DAY 8: The cost of Fair Trade

DAY 8: The cost of Fair Trade

Tia - quinoa farmer from Bella Vista.

Tia – quinoa farmer from Bella Vista.

There are a few requirements for a quinoa producer group to become a Fair Trade group – they need to be organized, registered, have a leader and regular meetings.    According to Tito, to apply there is a refundable $538 processing fee that covers a site visit, and determination if the group meets the Fair Trade criteria.  If not, the funds are returned.  If they pass the review than they are now part of the Fairtrade CLAC international network – with headquarters in Germany.  This now gives them greater market access and more transparency and price protection.

Belle Vista farmers learn about how they can join Fair Trade and what the cost, earnings and benefits are.

Belle Vista farmers learn about how they can join Fair Trade and what the cost, earnings and benefits are.

The FOB Fairtrade price for conventional quinoa is $2,250a ton (or $247.50 per quintal).  The FOB Fairtrade price for conventional quinoa is $2,600a ton (or $286 per quintal).    In addition there is a $260 per ton Fair Trade premium of which producers receive 30% or $78.

It is interesting to note, that according to their December 18, 2016 Alibaba listing, Auster Foods, a small, non-fair trade company specializing in gluten free ingredients, is selling Royal Quinoa from the US at these same prices ($2,200 – $2,300).

FOB means “free on board” which means it is the price of the product the moment it gets onto the ship to be delivered to its final destination.  In this case for quinoa it would be the combined price paid to the farmer, the transportation to the processing plant – often 10 hours away in La Paz, processing and packaging fees, documentation and transportation to the port of departure – usually Arica, Chile a full day’s drive.  These prices vary depending on who the producers are working with and how much of the work they are doing themselves.  Currently the price most certified Fair Trade organic producers are earning, according to Jose Santacruz of Jacha Inti, is 400Bs a quintal ($57.14), or $571.40 a ton or 26% of the FOB Fair Trade price.

Quino cookies made in Challpatata for the holiday season.

Quinoa cookies made in Challpatata for the holiday season.

Though it seems little of the Fairtrade price gets to the farmers, they are still earning 22% more than the non-fairtrade market prices (310Bs or $44).

Once accepted in as a Fair Trade group, there is a $1,356 annual audit fee which is based on the number of people in the organization, in the case of APROGUILGA, there are 30 members.

To understand the scale of commercial export quinoa production, farmer groups work with 20 ton lots – of which they ship 22 tons of product to the processing plant (about 10% is lost in sorting).  The total value of these lots to the farmers is $11,428 (with a FOB of $44,000).  These quantities are stored and shipped throughout the year.  The farmers at Belle Vista, the 1,500 member community we visited today with 30 members in their producer group – store about 60 quintals each of quinoa in their homes – just enough for a lot.

Capura farmers review their Fair trade costa, investments and earnings.

Capura farmers review their Fair trade costs, investments and earnings.

So the questions the community has to answer is if it is worth it to invest all of their quinoa into the FairTrade program to earn $11,428 (approximately $380 each – enough to sustain rural family for about three months) plus the FairTrade premium which is worth about $1,560 – minus their $1,356 audit fee – leaving them with $204 for a community project.  The other option would be to keep their quinoa as a “savings account” slowly selling it as cash as needed in the common market of Challapata – a potential loss of $88* per family plus no community funds.

Though Fairtrade is certainly bringing some advantage to farmers, there is the difference in cost of production and earned income to take into account.  Farmers estimate their productions costs to be 750Bs per quintal ($107).  This means there is a $50 loss for every quintal sold and a FOB ton of fair trade quinoa still represents a $500 loss for farmers.  For farmers to make a 6% earnings on their quinoa, an amount they consider to be dignified wage for themselves – they need to make 800Bs per quintal ($114).

So for Fairtrade quinoa to really be fair at current prices, the FOB price needs to be around $2,800 a ton, an 18% increase, to be fully fair.

*formula: ($11,428 – $8,800)/30

Day 21 – How much does it really cost to grow quinoa?

Day 21 – How much does it really cost to grow quinoa?

images-5A good quinoa yield is 5 quantiles per hectacre (1/2 ton per 2.5 acres). What does it cost to grow 5 quintales of quinoa on one hectacre of land with a market price of $178 a quintal and a total net value of $890? Talking to Omar Nina, administrator of APQUISA, one of the largest quinoa associations in the Salinas region, he explained there are several steps involved in quinoa production, each with their own costs.

