Sustainable Coffee Exports from Tanzania

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Sustainable Coffee Exports from Tanzania

• Evelyne A. Lazaro
• Jeremiah A. Makindara

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Introduction

• In the last two decades, prices for traditional
  agricultural export crops in the world market
  declined.
• Price of coffee, for example, reached the lowest
  level ever recorded in real terms between 2001
  and 2002

Figure 1 Traditional crops export prices
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Introduction cont.

• Low price of coffee,
• Due to
• structural changes in the global coffee market,
  including production innovation in Brazil and
  booming supply from Vietnam, and partly due to
  changes in corporate strategies among the largest
  roasters
• The coffee price has currently recovered from
  the lowest price of 2002/2003 season. For example
  in Tanzania the average coffee auction price was
  USD 41.61 USD/50 kg bag during 2002/2003 season
  but increased to USD 89.20/50 kg bag during
  2006/2007 season.

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Introduction cont.

• In Tanzania,
• Major decline in the value of exports
• Coffees contribution to total exports dropped
  (see Figure 3).
• A general decline in the contribution of the
  agric. sector to GDP and
• Lower rates of growth of the agricultural sector
  compared to other sectors

Figure 3 Proportional contribution of coffee to
total exports (by value
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Objective.

• To identify critical areas in relation to
  sustainability standards (reference to Utz
  certified) compliance in coffee
• Coffee the main traditional export crop for
  Tanzania

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Markets

• One possibility for increasing the value of
  agricultural exports is through sales to
  emerging, niche and value-added markets
• Such as specialty, fair trade, organic, and
  Utz-certified coffee.
• This requires compliance to standards

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Standards compliance

• Requirements for compliance to standards can be a
  barrier for developing countries to participate
  in trade and,
• May as well lead to the exclusion of small scale
  producers in developing countries from global
  supply chains.
• While standards can also help developing
  countries to upgrade their market competitiveness
  and improve agricultural practices.
• Complying with new standards entails costs,
  benefits, and changing levels of risks and
  uncertainty.

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Tanzania experience

• Only large scale estate farms have so far
  complied with standards
• Small holder coffee producers who are the
  majority are yet to respond to this demand

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Experience elsewhere

• Cooperatives and smallholder producer groups
  export sustainability-certified coffees
• Private exporters and support organizations have
  a key role in facilitating smallholder farmers.

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Coffee industry regulations

• Tanzania Coffee Board (TCB) regulate the coffee
  industry in Tanzania operates the coffee
  auction
• Focus on sustainability standards in coffee
  regulations is limited.
• Coffee regulations encourage the production and
  direct export of high quality coffee.
• But, there are no specific rules that guide the
  sale of sustainable coffee at the auction or that
  allow direct exports

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Standards smallholder coffee

• Smallholder producers and cooperatives that are
  certified in elsewhere have been facilitated by
  multinational companies, international
  organizations and or NGOs. The question for
  Tanzania is
• Whether there is a conducive regulatory
  environment for such involvement.

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Conclusion

• The coffee auction system does not have specific
  provisions for sustainability certified coffee
• The current approach in marketing Tanzanian
  coffee emphasizes coffee quality grades with
  little focus on current trends on certification
  and standards in coffee
• Two arguments for certification are that
• i) It encourages production of high quality
  coffee that can fetch premium prices
• ii) It allows the application of new knowledge,
  management skills and technology that will
  strengthen business in coffee.

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Policy Recommendations

• Revision of coffee export rules to make
  provisions for certified coffee. (note
  possibility that large amounts of Utz certified
  and other sustainability coffee could undermine
  the auction system if allowed to be exported
  directly)
• The coffee sector regulatory system to provide an
  institutional guide on coffee standards. The
  guide can be in the form of information on
  existing standards, market outlet and
  certification processes