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Cost-Effective Coffee Farm Renovation And Rehabilitation

Paul Hicks
April 18, 2023
Key Insight

CRS has begun collaborating with a number of farmers – both large and small – in El Salvador to design a Coffee Farm Renovation Fund that will provide low-cost financing for farmers tailored to the particular needs, based on a staged approach for coffee farm renovation and rehabilitation.

In a recent post we explained the reasons for launching the RENACER Coffee Farm Management School in El Salvador. This posts provides a bit more depth on goals and lessons related to coffee farm renovation.

Sigfredo Corado (left) and Daniel Torres (right) inspecting coffee plant at Noruega Farm, El Salvador.

In 2018 we carried out social and economic studies of rural communities in western El Salvador. This same year global coffee prices plunged and most coffee farms chose not to harvest coffee so the demand for seasonal farm labor was extremely low. Simultaneously there were record numbers of migrants leaving Central America to the USA, people looking for work. What we saw and measured was the consequence of chronic poverty and the impact on people on the margins whose livelihoods are so delicate and vulnerable to shocks to the economic system. Mothers took kids out of school because of the costs associated with school (food, transportation, time) and families cut back on the food consumption and other basic needs.

What we also saw was how many coffee farms in El Salvador were in decline, including the medium and large farms that employ people for farming, harvesting, milling and logistics (warehousing, transportation, exports, etc). So this slump in coffee in El Salvador was not temporary, it was part of a long-term decline. As we mentioned in a previous post, El Salvador exported half the coffee in 2021 that it exported in 2012.

We concluded that for the coffee industry to recover – for it to create jobs that pay good wages – there was an urgent and massive need for farmers, both small and large, to renovate their farms. But what we learned was the farmers were paralyzed by confusing and mixed messages on how to renovate farms. Following the leaf rust epidemic of 2013-2015, there was a big push by government agencies to plant so-called rust-tolerant varieties. But after the fall in coffee prices (2018-2020), it was clear that the only coffees with market viability were historic high-qualities varieties, such as Pacamara and Borboun, for which El Salvador is known. But these high-quality varieties have a reputation of being highly susceptible to leaf rust. So what is a farmer to do? Plant rust-tolerant varieties that can’t cover the cost of production, or plant high-quality varieties that are susceptible to rust? So farmers were (and are) paralyzed. Even those who could (and can) afford to renovate their farms are uncertain what to plant and how to manage their farms profitably.

As always, those who suffer most from uncertainty and instability in the economy are the poor, especially farmworkers and their families.

In this context, we met Sigfredo Corado from Los Naranjos Coffee (LNC), a new company, that was making bold investments to renovate several farms in western El Salvador. This was a good example of “positive deviance“, the concept that in every community there is often somebody doing something different that generates outcomes that are clearly more positive relative to other members of the community. In this case, Sigfredo and LNC were leading a renovation process that was generating impressive results, while most of the neighboring farms were neglecting farms.

The field staff of our RAICES program, led by Daniel Torres, teamed up with Sigfredo and together built up a method for renovating farms on a tight budget. What they did was to systematically identify existing trees that could be improved through better soil healthy management, strategic pruning and other basic agronomic interventions. The goal was to only replant a small percentage of trees on a farm (roughly 5 %) and rehabilitate trees that still had a lot of potential. The results were very impressive, with clear financial benefits by the second year of renovation. The lessons from this work in 2018 led us to design the RENACER Coffee Farm Management School to train farmers on the techniques that Sigfredo was demonstrating on farms owned by LNC.

In 2022, we began a serious effort to collect and analyze data on the costs and benefits of coffee farm renovation, comparing the costs to more conventional ways of renovating farms. In a conventional farm renovation process, farmers will replant significant parts of a farm, and thereby forego production for about three years as trees mature. The problem in El Salvador is that so many farms have been neglected for so long that the cost of replanting a significant proportion of trees is very expensive, about $5000 per hectare (depending on local conditions). Layer into that the uncertainties of leaf rust and price volatility, there is a tremendous risk. Given these risks, banks are cautious about lending, often giving terms that add more risk to borrowers.

In contrast, by taking a more staged approach to renovation and investing more heavily in rehabilitating existing trees, and keeping high-quality varieties, the cost of renovation is much less risky. The upfront costs are lower and farmers are able to keep a moderate amount of revenue in the first three years by harvesting coffee from the rehabilitated trees. Upfront costs are in the range of $1800 in the first two years, with costs offset by revenues, especially in years 2 and 3. (Note to self: make a good graphic to illustrate this) .

Over the past three years, we have seen how effective this renovation model works on farms, both large and small.

Based on these lessons, CRS has begun collaborating with a number of farmers – both large and small – in El Salvador to design a Coffee Farm Renovation Fund that will provide low-cost financing for farmers tailored to the particular needs, based on a staged approach for coffee farm renovation and rehabilitation. Beyond the direct financial returns to banks/investors, this Fund will also contribute to measurable social benefits (jobs) and environmental benefits (including water benefits and biodiversity).