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How Wakuli & Cafesmo are changing the lives of farmers in Honduras

Having an impact at origin is more than paying above the C price for specialty coffee. Dutch roastery Wakuli partners with Cafesmo in Ocotepeque to help farmers improve the quality of their beans so they can get better pay from all of their customers. Their story started at Algrano in 2021.

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“Our goal is to have all our prices set based on the costs of production of each coffee, with profitable margins feasible for the farmers responsible. This requires extensive research to understand what these costs are in each of the communities we source from.”  - Wakuli’s Impact Report 2020

Keje (above) at Wakuli's HQ in Amsterdam (Photo: Wakuli)

Wakuli is a new coffee brand with a mission to improve the livelihoods of the farmers they work with. Impact has been at the heart of the company since its foundation in 2019 and is core to its sourcing strategy. One example of how this translates is the partnership with the El Pinal community in Honduras, whose families are part of Cafesmo (Cafés Especiales Mercedes Ocotepeque), a Verified Algrano seller. But Wakuli isn’t simply buying their coffee at a “better price”. They are helping farmers track their costs and better their coffee’s quality.

Understanding costs of production
Last November, the company sent Keje Nagel, Impact, to Ocotepeque. He didn’t go so much to cup coffees as there were none to cup yet and their volumes for 2022 were already secured (growing from 86 bags in March 2021 to 1.5 containers now). He didn’t go for the food either, though he did gain 8 kg in 3 weeks as a result of farmers’ hospitality. “As our main goal was to understand what the farmers’ real coffee income is, I decided to go for an extended period of 25 days. Only through sharing a larger amount of time together, we are able to build trust and have levelled discussions on how to increase their coffee income and improve general living circumstances”, Keje explains.

Despite paying considerably more than the market price, there was no data to show if the US$2.45/lb paid in early 2021 had been enough to cover farmers’ cost of production. Wakuli could only compare it to the C price, which was at US$1.42/lb and later US$1.68/lb when they ordered. Even Cafesmo didn’t have a full overview of each member’s cost structure. “We manage all our costs, from staff to milling, but we can’t go into petrol, tools, pickers and other costs for all of our 280 farmers”, starts Sebastian Wiersma, Cafesmo’s representative. 

A typical wood-fired oven in El Pinal, the destination of many purchase receipts (Photo: Nohelia for Wakuli)

Managing receipts in the hot oven
After Wakuli’s first purchase, Cafesmo shared their farmgate price and introduced two members of the roastery - Yorick Bruins (Co-founder) and Kerissa Pnarine (Sourcing & Impact) - to a couple of farmers so they could verify that they had received what the co-op said they did. Cafesmo was already piloting a cost of production project with a few growers but the initiative was and is still in its early stages. “We have a very thorough administration of Cafesmo itself but the farmers get the receipts we give them and throw them in the oven”, Sebastian explains.

If defining the farmgate price received by a smallholder from a co-operative is already complicated (they get paid in two parts, the second payment depends on the value of the overall sales, and part of premiums can be allocated to projects), going into costs of production is even more of a minefield because producers themselves don’t have information. “Many of our producers have been selling coffee at a loss and they don’t know because they don’t calculate their costs”, says Sebastian.

According to him, most coffee farmers in Ocotepeque need money from relatives in the United States to get by. “Families abroad send something like US$300 a month but it’s still difficult. The price of pickers rose 60% because of the pandemic and migrations. Chronic food insecurity, or having less than 3 meals a day, went from 9% before Covid to 31%.” As the price of green only grew in the second half of 2021, this is the first time farmers will benefit from the market. It’s not even profit. “They are finally getting what they need to survive and send their kids to school”, Sebastian remarks.

Prices: too depressing to even think about it
For Wakuli, impact translates as contributing towards a sustainable living income (SLIRP), defined as “indicative of a coffee price that brings households toward a decent standard of living covering the cost of food, decent housing, and other essential needs”. To mean what they say they have to understand what a decent life is for their partners on the ground. This is why Keje spent over 3 weeks living and working with the El Pinal community, including 3 days at Cafesmo looking into their books. 

The unfortunate reality that Keje found is common among farmers. “I sat down with 20 farmers to try to understand their costs and forecasted production. It was the first step to also create consciousness in the community because they don’t manage their costs. Some farmers have done it but when they saw what they were making they decided to stop tracking it because it was too depressing. They buried their heads in the sand and didn’t think about it anymore”, he says.

Keje (left) with farmers Maria and Rodolfo (Photo: Keje Nagel)

Better livelihoods need to include a diverse source of income (Photo: Nohelia for Wakuli)

Disconnecting a whole community from the C price
Though Keje couldn’t precise the cost of production for previous crops with the greatest of detail due to lack of data and variables in production volume, his calculations show that, in December, the market price was finally covering costs for El Pinal, yet not by much. And though Wakuli had to reduce the differential paid this year, the price offered still sat above market rates, helping to ensure that farmers will deliver the coffee as agreed. It was the first step towards reaching a living income standard.

Other than focusing on price, Wakuli knows that improving income has to go through raising yields and overall quality. Keje explains that “our goal is to elevate farmers to a stable specialty coffee income. If you reach a certain cup quality of 85-86 points you are less connected to the C price than you would be by selling 82-83 points coffee. We want El Pinal to get to a point when they don’t need Wakuli anymore so we can do the same thing with another group of farmers”. They hope to achieve this in 3 to 5 years and then start a new cycle.

Large volumes at 85+: a milestone
To get there, Wakuli and Cafesmo are discussing areas of investment. They are supporting, along with other buyers, a 3-days workshop from fermentation specialist Lucia Solis to the co-operative, and are looking into hiring a local person to collect farmers’ data. “If farmers reach the 85 points level for 50% of their beans there is a massive increase in profit for the community”, says Sebastian. He sees Wakuli’s plan as “prudent”. “Wakuli is growing, so El Pinal won’t even be able to produce all that they need in the future. Adding communities brings that extra volume.”

Keje stresses that this collaboration is like a tripod, with Cafesmo, the farmers and Wakuli at each end of the triangle. “It’s working really well. What they do on the ground is impressive and we come in as an extra push”, he reflects. Keje compares Cafemo’s manager Hidardo Hernández to an “octopus”, helping farmers diversify their income even when the co-op gets no financial benefit from it. And it all started with a tasty cup and good chemistry. As Keje puts it: “Hidardo is a great innovative thinker and we trusted we could build something there.”

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