Project Origin, in 2023, is implementing prepayment plans for the farmers who pick cherries for the Thageini Washing Station in Kenya. Over the upcoming years, we will see the differences the advanced payments can make to the community, and we will report back with the results. Here is everything to know about prepayment plans.
What is a prepayment?
A prepayment plan is where we, as an exporter, pay an agreed amount for a coffee before the coffee begins harvesting or processing. You can think of it like a deposit. Farmers and producers are often able to predict the seasons’ harvest based on how the coffee trees flower. Using this understanding, we discuss the potential harvest in volume and quality with the farmers and producers, and agree to an end of season deal. With this deal in mind, we will then agree to pay some of that sum upfront.
Why arrange a prepayment plan?
An advanced payment for a harvest provides farmers and producers cash that can be used to ensure the coffee tree care leading up to the harvest can be of a higher standard. If the farmers and producers can use the cash to invest in fertilisers, or equipment, or even use it to send their children to school so the parents can work, this all contributes towards healthier, higher-quality cherries when harvest comes.
Of course, nothing comes risk free, and this is not a risk averse proposal. There are many factors that can result in us, as a green coffee importer, losing in this situation. The final processed coffee quality could be lower than what was expected. The exchange rate could crumble. The predicted volume may not be reached – whether by unfavourable weather or by farmers simply taking their cherries elsewhere for immediate cash. Each of these factors play a part in the uncertainty of working with advanced payments from an importer’s perspective.
So, why do we do it?
Honestly? Because we’re a community. Give and take is not, in our opinion, a one way street. Sometimes we need to be the ones prepared to give without return. That’s simply called being a nice neighbour. Maybe, the world could do with more of that.
Can you offer a prepayment plan to all coffee producers?
Much like everything in life, one size does not fit all. Prepayment plans work when multiple assets come into play. The relationship between importer and producer or farmer should be sound, product should be reliable enough in that the farmers know what to expect from their crops, and there needs to be a mutual trust that we will both fulfil our part of the deal.
So what do the benefits look like?
Benefits go both ways. Benefits for the importer include:
- Securing good coffee sourced in a way that improves the living and working conditions of farmers
- Forecasting what coffees we can expect to have on hand from before the harvest
- A deeper understanding of the opportunities and challenges that exist from the producer’s perspective, and not assume to know everything from the results of a cupping bowl alone.
Benefits for the producer include:
- Security of a confirmed buyer at the end of a harvest
- A guide to the value of their product they can expect at the end of the harvest
- Building and continuing a long term, direct trade relationship, to last multiple harvests, and not relying on finding a buyer each season, which is a serious concern for many.
- Receiving an income multiple times through the year. Since many producers and farmers harvest once per year, this results in being paid only once per year. Receiving an annual income in one lump sum is a big juggle, and so splitting the payment is a huge advantage to be able to invest towards what is needed at that point in time, whether it be fertilisers for a better quality harvest, or towards education for the children.
What can you do as a roaster?
Support direct trade companies. It is our specialty to work with producers and across multiple harvests and to understand their needs as well as ours as well as yours. By supporting the green bean exporters who put their focus on direct trade you know that you are contributing towards a more sustainable economy of coffee production.