Transfer of price from consumer to coffee grower in Papua New Guinea

By JOHN FOWKE

Farmers across the world feel with justice that their cut of the total retail value of the crops they grow and sell is a small one.
A wheat-grower on the prairies of Canada, an apple-grower at Stanthorpe in Queensland, a coffee-grower in an isolated village south of Okapa in the Eastern Highlands; all are disposed to hold a grudge against “the middle-men.,” and few if any understand the nature and the truth of the chain of trade which begins at their farm or coffee-garden and ends with a consumer in a far-away land.
In the case of our 400,000-odd coffee-growing families, here in Papua New Guinea, who are the middle-men who handle the coffee they produce?



Coffee cherries in hand

 What do the middle-men contribute as coffee passes along the chain of purchase, transport, transformation into a consumer product, distribution, and ultimate sale in small units, in packets and cups, to consumers?
Is the coffee grower in PNG getting a fair share of the overall market value of his coffee? The short answer to the question is “No!”.
But our PNG coffee-grower is not alone.
The same answer – “No!”- applies to all coffee-growers within all the “origins”- all the coffee-growing countries, world-wide.

Coffee being sundried in the highlands

Here in PNG as in other “origins” the grower, the roadside buyer, the coffee factory, the transport and insurance companies and the exporters all together share little more than 12% of the gross value of coffee sold at retail in packets or in cups at shops around the world.
The coffee- importers who are the agents or the clients of our exporters make a margin of about the same size as our exporters and for this they carry the risk of loss or damage or spoilage in transit, for landing and clearing through customs and quarantine and then storage and delivery to the roaster who has ordered the coffee.

Coffee cherries

The importer is basically a risk-manager who must find substitute coffee which is acceptable to his client if something happens to stop the shipment from PNG or to spoil it or damage it in transit.
Many coffee-roasters insist in just-in-time deliveries so that they don’t have to support big stock-holdings, and this responsibility is also born by the importer who sometimes even supplies storage silos and conveyors, installed in a clients factory, and keeps them full 24/7.
The small shops and cafes make a relatively small amount.
A huge 80% is shared between the consuming country- based roasters and their marketing agents and the major supermarket chains.
For instance, our small grower out beyond Okapa will laboriously carry his dry “pasmen” (parchment) coffee, sometimes a foot-journey of two or three days because all the outer-district roads are in such bad shape, or are non-existent.
He will either sell it to a mobile buyer at nearest road-head, or pay a truck-driver to carry it to Goroka where he will get a much better price.
In Goroka, today, he may get around K7.60 to K7.80 per Kg. for his dry parchment.If he is registered with one of the organic or fair-trade marketing groups he may receive another 30 or 40 toea per kilo.
Most factories in the main centres pay a bonus to help cover the cost of transport, and our bush farmer will certainly make sure he gets this before he pays the truck-owner what is due.

PNG Made coffee products

As of this week he may have a little over K1000 for his three bags or 150 Kg. of dry “pasmen” to spend or take home with him.

