ORGANIC MOVEMENT ATTRACTS COFFEE PRODUCERS

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 003938

SIPDIS

USDA FOR FAS; DEPT FOR WHA/CAR

E.O. 12958: N/A
TAGS: DR ECON EAGR
SUBJECT: ORGANIC MOVEMENT ATTRACTS COFFEE PRODUCERS



1. (U) The following was posted on the Embassy's classified
website on June 21:

Organic Movement Attracts Coffee Producers
- - - - - - - - - - - - - - - - - - - - -

Hoy newspaper carried in its weekly economic section on June
12 the title "More Coffeegrowers Join the Boom, in Organic
Coffee." Fausto Adames, the paper,s economic editor, had
attended the Second Organic Coffee Festival at Polo in the
relatively impoverished southwest of the country beyond
Barahona. The event was organized by the Institute for the
Development of Economic Associations (IDEAC) and the
Agricultural Entrepreneurs, Association (JAD). One of their
PR initiatives was to announce a tourism circuit called the
"Organic Coffee Route."

The subheading was promising: Production of this special
product rose 370 percent in the area of Polo, in Barahona,
passing from 240 quintales last year to 1,128 quintales this
year, and the number of producers rose 109 percent
over the last two years, from 143 growers in 2004 to 298
association members currently.

Adames reported that organic coffee continues to command a
high premium. Ordinary coffee brought USD 60 per quintal
sack of 100 kilos in the international market last year,
while organic coffee sold for USD 139. This year ordinary
coffee is bringing USD 88 while the organic product is
bringing USD 141.

Figures for 2002-2003 from Hoy assert that coffee cultivation
provided 50,000 permanent jobs in the country and more than
70,000 part-time ones.

This information needs to be considered in context. First,
international coffee prices have been in sharp decline in
recent years. Seminar participants blamed the entry of
Vietnam with the production of robusta variety coffee,
expanding its production by 14-fold in recent years. They
also complain of the domination of the wholesale coffee trade
by 8 international firms. Technological developments have
allowed international firms to use coarser robusta and less
fine quality coffee such as the arabica variety produced
here, similar to Jamaica's "blue mountain" coffee.

Dominican coffee has not achieved the brand recognition of
the Jamaican product, even though some persons assert that
some Dominican beans are exported to Jamaica and marketed as
"blue mountain" coffee. In part, this is due to traditional
harvesting techniques -- instead of hand picking only the
ripe beans, farmers tend to strip the branch, winding up with
a mixture of maturities which is therefore inferior.

The trade in organic coffee - certified as having been
produced by small holders and without pesticides - is a
relatively new delopment, originating in the Netherlands in
the late 1980's. Associated with this is the "fair trade"
movement, which seeks to link producers directly with outlets
in developed countries, thereby reducing the take of
intermediaries. Both USAID and the U.S. Peace Corps are
involved currently in supporting the formation of producer
co-ops targeting the organic market, in the central mountain
region of Jarabacoa and in the southwest around Barahona.
But to date the quantities are limited. Since a quintal is
100 pounds, the production boasted in the Polo area amounted
to only 113 metric tons. Hoy notes that of the current
year's coffee exports of 50,000 sacks (quintales) or 2,272
MT, only 6 or 7% of that (that is, about 160 metric tons)
went to "specialized markets." Dominican coffee has no
uniform certification of origin or of organic production
practices.

The world market in coffee is in relative stagnation,
expanding only about 1 percent per year, and prices have been
falling sharply. Statistics from the World Coffee
Organization show that the composite price per pound in the
international market at mid-year were about $1.45 in 1997 but
fell steadily to about 45 cents by 2003. They rose slightly
after that.

The consequences of this price slide on Dominican coffee
exports earnings were direct, both on volumes and dollar
export earnings. According to Central Bank figures, exports
of coffee and derivatives fell from around 20,000 MT at the
opening of the period to less than 5,000 in 2004. US dollar
earnings went down from around USD 65 million to only about
USD 6 million last year.

And in fact, the figures from Barahona as optimistically
presented by IDEAC had appeared counterintuitive at first
glance. Coffee trees and resulting production do not simply
spring up overnight; a coffee seedling is tended in a nursery
for up to 18 months and then must grow for another 3 or 4
years before it begins to yield. It can produce then for 30
years or more, but here there is only one harvest a year,
from about November to March. The expansion of the
cooperatives offers the explanation for the conundrum: the
lure of higher prices for "organic" coffee motivated a
certain number of owners to go back to plantations on which
the harvest had been left to rot, abandoned as uneconomic at
the prices offered by Dominican middlemen. Corporino Feliz,
president of the regional cooperative of organic coffee
growers explained to Hoy: because of the demand for Dominican
"organic" coffee, "After paying all of cooperative expenses,
with the remaining profits from the Fair Trade market, there
were some growers who got as much as 50,000 pesos (currently
US $1670) over their costs."
The Dominican Republic's trade in "organic" agricultural
goods goes primarily to Europe and involves much more than
coffee. Jesus Moreno of the JAD estimates that "organic"
products of all types earn about USD 100 million. Much of
this comes from melons and bananas grown in the northwestern
province of Montecristi - production that is dependent on
inexpensive Haitian labor, unlike the coffee plantations.

The FAO has published on the Internet a paper from 2002 on
organic farming in the Dominican Republic, marking a point
about the unexpected advantages of neglect:

"Generally it is important to note that many of the small
scale farmers were using few inputs prior to conversion to
organic agriculture, mainly for economic reasons. However,
this also meant tha the switch to organic production did not
require a major shift in ingrained 'bad habits' such as
over-dependence on pesticides. The timing of the development
of the organic sector in the Dominican Republic was perfect.
From relatively small beginning in the early 1990s, it was
possible to achieve rapid growth in the latter part of the
decade when demand accelerated because many key issues
including production and marketing had been resolved."

Similarly, as they open possibilities for organic coffee, the
Dominican growers benefit in part from the lack of earlier
development in the sector. If their associations can make
the marketing connections, improve harvest techniques, and
obtain credible certifications, they have the prospect of
expanding production, exports and earnings of an
unexpectedly premium product.

For the moment, however, only a few cultivators have
successfully engaged. One leading example is the
U.S./Dominican novelist Julia Alvarez, who has established
her own plantation in the heights above Jarabacoa -- a
project that is part vacation home and part development
project.


2. Drafted by Michael Meigs.
MEIGS