The Four Horsemen

Direct Trade , Events & Collaborations , Sourcing

Beginning about a decade ago, the term resilience began a steady climb to ascendancy in the field of international development.  In that domain, resilience refers to the ability of disadvantaged people to draw on different forms of capital — financial, natural, physical and social — to limit their vulnerability to specific threats in a context fraught with risk.  

Resilience in coffee was an appropriate topic for the Sustainable Food Lab 2018 Leadership Summit agenda because coffee growing is a risky business.  The list of risks facing coffee growers is seemingly endless. The four primary ones as we seem them at Intelligentsia — the Four Horsemen of the Apocalypse, perhaps — are the following:

Market risk | Risk associated with the failure of growers to respond to market trends or requirements, or to deliver coffee that meets market standards.  This category also includes the inefficiency and opportunity costs associated with failure of growers to find ready buyers for some or all of their coffee.

Price risk | Distinct from market risk, price risk is associated with price-discovery mechanisms and secular market conditions that keep coffee prices low, volatile, or both, as well as the implication of market uncertainty on a farmer’s willingness to invest in coffee.

Production risk | Risk associated with environmental shocks, significantly amplified in a period of accelerated climate change, that can include drought, frost, extreme weather events, pests and diseases, etc.

Foreign exchange risk | Risk associated with the appreciation of local currency against the U.S. dollar, in which contracts are generally denominated, which reduces the purchasing power of local currency.

The last of these issues is almost entirely beyond the control of coffee growers, depending in large measure on the monetary policy decisions of central banks that are supposed to be independent,  beyond the influence of domestic politics or the interests of specific sectors of the economy.

And while a grower’s practices, from the cultivars she chooses to plant to the way she manages them on her farm, can mitigate production risks, climate change creates a dynamic threat environment in which yesterday’s best practices may not be sufficient to combat today’s threats or anticipate tomorrow’s.  We participate proudly in the WCR Checkoff Program as an investment in the tools and technologies coffee growers need to adapt to climate change, but given the stickiness of our fossil fuel habit as a species and the collective neglect of research as an industry, we are all playing catch-up.  

If there is any good news here for growers, it is that each of the overarching principles on which our Direct Trade model is built — and some of the specific ways it is implemented at Intelligentsia — go a long way to helping mitigate the first two categories of risk.  I start exploring those principles tomorrow.

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This post is the second of seven in a series summarizing our participation in the Sustainable Food Lab 2018 Leadership Summit and exploring the ways our Direct Trade model helps to reduce the risks faced by coffee growers.

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