This comes to a little over K7 per Kg. for his two or three bags of “pasmen.”
This year coffee prices are higher than they have been for 34 years- the coffee-boom of the late 1970s
A time when the hand-roads leading out to remote areas in the highlands used to light up in your headlights at night with reflections from all the broken, empty SP Brownies lying there.
Because his coffee is reasonably clean and dry the factory buyer has given our grower the best price he can.
Now the coffee will be hulled and cleaned for sale to an exporter as “green bean.”
In this process there are costs for labour, electricity and fixed costs. But there will also be a loss in weight corresponding to the weight of excess moisture, skin and dust plus any bits of foreign matter such as sugar-cane skin etc which all will be removed, thus reducing the weight of the finished product, but also making it more costly.
This cost will be governed by a typical-( for good, dry” pasmen”) 30% processing loss where the clean coffee is packed into 60 Kg. export bags and weighed.
Weighed out at 70% of the inward or “pasmen” weight, on a per-tonne basis, what was bought for K7, 800 for 1000 Kg. as “pasmen” is now reduced in weight and has cost K7800/700 being K11.14 per Kg as green bean.
The factory will now sell the green bean to an exporter in Goroka for around K13.00 per Kg. at current late-April market price.Thus the grower has made something over K7.00 per Kg. for his dry coffee delivered to Goroka, and the factory-owner has grossed K13.00 per Kg, less cost of coffee at K11.14 per Kg, being a gross margin less running-costs of K. 1.86.
The exporter who puts together shipments blended together to present an evenness of quality, packs the coffee, conveys it to Lae, insures it, pays the CIC levy and customs and shipping agency costs will make a net profit after all costs of around K0.25 per kilo or around K, 5000 per 21 tonne container.
At the other end of the scale we might be tempted when living in Australia as this writer does, to order some beautiful-certified organic fair-trade coffee from the Purosa area south of Okapa.
This is available from a number of online suppliers including COFFEE SHRINE of Melbourne who are asking a mere AUD44.00 per Kg. for the Purosa-sourced organic fair-trade product.
Now even allowing for the landed cost including sea-freight of about AUD0.9 cents per Kg, plus wharf and handling costs, coffee agents markup, delivery to COFFEE SHRINE’S factory, roasting-loss of about 20% in weight plus packaging, this is not a bad markup, is it?
The finished article will have cost no more than AUD 28.00 per kilo at the outside, allowing COFFEE SHRINE a gross profit of around AUD16.00 per kilo of the finished, roast and packed coffee.
Turn this into Kina and the figure is K42 per kilo, or six times as much as the grower back in distant Purosa received per Kg. for the raw product in the first place.
This gives a good idea of the way the total retail value of coffee is shared between the various elements in the chain of production, export, transport, import and finally roasting, preparation, packaging and sale at retail.
I have visited one or two of the shops allied with big world-wide charities which are large retailers of certified and fair-trade coffees. I have asked about the margins they make and have been told,” Oh, we keep our costs right down and use all our profits to support poor people in third-world countries.
My reply is along the lines of “Is it fair that an impoverished subsistence farmer in a remote area in PNG should be working to support other poor people in countries like Bangladesh and Sudan when he maintains a closely similar standard of living?”
The answer was to the effect that I obviously didn’t know what I was talking about.
This is the sad side of the currently-fashionable Gourmet/Sustainable Coffee market
Ostensibly humanitarian and very greenie/tree-hugger- orientated, it is in fact not at all efficient in terms of what it says it sets out to do.
Pandering to inner-city fashionistas’ fancies, this market may run for 10 years or so, but already it is under the pressure of the accentuated prices of this year.
Exporters are finding it hard to sell coffee loaded with an extra premium, and in less-profitable times growers tend to sell to whoever offers the best price, not necessarily a certified or fair-trade-linked buyer. In spite of these truths the fact remains that growers can achieve better prices more often than not by becoming certified and holding their coffee for sale to the relevant buyer.
If this sector was more practical it would work hard at getting interested growers to group, building both knowledge and determination so that they are able and willing to effectively lobby for improved roads, hire trucks and establish central storage sheds. They might then set up and maintain simple effective standards for quality, thus growing their reputations so that better prices are received over the long term.
The re-planting of all the old and partly-dead trees dating from the 1960s’ explosion of interest in coffee is another area where lively and well-directed grower groups may provide a much –needed lead.
One hopes all this will be accomplished under the new, generous and ambitious World Bank-funded coffee programme.

Ripe coffee cherries

This looks as though it is going to be business-like and work positively without re-inventing wheels, - ( many of them square wheels, anyway) - as so many consultancy and aid-driven coffee and cocoa projects have done over the past 20 years and more.
Good Luck, WB!!
Don’t forget that you are dealing with a multi-faceted subsistence system, not farming-as-a-business.
Motivation, aims and outcomes are not what you’d expect in, say Peru or Colombia where growers are small businessmen whose full focus is on coffee production as the one means to live.

Public servants have not got housing yet

By ISAAC NICHOLAS

THE Public Employees Association has raised concerns over the slow progress of the K38 million housing development package for public servants at 8-Mile outside of Port Moresby, The National reports.
PEA president Michael Malabag said after two years, only 10 houses had been built from the promised 200 houses per year.
Malabag, who is also the PNG Trade Union Congress president, stated in his correspondence with Department of Personnel Management (DPM) secretary John Kali, that since the government was advocating home ownership for public servants, the PEA must be more than convinced that this process would be transparent, affordable and within a specific period of time.
“I say this because when Peter O’Neill was Public Service Minister, he announced a housing development package of K38 million in partnership with Strongbond International to build 1,000 houses over five years or 200 houses per year,” he said.
“Two years, on only 10 houses have been built at 8-Mile and I have yet to sight the actual criteria, number of public servants who have applied.
“So naturally, I have a lot of reservation about the government role in this housing pro¬ject. I would appreciate some positive feedback from DPM otherwise, such housing projects will be very much questionable even with government subsidy of K80,000 per application.”
The PEA president said this in his letter responding to Kali after the salary fixation agreement signing on April 14 was aborted due to PEA’s opposition to the K500 one-off buy-out housing allowance instead of the K250 a fortnight claim by the union.
Kali had stated during the meeting that housing was not a condition of employment for public servants and that housing allowance was not a negotiable matter, and that the government would proceed with its decision to add K500 across the board to all salary scales.
“In regard to home ownership, I reconfirm that the government’s intention is to enable public servants at all levels to enter into home ownership through approved home ownership schemes as they are developed across the country.”
He said for this purpose, the government had approved home ownership allowances, which would be announced in due course.
Under the current housing agreement, the government would assist public servants with K80,000 to participate in a buy-back home ownership scheme with the remainder to be met by an individual through their superannuation savings.
Kali said 200 houses were being built at 8-Mile for public servants to apply and buy and more houses would be built under the scheme where Malabag had raised concerns on the snail’s pace of the scheme.

