guy that milked cows. Since all the cows had "vanished" due to disease, theft and slaughter, there was no cowboy.

There were no written documents that listed workers, water was taken from a river that passes through the farm, telephone service was unheard of and hand tools consisted of one broken point screwdriver. The administrator, 60 years old, born in the farm property, had been feuding with family members for more than 20 years.. A real mess.

Today, the farm operates with 26 workers, has water and indoor sanitation in each house, has been completely mapped using GPS and Autocad, maintains a repair shop that is not equaled for 500km and electrical power has been installed in every residence, shop and work area. With no exception, each farm residence has parabolic antennas, color television, refrigerators and in some cases washing machines. In 2000, I designed and constructed a farm owners residence, installed radio link telephone and satellite internet. We have begun to feel like it is a true home. We are in residence at the farm and have been since 1995.

The workers are by Brazilian law, registered and receive all the benefits legislated by the Federal Government. Includer are:
* 44 hour work week
* 1-1/2 premium for extra hours
* double time for hours worked Sunday
* 30 days per year vacation with 33% bonus for the month
* 1 additional month salary called 13th month salary each year
* each child under 14 years receives a monthly salary equal to 5% of the worker
* each worker has government retirement plan which is paid monthly by the farm valued at
10% of gross salary
* each year the worker receives an additional month salary deposited for severance, if and
when it occurs
* a primary grade school is maintained in the farm at farm owner expense
* government managed medical care is paid for from a 5% salary deduction

The current salary is R$480.00 which equates to USD 220.00. Considering all the legislated benefits and the fact that the worker has 30 days vacation, 10 legal holidays and 1-1/2 days per week off....the hourly salary comes to something in the order of USD 1.80 or USD$ 15.00 per day worked. Failure to meet these obligations result in legal actions which can result in the farm being auctioned to meet the "AGRICULTURAL REFORM LAWS".

I was fortunate enough to have timed my arrival in the farm with that of "Witches Broom". The devastation caused by the disease is almost incalculable. In 1980 our farm produced 270 tons of beans. The year of 2000 closed with 30 tons. The application of technology, planning and very hard work, we closed 2008 with 60 tons and prospects of a similar harvest in 2009. Our farms are considered to be a model for management, social awareness and ecology...BUT...not a single cent of profit has been recognized and personal out of pocket prop up loans have mounted to something on the order of USD$300K.

Is there someone with more need for FAIR TRADE, I would like to meet them. I;ve had untold meetings and proposals from organizations SELLING certificates for FAIR TRADE, ORGANIC, RAIN FOREST ALLIANCE. Each has been turned away because it provides absolutely nothing towards the production of cacau, welfare of workers or ecological stability of our 500 acre Atlantic rain forest.

In an attempt to more fully understand the world of cacau, I made a trip to Ghana, Nigeria and Ivory Coast. The squalor and poverty I witnessed certainly did not substantiate the claims made by third party certification agents. Most of the small farms were hand to mouth existence and the only prosperity was achieved by 3rd party buyers that collected rural production. This production ultimately settled in the warehouses of multinational giants and finally on to the shelves of shops across Europe and the USA.

The web is filled with discussions regarding FAIR TRADE but most of the authors have not an inkling of the issues that prohibit FAIR TRADE. As long as commodity buyers in London and New York and Chicago control cacau prices and movement....FAIR TRADE ARE ONLY TWO WORDS!!!

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Alan:

There are a number of statistics about fine flavor cocoa production but if you do the math yourself you'll see that - at the commodity level as not all sales to small producers are reported - fine flavor cocoa runs to less than 10% of production (which would be around 300,000 tonnes of beans). Other stats I've seen put it closer to 3% which is probably closer when you consider blending which often happens in the country of original when buyers purchase from multiple growers and mix them together to dry on their patios.

Also - and here's a real fun one, does unfermented 100% Nacional out of Ecuador count as fine flavor cocao? From a genetics perspective yes, from a post-harvest processing quality perspective? In my opinion no.

Bean genetics is only one part of the fine flavor equation, which is why I tend to agree with the 3% number.

