DAY 42 – Creating a real Fair Trade value

DAY 42 – Creating a real Fair Trade value

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Breads made with kaslala quinoa.

Looking at the quinoa market from the producer perspective, the Fair Trade producer earns 4% of the total value of the quinoa they produce.  Producers however, consistently say this is not enough.  To cover production costs including their own labor, they need to earn 800Bs a quintal ($114 for 220 pounds) or $.51 a pound.  Plugging this amount into the current quinoa production costs it brings us to a FOB of $2,778 per ton.  This is 6% more than the current Fair Trade price.  To continue down the value chain through distribution to wholesale re-packagers down to consumer retailers, the final product arrives at a consumer price of $8.12 a pound – a 12% increase over the current Fair Trade, organic quinoa price.

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The proposed pricing for a pound of premium, heritage variety gourmet organic quinoa sold to consumers for $8.12 a pound and providing a living wage for farmers.

My UMass students conducted a market study of organic Bolivian Quinoa Real with the Mark of Original and found consumers willing to pay up to 25% more for a premium quinoa product that has higher nutritional values and cultural connections.  The Bolivian Quinoa Real is hand processed and 87% is blessed – both at planting and harvest – for the earth mother (Pachamama) to bring forth abundance, love and compassion for the farmers and the grain itself.

Being here in the Quinoa Real fields, I am noting that amongst the standard red, white and black varieties of Quinoa Real, there are many eco-types and sub-varieties with distinct properties and culinary uses which US consumers would value.  Some like the white Kaslala are great for bread making and baking while others like the white Toledo cook quickly.  Currently these are mixed and sold simply as “white quinoa” at low market prices.  From a marketing perspective, it appears there exists a unique, profitable, premium market for the rare, distinct varieties of Quinoa Real that Bolivian farmers carefully plant and harvest, but get mixed together in the general export sales of quinoa by color.  It seems that consumers are ready for the option – the challenge is to create the new market space and investment for this.

DAY 41 – Farmers earn less than 30 cents a pound for organic quinoa.

DAY 41 – Farmers earn less than 30 cents a pound for organic quinoa.

So what is the real cost of quinoa?  Looking at the entire value chain of quinoa there are complexities and challenges in all directions from the world markets competing for consumer dollars to the producers themselves, scraping to make a living from an undervalued grain that is not covering its production costs.    Here we will look at the quinoa value chain starting from the middle – the cost per ton for quinoa at the world market pricing of FOB from the Chilean seaport of Arica where sales are made to work markets.

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Quinoa price differences at the FOB point of sale form the Chilean port of Arica.

Prices are from the end of January 2017 and vary depending on the quality and origin.  Small grain industrialized conventional quinoa from Peru and elsewhere is selling at $1,900 per ton while conventional Bolivian quinoa is offered at $2,100 a ton.  Organic quinoa that is largely only found in Bolivia and is most likely is the Quinoa Real variety is $2,350 a ton and the Fair Trade certified, organic Quinoa Real from Bolivia has a value of $2,600 a ton – a 27% higher price than the cheapest quinoa from Peru.  In February Bolivia expects to have the European Community legally accept their Seal of Denomination of Origin for their Quinoa Real variety which has the distinct qualities of a large, creamy seed, the highest protein and mineral  contents of any quinoa, is organically produced on small farms, and only grows within in a 30-mile radius around the salt flats.  This can help to secure a new level of pricing for Bolivia’s quinoa, or at least make it more competitive in the world market at current prices.

Fair Trade organizations, based in both in Europe as Germany’s World Fair Trade Organization (WFTO) and in the US as Fair Trade USA(FTUSA), are set up to protect farmers’ rights, grow community and ensure producers receive a living wage.  Just recently Fair Trade has recognized Bolivian quinoa as a potential Fair Trade product and has been offering membership and price guarantees to Bolivia producers.  Currently there are about 20 quinoa growing associations signed on as certified Fair Trade producers.  This membership comes with costs and rules – organizations pay hundreds of dollars for audits and must uphold commitments to transparency, inclusiveness and democratic decision making. In addition to receiving a minimum price guarantee, regardless of market movements, producer groups also receive an annual premium based on a % of total sales that year.

I will offer a value chain analysis of the current Fair Trace price of quinoa and see where it arrives both for the consumer and the producer to determine the fairness of that price.  Next I will offer an alternative that can help farmers get what they consider to be a fair price, and what once was the Fair Trade minimum for quinoa in 2015.

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Price break out for a pound of Fair Trade, organic Bolivian quinoa sold to a US consumer in a local grocery store.

At $2,600 a ton FOB from Arica, Chile – Bolivia’s closest sea port, Bolivia’s Fair Trade, organic quinoa prices out at $1.18 a pound.  Private Fair Trade companies are buying this quinoa from producers at 450Bs a quintal ($64 for 220 pounds) or $.29 a pound. This represents 25% of the FOB price.  The rest goes towards covering the costs of commercial processing and cleaning ($.14 or 12%) and the administration, documentation and transportation from the farm to the plant to the port ($.75 or 64% of production).  This same $1.18 a pound of quinoa is shipped by container to the US (in this case) where it is sold to wholesale buyers.  The buyer (importer) sells the container of quinoa to large companies such as Pepsi and Kelloggs who then repackage the quinoa in small quantities under different brand names and sell it to stores who then place it on their shelves for consumer purchasing.  Each step in the supply chain has its own price points.  For example in the retail food industry the common store markup for packaged food products is 30%.

Taking a $7.17 per pound price for a box of organic quinoa in my local food coop – which has a 30% markup on their packaged foods – we can work out way backwards to the FOB to see where costs are incurred in the quinoa value chain.  The store gets $1.65 per pound on the product it sells (23%), the re-packager gets $2.60 (36%) which also covers the cost of packaging, branding and administration, the importer gets $1.86 (or 26%) which covers their administration, distribution and sales costs.