Motu-Koita leader backs Koiari locals

MOTU-Koita chairman Miria Ikupu has thrown his support behind the striking Koiari landowners, owners of the Rouna hydropower and Sirinumu dam in Central, The National reports. Protests by the villagers had stopped water and electricity supply reaching Port Moresby and the surrounding areas since Tuesday.
Services were reportedly restored by late yesterday afternoon.
Ikupu said in a statement yesterday that the national government had to honour the memorandum of understanding and memorandum of agreement signed over the years with the landowners who had, since World War II, sacrificed their land and resources for the development of the city of Port Moresby.
He said like the people of Motu-Koitabu, they continued to suffer on their own land with the government providing them with false hopes and promises.
“I am in agreement with what the Koiari landowners have demanded in their petition, but the demand for the government to pay K1.5 million is very little, a tiny drop in the Sirinumu dam, let alone the ocean, as this money should be a monthly payment compared to the PNG LNG project,” Ikupu said.
He said while he pitied the Koiari people and their plight, he praised acting Prime Minister Sam Abal for directing the reactivation of the inter-agency task force to address critical issues raised in the petition raised by the Koiari landowners.
The chairman said the LNG had taken precedence while the people, who have contributed so much in the enormous development of the city of Port Moresby and the country, had been given empty promises.
Ikupu called on the landowners not to give in to any sweet talks until and unless their demands were met.
“Likewise, as human beings and citizens of this beautiful country, we must have respect for mankind. It is about time the government introduces the Vagrancy Act which not only restricts the movement of people but make Port Moresby a peaceful city for everyone,” he said.
“The people of Koiari and Motu-Koitabu must be treated the same with other landowners in the country who enjoy gold, copper, oil and other resources because land, water and power are our only resources,” Ikupu said.

7.5% pay rise next fortnight for public servants

Department of Personnel Management and workers’ union to pen deal today


By ISAAC NICHOLAS

PUBLIC servants can expect their much-anticipated pay increase of 7.5% in their pay packets next pay day with housing benefits still a contentious issue, The National reports.
The pay increase will be backdated to January this year.
The K500 accommodation subsidy buy-out will be implemented by the Department of Personnel Management (DPM), but will not be included in the salary fixation agreement for this year to 2013 to be signed this morning between PEA president Michael Malabag and DPM secretary John Kali.
Malabag, in a letter dated last April 19, responding to Kali’s letter of April 15, stated that PEA had opposed the government’s “buy-out” of allowance plan which it viewed as inferior and was not in line with the union’s claim of K250 on top of the current K7 subsidy rate.
Malabag said: “I will take into consideration your letters stating that the government will proceed with its intention to apply K500 across the board to all salary scales and that the general order accommodation subsidy will cease forthwith, although it will not be included in this agreement.
“PEA will pursue this matter with the public service conciliation and arbitration commission with the intention of reaching an amicable resolution,” Malabag said.
He also welcomed the consumer price index (CPI) clause in the agreement, to be added as a protection against inflation projections, which was an added bonus on the salary adjustments.
“PEA is also satisfied with your offer of ‘recreation leave fares’ to be made available in full for public servants and their dependents.”
Malabag said both DPM and PEA must reach a separate agreement on other matters such as retrenchment and retirement, reduction of 35% tax on final payment of entitlements and compulsory life and health insurance cover and risk allowance.
“We commend you for creating and improving better terms and conditions of employment in the public service.”
The official signing ceremony for the 7.5% pay rise for public servants, slated for April 14, was deferred due to differences over housing conditions.
The government had approved a 6% increase with an additional 1.5% for productive performance. On top of that, the government had decided to make a K500 one-off payment in housing allowance.
However, the PEA had demanded a K250 fortnightly payment.
In his letter on April 15, Kali stated that because housing was not a condition of employment for public servants and an allowance was, therefore, not negotiable, the government would proceed with paying K500 across all salary scales and effective from the date of implementation, it would also cease the general order accommodation subsidy.
“This decision is of significant benefit to the lowest paid employee and should not be denied to them,” Kali stated.
The K7 allowance per fortnight for public servants had been in the general orders for decades.

