OCFCU - Oromia Coffee Farmers Co-operative Union

Oromia Coffee Farmers Co-operative Union Ltd

"We have been Fairtrade Certified for two years. Our members have greatly benefited from the profits generated. On top of that, we are now getting technical and financial support that enables us to continue our tradition of excellence. Therefore, Fairtrade membership is very important to our organization and its members." Tadesse Meskela, Oromia General Manager, 2003.

Background1


Oromia Coffee Farmers’ Co-operative Union was founded in 1999 by 35 small certified organic co-operatives. Its members are indigenous farmers located in the vast Oromia State of southern and southwest Ethiopia which produces 65% of the country’s coffee. The farms are located in mountainous, rainforest areas at altitudes of 1,500 to 2,000 metres where electricity and running water are rare.

[ 1 ] Main sources FLO Inspection Reports July 03, October 04.

Mission


The organisation’s mission is to make its members economically self-sufficient and ensure families can feed themselves when the harvest fails and famine threatens. It aims to maintain the quality of coffee production, increase farmers’ incomes and strengthen the capacity of the organisation so that members are less vulnerable to external forces such as the current crisis in world coffee prices.

Oromia operates under an Auction Market Waiver which allows it to export directly to speciality markets in the US, Europe and Japan. This means it can bypass both middlemen and the Ethiopian coffee auction and therefore achieve a much higher price for its members’ coffee. Oromia provides credit facilities and technical assistance and has acquired funding from the Common Fund for Commodities to set up a cashew nut project to diversify incomes.


Oromia's wider mission is to promote the reputation and boost sales of Ethipoian coffee, particulary to:

  • Improve the quality and productivity of Ethiopian coffee
  • Improve and maintain the sustainability of the national coffee industry
  • Regulate and stabilise the local coffee market

 

Production


The coffee grown by the founding co-ops is organic, forest-grown and bird-friendly. Its high quality is achieved through environmentally sound methods developed over generations - organic, chemical-free farming and intercropping with food crops to enhance soil fertility. The coffee bushes are interspersed with plants such as cardamom and ginger, fruits such as papaya, mangoes and avocadoes, and root crops such as sweet potatoes; acacias and oaks provide shade. The fallen leaves and decaying plant matter, along with animal manure, enrich the soil. The ripe and red coffee cherries are selectively picked by hand and processed in a clean environment to prevent contamination of the beans.Their quality was recognised with the third place award at the 2003 cupping trials of the Specialty Coffee Association of America (SCAA). Varieties grown include Yirgacheffe, Limu, Sidamo and Harrar.

Membership has recently risen to 74 primary co-operative members representing 68,691 smallholder farmers with a total of 343,455 family members. Total production for 2003 stood at 98,550 tonnes of which 30,415 tonnes was certified organic. The proportion of organic production has fallen because most of the new member co-operatives, although they employ organic methods, have not yet applied for organic certification.

Coffee crisis

Coffee growers have faced a six-year crisis in the price of coffee, largely caused by oversupply. Arabica coffee prices plummeted to a historical low of 45 cents a pound at New York in 2001 having averaged 112 cents throughout the 1990s. The International Coffee Organization calculates that the export earnings of producer countries have dropped from $10-12bn a year in the early 1990s to $5.5bn in the new millennium2, precipitating a fall in production levels in a number of countries. The prospect of a return to a balance in supply and demand saw prices jump dramatically to $1.00 a pound at the end of 2004.

"The price paid for coffee is now at a thirty-year low and small farmers are unable to cover the costs of production. They cannot earn the income necessary to feed their families, send their children to school, buy essential medicines and stay on their land. The coffee crisis is affecting 25 million producers in large parts of Africa, Asia and Latin America. Coffee is the nucleus of the Ethiopian economy. Coffee accounts for more than 50% of Ethiopia's exports, 95% of which is grown by small farmers. About 700,000 households are dependant on coffee and another 15 million are partly dependant on coffee for their livelihoods." Tadesse Meskela, Oromia General Manager3.


‘The collapse of coffee prices that has resulted in the loss of revenue for Ethiopia is obviously very serious. Despite the improvement of the quantity and quality of coffee production in the last six years, Ethiopia lost nearly $900 million over that period.’
H E Mr Fisseha Adugna, Ambassador of Ethiopia4.

 

Fairtrade

Eleven of Oromia’s co-operatives, all organic, have been Fairtrade certified since May 2000. They represent 8,963 farmers (461 are women) and produced 2,830 tonnes of organic coffee in 2003. Of the 2,431.5 tonnes exported, 946.8 tonnes (39%) were sold to Fairtrade markets in Europe and the US.

For these sales, the co-operatives receive the guaranteed Fairtrade minimum price of $1.41 a pound. This includes a 15 cents organic premium and the 5 cents Fairtrade premium reserved for development projects which are decided on by elected committees at primary co-op level.

Oromia is one of three Fairtrade certified co-operatives that supply Oxfam’s new Café Progreso chain of high street coffee bars. Serving exclusively Fairtrade organic coffee, the first two were opened in London in 2004, with a further 18 expected over the next three years. The co-operatives, who have a 25% joint shareholding in Progreso, will profit directly from the success of the business. Oromia coffee is also available from Marks & Spencer’s in-store Café Revives, Matthew Algie’s Tiki Fairtrade range and Equal Exchange’s Mocca and Ethiopian coffees.

Use of the Fairtrade Premium


Social Development
Under a quarter of Ethiopian children complete primary education5. As Tadesse Meskela points out: “The farmers cannot afford to buy [school] uniforms for children, cannot afford to pay even a small amount of contribution to the schools, they cannot afford to pay for food for when they stay in school, because it is 10 to 20 kilometres from their house.” Recognising the essential role of education in the fight against poverty, Oromia is in the process of building four primary schools to help farmers keep their children in school.