DAY 21 – When is research no longer “real search”?

DAY 21 – When is research no longer “real search”?

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Me in Salinas – walking the quinoa trail alone?

What is the role of a researcher? It can be that of a non-participant observer, like one watching Aristotle’s cave. An interpreter of images on a wall.  Or is it can be a data gather.  A survey taker – rushing in to measure something looking for quantity, measurements and numbers –  Coming up with thousands of responses and statistical significance showing causal effects of something.  It is also a gather or other’s data – a cruncher of numbers and purveyor of literature – re-combining others’ ideas in new ways.

For me what’s important is the context.  What is the point of view where the data was collected?  How does it fit into the larger picture?  What influences may cause it to be presented or interpreted in different ways?  What was not reported?  How was the researcher perceived by those being studied?  How does this affect the information given?

Looking for guidance from Robert Chambers and his “participatory rural appraisal approach” creates a place for the researcher to be a part of and apart from the people being studied.  By participating in daily activities trust and experience is built.  Instead of writing that farming is hard, the researchers do the hard farming themselves.  This takes time, commitment and moments of unease and discomfort.  But then relationships are born and friendships made.

Now I’m in stage II of my research – back with my friends made over last year’s first steps into the quinoa lands.  I now know the people places, stories, histories and backgrounds.  That initial, self-conscious, deep reflection, first immersion is gone.  I know the towns, neighboring areas, the best place for lunch and dinner, it’s familiar and feels almost too easy to just relax into what I already know and verify that it’s what I think it is.  I’m beginning to feel anecdotal as I ask women quinoa farmers how their quinoa is and they tell me it’s bad, market prices are down, there are not good sales, they are owed money by their associations from past sales, they are saving their quinoa and not selling it until prices rise.

The farmers want a minimum of 600BS per quintal ($86 per quintal or about $0.39 a pound) or preferably 800Bs ($.52 a pound) which is what was considered a dignified price by the Fair Trade associations a year ago.  This is double the current 300Bs per quintal price most Fair Trade organizations are paying farmers for their quinoa.  300B does not cover production costs.  I noted this to the Fair Trade buyers and was told that farmers exaggerated their production costs and can actually accommodate quinoa production at 300Bs.  Seeing that just for a 3-acre plot (1 hectare) that produces about 5 quintals of processed and cleaned quinoa there is a $100 cost for llama manure, $30 cost for pheromone traps and $100 cost for paid labor, $230 total – the numbers do not match up.  At current prices of 300Bs a quintal total earnings are just $214.  For a year’s worth of work, the farmer makes $16 per hectare of quinoa planted.  In the heart of the quinoa lands farmers are cultivating about 8 hectares each.  This is much less than the 15-20 hectacre plots being managed when quinoa prices provided a living wage.  At current planting rates, the total yield for the year is about $128, which in Bolivian currency is enough to sustain a family of 5 for about a month.  When I tell this to the buyers, they explain that farmers need to improve their yields which the buyers are working on helping the farmers to do.  However – the delicate lands of the quinoa region do not bode well with massive production – they quinoa is a heavy feeder, pulling vast amounts of minerals and nitrogen out of the earth.  These take time to replace.  So it is an evolving problem-solution story.

After eight years of ever more quinoa production and ever higher prices – increasing at a rate of 20% a year and hen plummeting in 2015 by 300% in just two months and staying at this low price level –  this is the first time, that issues of soil loss, unpaid expenses and economic instability have emerged.

But where is the research here?  I have piles of surveys, but the high school seniors who used to do the surveying for me are away on their two-month summer vacations.  I can visit quinoa communities for observation and to offer women’s workshops but the rains finally came but now the quinoa communities are left inaccessible as the slippery dirt roads that climb the vast mountain scape become impassable.  I can offer workshops in the (accessible) larger quinoa towns, but many farmers are not present as this is time for families to be together and many have left for the cities and abroad in search of better work.  In addition, my NGO counterparts have left as their organizations have moved onto other projects.  I have lost a lot of my infrastructure and backing – and am now here in towns with friends, stories and observations.  I feel lucky and lot at the same time.

I worry about my data.  My work is about the life of the women and I worry my friends are not representative of that, or that the few people I am having informal conversations with in passing – the woman on the bus, the indigenous leader in the plaza, the lady butcher – who are all women export quinoa farmers – are not a significant data base.  I don’t want my data to be anecdotal (not really accurate or measurable) and I also don’t want to be missing important data this is not being collected.

I want to do the study that was done before one again, but now the time has changed.  Do I plug away with my old research method anyway trying my hardest to get the surveys out myself, set up workshops on my own?  Or is there something different I can be doing instead?  Or is a hybrid of a bit of both – some surveys and workshops and more participant observation, informal interviews and modified workshops?  The clock is ticking.

My friends are sympathetic and trying to help out – they introduce me to a doctor that I can tag along with for a rural site visit and offer a workshop to women while he is checking baby weights, another engineer offers to take me to his town where there is a women’s group I can meet with and hold a workshop with.  But I already started with this type of research, working with Tito as he visited Fair Trade communities – spending a few hours in each one. And I feel that a few hours spent collecting data in a community creates more questions than answers and does not give me the deep understanding I need to properly interpret the data nor does not build the trust I feel when I’m with a community for several days.  It’s just numbers – not understanding.

I feel we are applying patches rather than a real, deep plan.  But I also feel I’m in an important place in that I do have these connections and understanding.  So the big question is quality versus quantity, the degree of bias from small sample sizes, how much to measure and what…

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