Agroforestry – buzzword of the agriculture sector, and a part of the discussion on regenerative agriculture. Considering the context of global climate change in which industries are moving towards a more sustainable future, benefits of agroforestry compared to monoculture are self-evident. Read more on a detailed introduction of the agroforestry system.
However, despite its advantages, agroforestry implementation is not yet a common practice. In traditional Brazilian coffee production, there is a strong focus on volume and cost-price efficiency. Farming practices that include machine harvest have been perfected over time, developing the need for uniform farm planning, and yes, monoculture.
The need to create a beneficial and efficient polyculture that includes other trees and cash crops, simply said, did not exist in the past. However, the imminent threat of climate change is forcing a change in the status quo. This year’s (2021) drought and heavy frost are potential catalyst for the innovation of agricultural systems. Read further on the topic of climate volatility in Brazil recently. Unfortunately due to a lack of expertise, finding a starting point to implement coffee agroforestry systems is no easy task for most farmers.
How does agroforestry fit into the Brazilian farmers business model?
From a producers’ point of view, there is a big trade-off to consider. Agroforestry benefits soil health and long-term climate resilience. However, the drawback includes less space to plant coffee trees and the need to adapt to a complete new management system, with heavy pruning and cover crops.
Starting the business with agroforestry
To understand the viability of agroforestry as a business model, we interviewed Eduardo, a Brazilian coffee farmer, whose farm, Fazenda Pedra Pretais located on the edge of Mantiqueira de Minas.
You might recognize his name: Eduardo, a partner of The Coffee Quest, is well-known for pioneering his own scalable regenerative agriculture system called Tropicália. The objective is clear to Eduardo: Making agroforestry mainstream. His journey is starting off with only 4 hectares of agroforestry, but he plans to grow this to almost 100 hectares within the next 10 years.
To provide an insight into the business model of Eduardo, we took the liberty to put together a simple Business Model Canvas (see the picture above). We begin at the heart of the business, which translates what Eduardo has envisioned for his farm.
This was the easiest question to answer. In the last 3 years, Eduardo has focused on promoting specialty coffee with sustainable practices through regenerative agriculture. Investments in the farm’s post-harvest processing equipment and devising a new agronomic approach are now part of the value proposition.
Customer segment: Who and how?
Following his production range, Eduardo’s customer base lies in both the commodity and specialty market accordingly. However, there are two side stories to be told.
It is a common practice in Brazil that commodity coffee reaches customers through the intermediates like cooperatives and exporters, where the responsibility of coffee farmers does not extend further than coffee production. To establish a direct relationship between farmers and their own, mainly international customers, is always challenging.
Meanwhile, to develop agroforestry as a business, increasing market stability and aiming for long-term relationships is key. Agroforestry needs strong supporters, both financial and non-financial, who believe in its potential, not for a day or two, but for the long-term. That’s the path Eduardo is following: starting with intra-trade with domestic cooperatives and moving towards the international, commercial market.
To raise more awareness for his regenerative vision, Eduardo dedicates a lot of his effort to connecting with individuals that share his values for a future with sustainable agriculture. Joining coffee events, online calls, connecting with new faces from client’s networks all allow him to build this network.
What takes place on an agroforestry farm? There is no doubt that for a monoculture farm, the main activity is coffee production. However, production at Fazenda Pedra Preta expands the range of activities. We divide these into 5 main topics:
The first two activity are not difficult to guess: Monoculture and agroforestry coffee production. In the coming years mono-cropping will remain part of the key activities, using full mechanical harvest as continued income. The agroforestry system is still in its conversion phase with many years to come. Planning the conversion of areas and eco pathways right from the outset can help connect islands of native forest and stimulate biodiversity. The consultant/agroforestry experts from PRETATERRA play a key role in the initial systems design!
This introduces the need for piloting and experimenting , as Eduardo continuously seeks to improve Tropicália and the potential of his regenerative system. Alongside coffee, the Pedra Preta also contributes other forms of food production . Plants such as avocadoes, macadamia nuts and bananas are grown and harvested for local trades.