Desecration of WW11 Coastwachers' memorials in Madang

By SIR PETER BARTER

Some of the bronze plaques on the Coastwatchers Memorial Lighthouse in Madang were stolen and taken to Lae to be sold as scrap metal.
Fortunately, the culprits were caught and one of the plaques (pictured) was returned to Madang where David Faithful, from Lutheran Shipping willingly cleaned and polished it up and it will be re-installed in the near future.
 Another plaque remains missing and I have requested requested any information that could lead to the recovery and re-installation in memory of the Coastwatchers who served in PNG and other Pacific Islands.

Eastern Highland students take to rice

By ZACHERY PER

STUDENTS attending Korofeigu Primary School in Lower Bena area of Ungai-Bena district, Eastern Highlands, had a rare experience in rice farming.

Pictures show Grades seven and eight students from Korofeigu Primary School at the rice field at Kinigito. – Nationalpics by ZACHERY PER

The opportunity was created for grades seven and eight classes by Kinigito Community Association just before the school closed for Easter break.
Teachers and students were taken to the Kinigito rice farm where they were allowed to harvest rice at the farm.
Each student was given a handful of rice seeds to be planted at their respective villages.
Kinigito Community Association secured funding from the Department of National Planning to venture into rice farming as a solution to food security problems.
President of Lower Bena local level government, Jerika Haki, emphasised that rice had become staple diet for the people.He said they want to ensure students mastered the art of rice farming so they could cultivate rice to cut down on the imported stuff.
“Food security for Lower Bena area has been one of our main priorities after experiencing drought, which saw us facing serious shortage of food,” Haki said.

“We are going into rice farming to help solve food security problems.”
Haki said rice could be stored for longer periods than other staple food crops like kaukau (sweet potato).
He thanked Kinigito Community Association for accepting the students to learn how to harvest rice at the farm.
“We gave each student a handful of rice seeds that they will plant in their own garden,” Haki said.
“After harvest, they will bring their rice to be milled at the association’s rice mill and will be given to them for consumptions. “
Alex Bare the technical advisor of rice growing with Eastern Highlands provincial natural resource division provided technical information on rice to the students.
Several students asked questions on rice growing that were answered by Bare.




NARI show set for next Thursday

National Agricultural Research Institute will be hosting its Agricultural Innovations Show at the Sir Alkan Tololo Research Centre at Bubia, outside Lae, next Thursday, May 5.

Model resource centre at the 2010 show.-Pictures by MALUM NALU

This day also marks NARI’s 14 anniversary.
The event is organised around the theme “Investing in Innovative Agriculture for Prosperity”.
“The theme reaffirms NARI’s view that progress through innovative agricultural development is essential if PNG is to realise Vision 2050 and become a wealthy and prosperous nation,” said NARI director-general Dr Raghunath Ghodake,
“The nation has the need, great potential and vast opportunity to prosper through innovative agriculture, and enhance the focus on investing in innovative agriculture.
“The theme is in line with NARI’s efforts to encouraging consistent investment in agriculture, particularly in research to develop technologies and innovations, which are crucial agents in innovative agriculture and rural development.
“With the economy projected to grow at 8.5 % and the LNG and other related projects coming on stream, PNG has a more-favorable environment and opportunities now than ever before for all stakeholders to make positive contribution to innovative agricultural development, in general, and to research, science and technology, in particular.
“Since its inception in 2007, the show has become an annual popular event to recognise and value the importance of innovations in agricultural development, and promote and create awareness on the significant role of research, science and technology in innovative agricultural and rural development.”

A heavy downpour didn’t deter showgoers at the 2010 show, as seen in this picture at the Brian Bell stall.

Chief guest of the event will be Paru Aihi, Minister for Higher Education, Research, Science and Technology and guest-of- honour will be Morobe Governor Luther Wenge.
“This year’s show will involve demonstrations and displays of materials and technologies,” Dr Ghodake said.
“NARI will also be officially releasing three improved technologies to the farming community.
“There will be a number of government officials and the private sector representatives and other stakeholders participating.
“Also participating and presenting their activities will be a number of research and development agencies, the private sector, educational and training institutions, extension providers, NGOs, and community groups.
“More than 10, 000 people are expected to participate in the event with plenty of information and knowledge-sharing activities.”

Showgoers at the 2010 show.

For more information, contact James Laraki on telephone 475 1444/475 1445 or email james.laraki@nari.org.pg .