:: Clay

:: Clay
Hi Clay,

Thank you very much for your help on that one. I've got two stats that might throw some light on the subject - one from Ecuador where I live at the moment and PNG where I work (don't ask about the flight time!!). I have it that Ecuador produced 130,000 tonnes this last year and I gather most of that is fine flavour and exported. PNG just topped the 51,000 tonne mark this year too and, while I'm guided by the IOCC rating, seems that most of that is fine flavour and also exported. So we have approx 150,000 tonnes there all up. I understand Dominican Republic is also in the fine flavour category but volume is small.

So does this help us get closer to the volume and so the % that is fine flavour? Value your thoughts. And while not in the slightest an authority, like you, my money would be on the post-harvest/customer persepctive!

Can I squeeze in another 'ask': I'm told by people here in Ecuador that either no one of the buying fratenity in the EU (at least) knows about PNG cocoa or they know of it but just can't access it (Duffy's dilemna comes to mind). Does any one share these views? Also while on the same topic, I've been staggered to not see PNG listed as a producer of cocoa let alone fine cocoa in almost all of the stats on world cocoa production. To top it off, I recently read an IOCC doc from the Executive Committee' of Sept 2006 on "A Study on the market for Organic Cocoa". It provides a table (Table 2) of world organic cocoa producers and under 'Asia and Oceania' as producing in total 762 tonnes of organic cocoa in 2006 - but it doesn't even list PNG who produces 51,000 tonnes (while not certified - our next challenge)!!! I 'm beginning to think it is a matter of 'nobody knowing' about PNG cocoa. To finish, I like the requirement of 3 years non-use of pesticides etc for organic certification. PNG cocoa growers haven't used it for several millennia!

Very glad for your thoughts on the above questions.

cheers.
Hi Samantha,

Well firstly a very hearty thanks for your detailed reply. Just great to get as I've been on the 'how does the cocoa industry work?' track for the last 6-9 months and, while making progress, there are still a lot of unknowns. Surprise surprise.

I'll work through your points and valuable comments and see how it shakes out. Hope we can continue this.

Re exporting from PNG, yes this has all the hallmarks of somewhat of a 'closed shop' with some long established (read 'comfortable') relations in place. We (in the project) are working our way along this one carefully. We are helping growers to form co-operatives as the basis for progressing 'extension services' - which are pretty well now non-existent in our area at least - using a farmer-to-farmer basis. This has worked well in Madang with the cocoa growers there and we have high hopes for it in our patch. Another reason for helping growers to form co-ops is that they then become the base organistation which can apply (!) for an export licence from the Cocoa Board of PNG. So without counting our chickens this approach seems the way to go. We are working with the CoBPNG as a partner and feel we are at a stage where we talk the same language. So we will see very soon if this line of thinking 'works'. I can certainly let you know about what happens there.

Re Markham Farms - just a bit of passing up-date, they did belong to the Swire group but have just been sold to a Malaysian firm. In the process they lost perhaps the best cocoa plantation manager around so it will be intersting to see how they go from here on. And they also sell beans to Michel Cluizel who then produce the "Maralumi" bar you mention. So that gives us some heart that small growers near by who produce the same quality of bean can come close to doing also. In saying this though I'm conscious of the great credibility gulf b/w Markham Farm and local small growers in the mind of buyers. But again here lies our challenge - to link up on an initial low volume 'trial' basis with buyers who buy quality beans and build the credibility from there. The trick of course will be actually getting to the 'trial' order.

Re Quality: This is a very intriguing one for me as well. I gather in the final analysis the notion of what is and is not 'quality' is determined by the bean buyer. I've also heard here in Ecuador that a lot of store is put in the taste of the bean with some people (few) able to tell where a bean is from by the taste. I'm going to meet with some cocoa buyers in Germany soon and I'll be asking your same question: how do you determine the quality of a bean? So I can report on that too in 2 weeks.

