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The local demand for coffee outpaces its production in the Philippines, according to an industry expert.
This unmet need bodes well for farmers seeking credit from typically risk-averse financial institutions.
In this B-Side episode, TJ Ryan, chief of the party of Philippine Coffee Advancement and Farm Enterprise (PhilCAFE), talks to BusinessWorld reporter Patricia B. Mirasol about post-harvest handling, agricultural lending, and leveraging public-private partnerships in the Philippine coffee industry.
PhilCAFE is a project focused on Philippine coffee and funded by the United States Department of Agriculture.
TAKEAWAYS
Agricultural lending in the sector has improved, but it is still a work in progress.
PhilCAFE has set up coffee appreciation tours with its financial institution partners to help facilitate agricultural lending, Mr. Ryan said.
The tours demonstrated how coffee was being produced according to improved quality standards. Partners were also introduced to the entire value chain of local coffee, which included introductions to buyers.
Such efforts have yielded results, such as a tripartite agreement among the cooperatives, banks, and buyers worth north of $4.2 million in agricultural financing, Mr. Ryan said.
“Agriculture is really the last thing banks want to invest in,” he said, noting how the effects of climate change have likewise made farming tough for coffee producers.
“When [financial institutions] talk to buyers and the buyers say, ‘We can’t get enough coffee,’ that’s going to be positive for the banks, because of course they understand that that’s an unmet demand. An unmet demand means a financial opportunity,” Mr. Ryan added.
The Philippines imports 90% of the coffee it consumes.
Robusta is undergoing an image makeover worldwide.
Robusta used to be looked down upon because of its reputation as fodder for instant, lower quality coffee, Mr. Ryan said. However, two factors are now working in favor of this variant.
“One, people have focused on improving its quality, and are therefore showing that Robusta can be very, very good coffee,” he said. “Two, Robusta’s resilience against inclement weather and high temperatures is really thrusting it in the spotlight.”
Arabica, another commercially grown variant that is used in chains such as Starbucks and Bo’s Coffee, is under greater threat of climate change.
“When we took the Philippine Robusta to Milan last year and Greece this year, it was really well-received,” added Mr. Ryan. “With proper investment and attention, it could be a real source of economic strength and build a reputation in the coffee world for the Philippines.”
The Philippines produces about 45,000 metric tons of Robusta.
The other known commercially grown variants are Excelsa and Liberica (locally known as barako).
Education in coffee production, including in post-harvest handling, are raising the livelihoods of Filipino coffee farmers.
Competition among the 137 entries was so stiff at the 2023 Philippine Coffee Quality Competition, Mr. Ryan said. He mentioned that if the 2022 winner had participated, he would have finished 6th.
“We had the highest number of specialty Arabica and fine Robusta entries,” he said. “We had the highest percentage of those two categories, and the highest scores ever in the competition.”
The competition has been running since 2017. Micro-lots of the winning entries are sold through bids in a subsequent international auction.
Last year’s winning cup was sold at $75 per kilo.
“[These] are life-changing numbers for these producers,” Mr. Ryan added.
PhilCAFE, for its part, offers processing courses for free to coffee producer organizations in the Philippines. The courses are from the Coffee Quality Institute (CQI), which sets standards for coffee quality around the world.
According to Mr. Ryan, these processing skills have been distributed geographically in areas across Luzon, Visayas, and Mindanao.
“Normally the CQI courses are a paying course, but – in a country that’s transitioning into a pretty significant specialty coffee phase – these courses can make a huge difference both in producers’ livelihoods and skillsets,” he said.
“When the project ends, they probably would have to renew their certification in 3 years through a paid course,” he added, “but they typically now earn more, because they’re selling higher-quality coffee.”