Last but not least, we have coffee post-harvest processing as one of the main activities in Eduardo’s farm. Off course this is standard on a coffee farm, but extensive control within this process is essential to provide specialty coffee.
The process concludes with post-harvest processing to provide the high-quality specialty coffee, ready for the market.
To manage the full operation of Fazenda Pedra Preta, Eduardo is constantly developing his organization. As he shared with us, this requires first and foremost knowledge; a comprehensive understanding of how multiple factors come into play within each agroforestry plot.
In addition, staying on top of communication is a key aspect that brought Eduardo’s vision closer to reality. By being able to connect in English and staying updated with the newest digital tools, Eduardo is establishing a network and fostering relationships that enable the development of the agroforestry system.n.
For pre-harvest, production and post –harvest planning, he looks to external partners for unique roles to support his business. Special mention to The Coffee Quest Brasil, who play a key role in composing the lots for commercialization.
Cost & Revenue
We have reached the final part of discussion in this business model: the financial model. What are the financial losses and gains from developing the agroforestry system?
Research by Eduardo in the beginning of 2021 shows that planting a hectare of polyculture agroforestry is +9% (around 5900€) higher than a monoculture coffee crop. Similarly, management cost per hectare increase by8,8% (around 2800€), where additional effort must be invested into pruning and starting up a polyculture system.
Another factor that cannot be quantified at this point, is the overall cost dependency on farm inputs. So far, none of the agroforestry plots have needed pesticides and, by building healthier soils with sufficient biomass, the need for fertilizer will decrease over time. The regenerative character of the system allows a lower input dependency. This year alone, Eduardo’s average cost price per kg has increased by 46% from 2020 to 2021, largely due to higher cost for farm inputs.
To compensate for higher costs and the decrease of coffee trees per hectare, Eduardo focusses on increased revenue by quality, consistency, and polyculture gains.
Quality stands first as a pillar of the specialty coffee industry, dictating how high a price a coffee can reach. Hence, Eduardo’s investments (knowledge & equipment) in correct post-harvest processing have multiplied the amount of 83+ scoring coffee by a staggering 5-fold. Besides receiving a quality premium, he is able to open up new markets in specialty coffee- a market that shows a lot of potential to forge long-term relationships.
Emphasizing consistency as the second focus, we must consider/note that the amount of trees planted per plot is around 20% less. In every 4th row we find a line of indigenous trees where one would otherwise plant further coffee bushes. On the other hand, the projected yield per tree is expected to be higher and more consistent due to an increased climate resilience.
Last summer, the drastic frost in Brazil eliminated 30% of the crop. Yet, the natural protective barrier developed from the agroforestry system is indicative of how climate volatility is less affective on Pedra Preta’s production volume.
The third piece, polyculture, is how the new revenue model is created by including a second cash crop. In the case of Pedra Preta, the addition of Avocado and Macadamia plants provided additional revenue shaped by local demand. The revenue model recognises hardwood trees as long term savings: after a cycle of 20 years when the plot requires renovation, coffee trees can be replaced, while hardwood trees such as the African Mahogany and the Australian Cedar can be sold for significate income.
By filling in a basic Business Model Canvas we can provide basic understanding of the Pedra Petra’s business model. The pioneering work from Eduardo to develop his farm activities whilst maintaining contact with his network of partners and customers is impressive.
As The Coffee Quest, we are proud to support his work both in Brazil and in Europe, and we see that agroforestry and specialty coffee are a good match! The specialty market is keen on supporting pioneers, especially as the coffee is more than good enough to be offered as single-origin.
Similarly to last year, we are offering European roasters this coffee at a price that includes an additional €1/kg to go towards the support for Eduardo’s project. Pedra Petra still produces its main volume in conventional methods, but through this additional premium we can set a goal together: To replace the conventional coffee to agroforestry. In the next blog we will take a deeper dive into exploring this goal!
P.s. The Canvas is showing a few opportunities for other partners left unexplored. Such as Carbon Credits and Start-up Financing. Send me your ideas: email@example.com