Improving the Colombian Coffee Supply Chain.

One of Colombian’s most famous, and delicious exports is coffee. For many years now it has remained a high demand industry, with a very intricate supply chain that is critical to the Colombian GDP. With over 2 billion cups consumed a day, Colombian Coffee will continue to be a profitable sector for a very long time.

Even though 90% of the world’s coffee is produced in developing countries, it has not been a reliable source of income for many farmers. Economic issues such as limited market access for producers, lack of product and market information and depreciating market prices all contribute to supply chain problems that farmers face every day. General market prices of coffee do not always reflect the quality of an individual’s Colombian coffee crop, or their personal financial situation.

On top of that, there are a number of large Colombian coffee companies that claim to be engaging in fair trade, when in reality they purchase their coffee through other middlemen. Exporters and middlemen generally get an extra cut from this transaction, while the farmers rarely do. For these reasons, farmers rarely receive fair compensation both for their labor and for the value of their Colombian coffee product.

The Colombian coffee supply chain can be broken down into a large complexity of parts:

• Farmers
• Mills
• Commodity traders
• Exporters and Importers
• Roasters
• Distributors
• Retailers

This elaborate complexity lowers the sale price from coffee that leaves the farmer, and maximizes it as it goes down the supply chain, leading to all the cuts of profit that are taken along the way.

The Commodity Fairness Index measures fairness for members of a commodity supply chain by evaluating degrees of imbalance. For example, the index showed that almost 90% of Colombian coffee producers are capturing less than 5% of the value created by their coffee. If other developing countries have similar levels of inequality in their coffee supply chain, then thousands of producers are being undervalued and under paid for their labor.

"Redesigning the coffee supply chain to increase transparency, efficiency, and win-win economic transactions can help to rectify this situation. Blockchain in the coffee supply chain can help growers see where their beans end up, and enables consumers to see where their coffee comes from. This technology can help ensure that growers are given fair payments for their crops and are maintaining sustainability practices. And it can allow consumers to make more informed decisions about where they should purchase their coffee."

Some believe that economic loans or social programs are the best way to help farmers through this dilemma. But in reality, it only masks the systemic supply chain issue. It would be more equitable to create a system with blockchain that enables farmers to make a fair profit as a member of the Colombian coffee supply chain and rectifies imbalances through full transparency and traceability, rather than be taken advantage of for profit.

Brandon Zemp
Head of Operations, Blocolombia