Re PNG cocoa and 'fine flavour' rating: Thanks for that reference. Very heartening to see PNG listed as 75% - the same as Ecuador. I'm intrigued to get the full story on the quality of the cocoa beans in PNG when I'm there soon. But for a few 'experts' there seems a dearth of knowledge on the quality front. Here in Ecuador they use the guillotine method in the field on harvesting to check for bean colour and disease and grading their crop, but that tool is unknown in PNG to my knowledge. But I'll check it out. When you mention 'EU' I gather you are referring to the aid agency whereas I think I was talkin about the European Union as a geographic market. But interesting though your point about the involvement of donor agencies in the cocoa industry in PNG and the less than astounding results. I'll be very interested to read those articles (and thanks). But the influx of 'helpful' agencies with varieties that might/do dilute the quality of the cocoa bean in favour of volume is silly in my view. If you have a quality product with limited supply with a level of demand from a market prepared to pay a premium they why would you ignore it and try to compete in the 'me too' market? My strong sense is this has been and still is PNG cocoa's dilemna - little unified agreement on the positioning of the industry internationally.

Re image of PNG: Thanks for the further good news that 'scientists, chocolate connoisseurs, and ICCO are also well aware of PNG as a cocoa grower'. The info I've received recently here (2nd hand and always a danger) is that the buyers in Europe 'don't know' except Michel Cluizel of course! But I'm going to gather some info on that first hand soon too.

Re the aid agency level of 'success' - I won't say anything about this other than the project I'm involved in is takin a private sector approach to building income in the District by taking a customer-driven approach to these industries. So that means seeing the cocoa/coffee/etc growers as customers on an equal plane to the Michel Cluizels of this world.

In finishing Samantha I might just mention one of the biggest barriers we face is helping growers get access to finance - even microfinance. Banks in PNG and yes even micro-finance bodies see the growers as too much of a risk and impose overly stringent borrowing terms leaving the grower with literally no where to go despite a crop in the ground with an market value of $+++. So they are snookered and any buiding of their crops (e.g. even modest fermentries) is out of the question for the single grower - hence the co-op idea again. But this may (?) help explain why the Ausaid dryers exercise virtually failed. There is of course the not insignificant matter of whether the new dryers were the growers idea or 'imposed' (always a bad course).

Pardon for making this reply so long Samantha but your thoughts and comments were so interesting they begged some wordy reply.
Hi Alan,

I am working with farmers in East New Britian on importing Cacao to the United States. The samples of cacao they provided were outstanding and we were lucky enough to find a corporate partner interested in purchasing the beans at a premium over normal PNG prices. I would love to chat sometime about travel to and within PNG. I would also like to hear more about your experiences organizing coops.

But, to the topic at hand... I have good news. PNG beans trade at over the world market price for beans. It seems that the quality of PNG beans is recognized not only in in the ICCO rating (as meaningless as that may be), but more importantly it is recognized by the market. Generally PNG beans sell for a premium of around $400 USD over the NY price. That is not where near what Vene beans sell for but it is still a premium.

Since Dec. 08 the price paid by Agmark and Garamut for dried fermented PNG beans increased by 38%. Honestly, the prices don't seem that awful given the market price and degree of risk. Maybe the data I have is from a very particular and slightly more competitive market. It seems that those who don't dry or ferment are in much greater peril. Farmers selling wet beans get about 1/3 of the price dried beans go for. I would be happy to learn more about the situation in PNG. If you have your own experiences to share or some articles I can read I would really appreciate it!

Smoke damage is the #1 issue that plagues PNG beans and creates a certain degree of risk for anyone dealing with them. I know our partner/buyer is extremely worried about this even thought the samples provided were smoke free. They will reject the shipment if there is a hint of smoke.

Unfortunately solar dryers have not caught on. The report Samantha links to below indicated that costly maintenance might be the issue. The farmers I work with did examine solar dryers that were available through one of the local nurseries and the CCI and opted instead to use a brick kiln. I don't have all the details on why they went this way. They did say that they felt the kiln is more reliable, and that they can go for weeks without much sun during the rainy season. The kiln they created is very well constructed keeping smoke from the beans. Alan, are your co-ops using solar?

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