US embassy cable - 05SANTODOMINGO3938

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 003938 
 
SIPDIS 
 
USDA FOR FAS; DEPT FOR WHA/CAR 
 
E.O. 12958: N/A 
TAGS: DR, ECON, EAGR 
SUBJECT: ORGANIC MOVEMENT ATTRACTS COFFEE PRODUCERS 
 
 
1. (U) The following was posted on the Embassy's classified 
website on June 21: 
 
Organic Movement Attracts Coffee Producers 
- - - - - - - - - - - - - - - - - - - - - 
 
Hoy newspaper carried in its weekly economic section on June 
12 the title "More Coffeegrowers Join the  Boom, in Organic 
Coffee."  Fausto Adames, the paper,s economic editor, had 
attended the Second Organic Coffee Festival at Polo in the 
relatively impoverished southwest of the country beyond 
Barahona.  The event was organized by the Institute for the 
Development of Economic Associations (IDEAC) and the 
Agricultural Entrepreneurs, Association (JAD). One of their 
PR initiatives was to announce a tourism circuit called the 
"Organic Coffee Route." 
 
The subheading was promising: Production of this special 
product rose 370 percent in the area of Polo, in Barahona, 
passing from 240 quintales last year to 1,128 quintales this 
year, and the number of producers rose 109 percent 
over the last two years, from 143 growers in 2004 to 298 
association members currently. 
 
Adames reported that organic coffee continues to command a 
high premium.  Ordinary coffee brought USD 60 per quintal 
sack of 100 kilos in the international market last year, 
while organic coffee sold for USD 139.  This year ordinary 
coffee is bringing USD 88 while the organic product is 
bringing USD 141. 
 
Figures for 2002-2003 from Hoy assert that coffee cultivation 
provided 50,000 permanent jobs in the country and more than 
70,000 part-time ones. 
 
This information needs to be considered in context.  First, 
international coffee prices have been in sharp decline in 
recent years.  Seminar participants blamed the entry of 
Vietnam with the production of robusta variety coffee, 
expanding its production by 14-fold in recent years.  They 
also complain of the domination of the wholesale coffee trade 
by 8 international firms.  Technological developments have 
allowed international firms to use coarser robusta and less 
fine quality coffee such as the arabica variety produced 
here, similar to Jamaica's "blue mountain" coffee. 
 
Dominican coffee has not achieved the brand recognition of 
the Jamaican product, even though some persons assert that 
some Dominican beans are exported to Jamaica and marketed as 
"blue mountain" coffee. In part, this is due to traditional 
harvesting techniques -- instead of hand picking only the 
ripe beans, farmers tend to strip the branch, winding up with 
a mixture of maturities which is therefore inferior. 
 
The trade in organic coffee - certified as having been 
produced by small holders and without pesticides - is a 
relatively new delopment, originating in the Netherlands in 
the late 1980's.  Associated with this is the "fair trade" 
movement, which seeks to link producers directly with outlets 
in developed countries, thereby reducing the take of 
intermediaries.  Both USAID and the U.S. Peace Corps are 
involved currently in supporting the formation of producer 
co-ops targeting the organic market, in the central mountain 
region of Jarabacoa and in the southwest around Barahona. 
But to date the quantities are limited.  Since a quintal is 
100 pounds, the production boasted in the Polo area amounted 
to only 113 metric tons.  Hoy notes that of the current 
year's coffee exports of 50,000 sacks (quintales) or 2,272 
MT, only 6 or 7% of that (that is, about 160 metric tons) 
went to "specialized markets."  Dominican coffee has no 
uniform certification of origin or of organic production 
practices. 
 
The world market in coffee is in relative stagnation, 
expanding only about 1 percent per year, and prices have been 
falling sharply.  Statistics from the World Coffee 
Organization show that the composite price per pound in the 
international market at mid-year were about $1.45 in 1997 but 
fell steadily to about 45 cents by 2003.  They rose slightly 
after that. 
 
The consequences of this price slide on Dominican coffee 
exports earnings were direct, both on volumes and dollar 
export earnings.  According to Central Bank figures, exports 
of coffee and derivatives fell from around 20,000 MT at the 
opening of the period to less than 5,000 in 2004. US dollar 
earnings went down from around  USD 65 million to only about 
USD 6 million last year. 
 
And in fact, the figures from Barahona as optimistically 
presented by IDEAC had appeared counterintuitive at first 
glance.  Coffee trees and resulting production do not simply 
spring up overnight; a coffee seedling is tended in a nursery 
for up to 18 months and then must grow for another 3 or 4 
years before it begins to yield.  It can produce then for 30 
years or more, but here there is only one harvest a year, 
from about November to March.  The expansion of the 
cooperatives offers the explanation for the conundrum: the 
lure of higher prices for "organic" coffee motivated a 
certain number of owners to go back to plantations on which 
the harvest had been left to rot, abandoned as uneconomic at 
the prices offered by Dominican middlemen.  Corporino Feliz, 
president of the regional cooperative of organic coffee 
growers explained to Hoy: because of the demand for Dominican 
"organic" coffee, "After paying all of cooperative expenses, 
with the remaining profits from the Fair Trade market, there 
were some growers who got as much as 50,000 pesos (currently 
US $1670) over their costs." 
The Dominican Republic's trade in "organic" agricultural 
goods goes primarily to Europe and involves much more than 
coffee.  Jesus Moreno of the JAD estimates that "organic" 
products of all types earn about USD 100 million.  Much of 
this comes from melons and bananas grown in the northwestern 
province of Montecristi - production that is dependent on 
inexpensive Haitian labor, unlike the coffee plantations. 
 
The FAO has published on the Internet a paper from 2002 on 
organic farming in the Dominican Republic, marking a point 
about the unexpected advantages of neglect: 
 
"Generally it is important to note that many of the small 
scale farmers were using few inputs prior to conversion to 
organic agriculture, mainly for economic reasons.  However, 
this also meant tha the switch to organic production did not 
require a major shift in ingrained 'bad habits' such as 
over-dependence on pesticides.  The timing of the development 
of the organic sector in the Dominican Republic was perfect. 
From relatively small beginning in the early 1990s, it was 
possible to achieve rapid growth in the latter part of the 
decade when demand accelerated because many key issues 
including production and marketing had been resolved." 
 
Similarly, as they open possibilities for organic coffee, the 
Dominican growers benefit in part from the lack of earlier 
development in the sector.  If their associations can make 
the marketing connections, improve harvest techniques, and 
obtain credible certifications, they have the prospect of 
expanding  production, exports and earnings of an 
unexpectedly premium product. 
 
For the moment, however, only a few cultivators have 
successfully engaged.  One leading example is the 
U.S./Dominican novelist Julia Alvarez, who has established 
her own plantation in the heights above Jarabacoa -- a 
project that is part vacation home and part development 
project. 
 
2.  Drafted by Michael Meigs. 
MEIGS