Risk, resilience and Direct Trade

Risk, resilience and Direct Trade

Last month, I was invited by old friends at the Sustainable Food Lab to join its annual Leadership Summit in Mexico.  

SFL is an extraordinary Vermont-based non-profit that is so unique it is hard to characterize. For my part, I would call it a membership organization devoted to fostering pre-competitive multi-stakeholder engagement and cross-sector collaboration to make global food systems more sustainable.  The SFL platform supports organizational learning and innovation and convenes “safe spaces” for exploration of key sustainability challenges and opportunities among leaders in food and beverage sector. Its members and collaborators include leading multinationals (think Mars, Pepsico and Unilever), leading global coffee brands (Nespresso, Keurig and Starbucks), research institutions in the Consultative Group for International Agricultural Research like CIAT and CIMMYT, non-profits and ministries of agriculture.

Every year, SFL convenes its members and special guests to explore a salient topic through a combination field visits and two days to work.  The theme of the 2018 Leadership Summit was Leadership for Resilient Agriculture, with a clear focus on production risk in a period of accelerated climate change.  It emphasized coffee as a sector that is both uniquely vulnerable in Mexico and a priority in the agriculture ministry’s new long-term agriculture development strategy.  The Summit included a field visit to coffee farms and projects in Chiapas and two plenary sessions focused on coffee. I was invited to join one of those plenary sessions devoted to an exploration of business models and the role of private-sector actors in contributing to greater resilience in the coffee sector.

Over the coming days, I will summarize my contribution to the SFL Summit in a series of posts here examining the way our Direct Trade model helps to make coffee growers in our supply chain more resilient by helping mitigate certain risks that most growers face, beginning tomorrow with a taxonomy of what we consider to be the primary sources of risk in coffee farming.

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This post is the first 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.  Follow the links below to the remaining posts in the series.

2 | The Four Horsemen | Introducing the four principal sources of farmer risk, as we see them at Intelligentsia: market risk, price risk, production risk and foreign exchange risk.

3 | The signal and the noise | How the direct part of Direct Trade creates value and mitigates risk by amplifying the signal and reducing the noise the market sends to origin.

4 | Escaping the commodity trap | How the mutual commitment to quality on which our Direct Trade relationships are based, and our commitment to quality incentives and fixed prices, hedge market risk and seize market opportunity.

5 | Busting the microlot myth | Taking on the most pervasive, persistent and pernicious myth about Direct Trade — that it is all about microlots.

6 | ECW: What’s risk got to do with it? | Our annual supply chain gathering is more than an exploration of the sources of extraordinary coffee — it actively hedges market risk for growers.

7 | Being there | Direct engagement, annual visits, quality premiums, fixed prices, multi-grade contracts, ECW — each one of these practices mitigates risk for growers. Together, they represent a source of significant value and contribute to farmer resilience. But they are most powerful in the context of stable, long-term relationships.