Most of Bolivia’s quinoa is produced by hand. Though more farmers do have tractors, most prefer to hand plow and plant the quinoa because they have more control over the use and placement of seed and soil management. Studies have shown that these artisanal methods produce superior quinoa in flavor, protein content, and quality. The farmers are very proud of their hand grown quinoa. To do this, day laborers are needed. In the Salinas area most day laborers come from communities several hours away in the neighboring state of Potosi. Each farmer has a set of laborers that return year after year. The average farm size is 15 hecracres and requires 2 to 5 laborers at certain times of the year. The laborers know when to arrive. The biggest time for labor is the end of August when the soil needs to be prepared, manure and compost spread, rows hoed and seed planted. In Salinas the average price paid for day labor is $28 which, for a 10-hour day, is still higher than the national minimum wage of $   an hour. Omar explains that it takes 4 peones about 4 days to properly prepare and plant a hecracre of quinoa, a total cost of $448, more than half of the farmer’s entire harvest earnings.

This step is so important that almost all farmers offer blessings to the Earth Mother (Pachamama) for a good year, ample rain, and minimal frost before beginning the planting season. Each family often performs a q’olla which is a burnt offering made up of a “white plate” built by medicine women in the Oruro markets. The plates often include a llama fetus, died llama wool, colorful foil, sugar tiles representing a good harvest, herbs and incense. These can cost as much at $10 or more which for a majority population living on less than $4.00 a day, is an investment. In the evening the family gathers around a fire made of dried brush in the fields. The q’olla is brought and placed on the hot coals. As it burns the smoke raises to the mountains delivering the gods the prayers of the people. The family spills alcohol and beer on the ground in respect for the Pachamama, asking for her help and generosity in bringing forth a favorable harvest. Coca is chewed by all and leaves dropped on the ground for the Pachamama and in the coals for the mountain gods.

The farmers themselves manage the pest control creating their own organic insecticides by boiling together select local herbs known for their bitter taste and smell, such as muna (pennyroyal) and n’anka, with the saponin-rich wash water from the previous harvest’s quinoa. Saponin is a natural pesticide which is present on quinoa grains and needs to be removed so the quinoa has a fresh, nutty flavor. If not, the quinoa tastes sour and is unpleasant to eat. Each family, explains Omar, maintains about 6 drums each filled with 200 liters of the saponin-rich water for use in pest control for the coming year. One hundred liters of this natural insecticide tea is applied to each hectacre of land about tow to three times a year. Peones usually do the application and can complete two hectacres a day. This puts the fumigation cost for a single hecracte sprayed twice at $28.

There is also weeding which needs to be done throughout the 9-month long gorwing season.

The May harvest is another time when farmers will take a moment to gather their family and bless the Pachamama, asking for a rich harvest and many grains of quinoa. Sometimes a sheep or llama is slaughtered at this time with the blood being spilled on the earth as an offering for he Pachamama and the still-beating heart placed in the fire as an offering to the mountain gods and ancestors. Farmers explain they must have faith, and these ceremonies help them to gain the faith and support of the Pachamama, mountain gods and ancestors to move forward with assurance in their work. Farmers tend to do the harvest themselves with the help of family members. However the processing of the harvest again falls on the peones’ shoulders. Once the quinoa is cut and gathered, it needs to be thrashed to remove the tiny seeds from the plant. This is often done by foot with peones stepping on the plant to remove the seeds. Then the chaff and dirt need to be separated from the seed. This is often done with large sifters and with the help of the afternoon wind. Afterwards seeds are rubbed, sometimes by machine, to remove the outer coating and then washed to remove the saponin. They are then air dried until they reach 8-10% humidity. Omar estimates it takes one peone about a day and a half to clean and process the quinoa seeds produced from a hectacre of land, with a total cost of $36.

This leaves the farmer with a total labor cost of: $512 (plus weeding ). Other inputs include organic fertilizer. A dump truckload of llama and/or sheep manure costs $140 and covers a hectacre of land.  Many farmers have begun composing vegetable matter and household waste (such as paper and kitchen scraps) for use as fertilizer. Others maintain small herds  of llamas for both meat and manure. The farmer collects and sows his own seeds so there are no costs in this. The best varieties are sought and planted to preserve and improve the genetics.

There is also much ancestral knowledge (indigenous knowledge) that goes into quinoa farming; the light from a star, appearance of a bird, pattern of frost, are important indicators of things to come. Farmers of all ages report the importance of learning, using and passing on indigenous knowledge and consider it an honor and obligation to insure the preservation and continuity of knowledge and the wellbeing of the people. Almost all farmers are at least bi-lingual in Spanish the national language, and either Aymara or Quechua, two regional indigenous languages. Many speak all three languages. Spanish is used in more formal communication while Quechua or Aymara is spoken amongst family members and in the countryside.

So after all is said and done, 5 quintales of quinoa takes a hectacre of land, 8 months of growth and harvest, and $652 to produce, yielding a gross return of $238. With an average of 15 hectacres planted, this brings the farmer a total gross return of $3,570 a year or $297 a month, which is about double from what he earned before the quinoa. Most farmers report being satisfied with their quinoa earnings but are cautious about what the future will bring with both climate change and growing world competition in quinoa. They can just about manage today’s prices but are fearful about what will happen if they drop any lower, especially with so many fixed costs for production.