The Profitability Equation

Volcafe Way focuses on the root problem and the solution to stability in the supply chain: farm profitability.

What does that mean specifically? As with any business, farm profitability can be summarized as: Revenue – Costs = Profit.

In the case of producers, the components of the equation look like this:

• Revenue = (number of green coffee bags (on a per hectare basis, this is productivity)) x selling prices received)
• Costs = (labor + inputs + administrative + harvest + post-harvest + transport, etc.) 

Each of the cost components involves numerous variables and many ways to measure.

The agronomists and technicians in Volcafe’s Farmer Support Organization (FSO) receive extensive training in measuring and analyzing farms’ costs of production and in diagnosing ways to make farms more profitable.

At each farm, technicians begin by performing a baseline diagnosis to identify immediate ways a producer can begin to improve income, whether by increasing productivity, decreasing costs or both.

But Volcafe Way is about more than quick wins.

Working shoulder to shoulder with producers, FSOs create long-term farm management plans — essentially, business plans for farms — that focus on the best ways to use available resources. For smallholder producers, who may have little cash, plans often focus on the best use of their own labor, whether that’s pruning, shade tree management, pest prevention, plant nutrition or soil health.

Drawing on the producers’ knowledge, and the knowledge of our field teams, the plans are individualized roadmaps that producers can follow toward clear sources of increased income for their families.

These are early days in the program. We’ve just completed our first full year of documented data collection (so, not surveys). And the results so far are very encouraging. In one department in Guatemala, for example, one producer, focused on labor efficiency, reduced his labor costs by 82 percent, while another saw her production increase by 375 percent, reducing her costs and resulting in greater profitability.

There’s still much more to be done — and we look forward to sharing more results. •