Exportadora de Café California

Exportadora de Café California

Exportadora de Café California

Exportadora de Café California Finance resilience in Coffee. Mexico City. March 2018 Exportadora de Café California

Exportadora de Café California

2 Context – Café California and Mexico Exportadora de Café California Overview of the country value chain • Mexico is the 7th largest coffee producer in the world, and the biggest export of organic coffee. • 2.5 million people in Mexico make a living of coffee. • In 2014-2015 the production decreased from 5 million of bags to 2.3 Million. In 2017 the crop recovered to 3.4 Millions of bags(1 bag = 60 kg). • The local consumption in 2016 was 2.8 millions of 60 kg.

• Mexico has: • 722,444 hectares of coffee production • 527,662 coffee farmers with an average of 1.4 hectares by farmer.

Exportadora de Café California • ECC was founded in 1941 in Tapachula, Chiapas. • Our core business is to bring services to coffee industry and farmers. • We work directly with more of 8 thousand coffee producers and 150 customers. • We are coffee producers in Chiapas and Puebla. Farmers Coops / middlemen Wet and dry mill Exporters Domestic market Mexico Coffee Market Share ECC 20% Other companies •15 Puchase agencies •1 Wet mill •3 Dry mills •9 Collection points •8 Farms •2 Sales centers •15 Nurseries

Exportadora de Café California

3 Exportadora de Café California Production • Coffee crops in Mexico were reduced from 5 m.

of bags to 2.3 m. of bags in 2014. • Old coffee plantations were prone to deseases because of climate changes. Demand • Local coffee consumption increased by 3% annualy. • México has the 3rd. biggest capacity installed of production in roasted, soluble and decaf coffee. The challenge Café California has always operated with a high volume coffee set up, at the same time the crop was decreasing in a 50%. We got two possibilities: 2014 Option B • Innovate and influence along value coffee chain creating a sustainable model for small coffee producers.

Option A • Reduce our company size and wait until coffee production rises again. Local demand 2.6 Exports 2.4 Total Demand 5.0 Production 3.2 Production deficit - 1.8 Bags of 60 kgs. Crop 2013/2014 million of bags

Exportadora de Café California

4 Exportadora de Café California Por Mas Café Program • The model must be self sustainable. • The success of the program must not depend on subsidies, philanthropy or donations. • FINANCING should be the K-Detonator of the program • We need other stakeholders. 2014 action • Improve their livelihoods by working their land • Acceptance of a sustainable agricultural business model, breaking down the traditional agricultural welfare system.

• Understand that nothing is for free, the program involve a lot of work Main Challenges • Coffee production in Mexico has been hit hard for the last four years by coffee rust (roya del café) • The regions with the highest percentage of area affected by coffee rust are Veracruz with about 70% of total area affected, Chiapas and Puebla with about 60% of total area affected • Farmers face a lack of agricultural know-how (e.g. use of fertilizer, disease control, etc.) • There is no access to technical assistance, input or finance • The economic viability of coffee farming is low, due to low profitability and productivity • The average age of coffee trees is around 50 years • Due to coffee rust and old trees, production has decreased from 4.5 million bags in 2010/11 to 2.2 million bags in 2015/16 • Coffee farms are facing the consequences of climate change with shifting weather patterns (droughts/floods) • There is a constant rural exodus of younger generations as the profitability of coffee farms remains unattractive • Culturally, people are reluctant to rejuvenate plantations as they are seen as family legacy, even if the trees are no longer productive Agronomic Economic Social & Environ- mental Oriented to small coffee growers who want to:

Exportadora de Café California

Implement a supply chain system in which at least the 60% of our coffee needs come just from a self sustainable model focused mainly in smallholders. 5 Exportadora de Café California Por Mas Café Goal Objectives Turn farmers into agribusiness entrepreneurs Renew coffee farms in Mexico Improve the smallholders organization, skills and capacities Develop the capacities, labor and productive enterprises of women and young people. Outcomes Increased productivity due to renewal farms Improved business case for farmers Coffee-producing communities overcome extreme poverty Activities Integrated model for social and economic development that includes access to inputs, planting material, technical assistance, finance, and support for organizations Goal

Exportadora de Café California

6 Input provision • ECC provides access to fertilizer and inputs to producers. • ECC is not an ordinary input supplier but in its ability to buy inputs in bulk at lower costs, ECC offers producers access to high-quality fertilizer, crop protection and other agro-inputs at competitive prices. Renewal • ECC produces improved planting material using selected varieties, such as Sarchimor, Parainema, Obatá, H1, Robusta . • These plants are rust- and nematodes-resistant plants, more productive and have more adaptability to weather conditions. Extension services • ECC provides technical assistance through extension officers that are specialized in every region/context.

• ECC constantly trains its personnel on state-of-the-art agronomical know-how and works with international coffee consultants to continuously provide producers with the most updated knowledge. Financing and insurance • In collaboration with FIRA and Banco Ve por Más, ECC offers a pre- financing model and credit scheme for rejuvenation, inputs and labor. • ECC pre-finances farmers to facilitate a “grace period” of 2 years. • The service bundles also include crop insurance.

Organizational capacity building support • ECC requires producers to be organized in groups. • ECC supports producers organize and finances any fees related to the legal formation, when needed.

• This service is NOT included in the service bundle offered to farmers Verification & certification • ECC offers support and technical assistance for 4C verification, and for certification such as Organic, Fairtrade, Rainforest, UTZ, and C.A.F.E. PRACTICES. FINANCING

Exportadora de Café California Co-funding of program Service bundle inputs: seedlings, fertilizer, crop protection, other inputs and insurance Farmers Donors Input suppliers Payment for coffee after discounting service bundle repayment over the years ECC purchasing agencies and warehouses ECC extension officers Service bundle services: Technical assistance and certification Dry beans (parchment/ pergamino) ECC Domestic sale and export ECC processing mills (dry and wet) Coffee beans Input Pre-finance Farm inputs Payment for service bundle in parchment coffee (pergamino) Guarantee and payback First loss guarantee ECC nurseries Financing for farmers Organizational capacity building support Flow of goods and services Cash flow Legend Salary, materials and other costs Payment for org.

support in coffee

8 Exportadora de Café California Results achieved Year Farmers Renewal hectares Coffee plants In million Long term loans (Ve por Mas Bank) 000 USD Technical assistants Year Accumulated Year Accumulated Year Accumulated 2015 2,474 2,474 1,034 1,034 3.0 $2,116 $2,116 11 2016 1,827 4,301 1,368 2,402 4.0 $2,590 $4,706 24 2017 1,564 5,865 1,650 4,052 5.0 $3,651 $8,357 41 2018 2,000 7,865 2,240 6,292 8.0 $6,272 $14,629 68 2000 4000 6000 8000 1 2 3 4 - 2,000 4,000 6,000 8,000 10,000 1 2 3 4 2015 2016 2017 2018 2015 2016 2017 2018 Farmers 2,474 4,301 5,865 7,865 Hectares 1,034 2,402 4,052 6,292 Before Por más café Program: 3 bags per hectare.

After 4 years of work with Por más café Program : 22 bags per hectare. Increasing more than 600%.

Altos Project +

9 Osvaldo Ortega Av. Framboyanes Lote 21 Manzana 6 Fracc. A y B Cd. Industrial Bruno Pagliai Veracruz, Ver., Telefóno: 01 229 989 42 00 osvaldo.ortega@nkg.coffee www.eccmexico.com Exportadora de Café California Exportadora de Café California

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