Why do coffee farmers need access to finance or capital?
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For every coffee farmer, access to finance or capital is very important. Some farmers have been extremely troubled when faced with challenges due to lack of budget for a long time. In addition, in seminars on sustainability, the issue of supporting and increasing access to capital for farms is always a top concern of experts, organizations and related departments. Join 43 Factory Coffee Roaster to find out how important they are to coffee farmers!
What is capital for coffee farmers?
Basically, capital is a term often used to refer to money or assets that can be converted into money held by an organization, business, or individual. Those assets can be used to operate or expand operations in the business.
A coffee farm is like a business. Farmers need capital to invest in seedlings, land, fertilizers, machinery and equipment, repair or improve irrigation and wastewater systems, etc. to serve the cultivation, preliminary processing and trading of coffee. get high.
How farmers recover capital
Coffee is a seasonal crop, harvested at a certain time each year as the plant matures. Therefore, farmers can almost only rely on the results of the crop year to generate capital and access finance. By selling coffee, growers generate money to further invest in their businesses.
According to Luis Alberto Cuellar – co-founder of Promising Crops, farmers are usually paid once a year after they sell their coffee. In particular, the time of harvest determines most of the time when the finished coffee products (fresh berries, green coffee beans or roasted coffee) are delivered and sold. In fact, there are very few farmers who can afford to keep the coffee and sell it after the harvest season. Furthermore, the price the farmer receives (the price at the farm gate) usually does not include additional costs such as milling, transportation or export fees. This leaves farmers vulnerable to price squeezes and often receive prices lower than what is paid at the processing plants or to coffee traders.
Advantages of coffee farmers with access to finance
With good access to finance, farmers can utilize all the resources needed to operate the farm. For example, planting a new coffee plantation will typically require at least $5,000 per hectare. Not only that, for farmers who are just starting out, they need to buy land and invest in infrastructure. Many manufacturers do not have the financial resources to pay for all of this. Especially when coffee takes a minimum of three years to be harvested, which means it takes at least three years to recover the investment. Compared to the links in the coffee supply chain, farmers often do not hold much capital, especially smallholder farmers. This can lead to a number of challenges, including opportunities for using new fertilizers and equipment, as well as advanced coffee quality improvement techniques. Therefore, having the ability to manage and access capital can help farmers take advantage of advanced achievements, reduce the burden as well as reduce the risk of unforeseen circumstances in production, Quality is affected by extreme weather conditions.
In addition, financial resources such as credit facilities and loans can also meet long-term needs in coffee production. According to the co-founder of Promising Crops, in countries like Colombia, coffee farmers have access to financial models for setting up farms, building facilities and buying new equipment. There are also farm renewal programs, which are carried out every seven years. However, not every country of origin has the same financial support, which makes it necessary for some manufacturers to obtain credit or loans from banks. However, these loans often have high-interest rates and require borrowers to obtain collateral which is difficult for small-scale farmers.
As can be seen, access to capital plays an important role in the operation and long-term development of a coffee farm. Moreover, it also has a great impact on the profitability and success of farmers. Therefore, it is clear that rethinking how to finance coffee farmers should be an indispensable topic in the future on how to make the coffee industry sustainable.
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Source: perfectdailygrind
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