Two clinics and two clean water pumps have also been built or are under construction (2004) and farmers have used the extra income to build or repair houses and purchase livestock.

The Homa Co-operative in Yirgacheffe has 967 members, all Fairtrade and organic certified. Fairtrade premiums are funding the construction of two schools as well as a clinic built from traditional teff grass bales. It will serve more than 2,000 people, with treatment under the supervision of a trained health expert provided by the government6.

Equipment and repairs
Seven coffee washing stations have been completed or are under construction. A fund has been developed for the repair of de-pulping machines to safeguard the organization's capacity to produce high quality, washed Arabica coffee.

Food security
Members have reduced their dependence on imported food by intercropping coffee plants with fruit and vegetables.

A commitment to organic production
The cooperative provides technical assistance to its members, including workshops on composting the by-products of coffee production and utilizing shade trees and natural fertilizers to enrich the soil.

 

Future plans
The premium has been earmarked for the construction of a processing plant and warehouse and 50 more coffee washing stations. Quality improvement programmes are planned and money will be invested in promotional and marketing work to expand sales in Europe, Japan and the US.

“To me, Fairtrade means a buying and selling process in which humanitarianism has a big part. It is creating a family relationship between peoples who live on this planet.” Tadesse Meskela, Oromia General Manager, January 2005.

"With the extra income from the coffee sales we have built a school and given a dividend to our members who are now able to pay school fees for their children"
Dulecha Gobena - Chairman, Kilenso Resa Cooperative, Yirgachefe.

On the farm


The average farm is about two hectares (five acres) in size and produces around 400kg of coffee a year. Farmers rarely employ labour as all the work is done by family members except at peak periods such as harvest when families traditionally help their neighbours without payment.

Most primary co-ops have wet processing facilities and employ an average of 70 temporary workers during the harvest period from September to December (the others use the sun-drying method). They also employ a few admin staff as does Oromia which employs admin and marketing staff at its headquarters in Addis Ababa.

The average annual income from coffee for farmers is estimated at 2,500 Birr ($287), of which 50-70% is provided by coffee. The co-operatives are spread over a large area, up to 800km apart, with different geographical characteristics. For some farmers, maize, wheat, sorghum, teff (a grain), beans, peas, chat and sesame are the main crops grown for home consumption or for sale at local markets, while livestock rearing is more important to others.

“We used to sell our coffee to exporters who would cheat us and sometimes they did not pay us at all. Now we know the value of our coffee and we receive profits from the coffee sold by the Union".
Miju Adula, Chairman Kilenso Mokonisa Cooperative, quoted at www.greendevelopment.nl/progreso.


Oromia Coffee farmers Co-operative Union
74 primary co-operatives, 68,691 farmers
Total cultivated area: 163,192 ha
Total production: 81,596 tonnes
Cultivated area certified organic: 50,692 ha
Organic production: 30,415 tonnes
Infastructure: 48 wet-processing facilities; 15 de-hulling facilities; 63 warehouses

Coffee in Ethiopia


Classified by the World Bank as a low income, highly indebted country, Ethiopia is one of the poorest countries in the world. In 2003 its gross national income per capita was just $90 compared to $28,350 in the UK7, with 44% of its population of almost 70 million living below the poverty line8.

The country’s drought-prone conditions mean food production is unreliable and malnutrition remains a major problem: 47% of children under five suffer from malnutrition9.

Ethiopia is recognised as the birthplace of coffee and now produces around 220,000 tonnes of coffee a year. It has more than 1.2 million coffee growers10, 95% of which are smallholders, and around 15 million households are partly dependent on coffee for their livelihoods.

Coffee is the country’s major export and is a vital contributor to the US$120m11needed to service its $6.5bn external debt. But the collapse of international coffee prices has seen Ethiopia’s coffee revenues fall by 53% - in 1997, 119,000 tonnes of coffee exports earned US$384m, while 135,000 tonnes earned just US$181m in 200312.

Coffee traditionally accounts for around 65% of total export earnings, but this figure has now fallen to around 39%13, while coffee farmers’ average earnings have fallen from $1.20/kg to $0.4014.

Historically low prices have seen many farmers switching to qat to supplement income15. Qat (or chat),
a legal amphetamine-like stimulant, is grown and exported to mainly Somali immigrants in Europe and North America where it is illegal. Ethiopia’s earnings from qat doubled to $58m in 2003, representing 13% of export earnings16.

[ 2 ] Coffee crisis at www.ico.org.
[ 3 ] Speaking prior to his tour around Australia as part of Oxfam Community Aid Abroad's Make Trade Fair Campaign, May 2003.
[ 4] Speaking on Food Security in Ethiopia since 1984 at a panel discussion organised by the Royal African Society at the School of Oriental African Studies, London, November 2, 2004.
[ 5 ] 24.1% in 1999, World Bank Development Data.
[ 6] Extract from Ethiopia Trip Report by Higher Grounds Coffee Co at http://highergroundstrading.com/ethiopia/
[ 7] 2003, World Bank Development Data.
[ 8] Ending Hunger in Africa, International Food Policy Research Institute 2004.
[ 9] Idem.
[ 10] This is the traditional number; low prices have forced many to give up growing coffee.
[ 11] Debt service repayment for 2003.
[ 12] UN Food & Agriculture Organisation.
[ 13] Tadesse Meskela, Oromia general manager speaking at opening of Progresso Café, London 11/04.
[ 14] Ibid.
[ 15] CIA World Factbook 2004.
[ 16] Africa Online News.


(Main sources: FLO Inspection Reports July 03, October 04. Updated Feb 2005)

Look for the FAIRTRADE Mark on products. It’s your guarantee that disavantaged farmers and workers in the developing world are getting a better deal.