Everyone knows that coffee is only second to crude oil in terms of trading commodities, and thus the coffee industry can be pretty lucrative. Billions of dollars in future contracts for coffee are traded daily in commodities exchanges around the world. The burgeoning coffee culture and high demand for the drink around the world puts money in the pockets of large-scale farmers, distributors, and giant retailers like Starbucks; but, what about the small coffee farmers? How can they get a fair share of this lucrative market without having to cede their land to big-time farming operations?

The answer for small Tico coffee growers who can’t compete against the likes of giants like Cafe Rey may reside in their cultivation practices. Recent developments in Wall Street indicate that another global Renaissance for organic and shade-grown coffee could be brewing; something that small farmers in Costa Rica can take advantage of.

Green Mountain vs. Starbucks

A duel between two high-flying stocks on Wall Street on Friday, March 9^th emphasized the importance of coffee on the financial markets. Green Mountain Coffee Roasters (NASDAQ:GMCR), a darling stock that showed incredible resilience during the Great Recession and meltdown of the financial markets, faced off against Starbucks (NASDAQ:SBUX) in a battle over home espresso makers.

The performance of Green Mountain’s stock during the Great Recession is admirable. At the height of the Wall Street meltdown of 2008-2009, GMCR went from around $5 to over $100 in September of last year. From then on, the stock has been plagued by short sellers, and in March 2^nd it was trading under $70, but on March 9^th it lost more than 15 percent. Short sellers of GMCR were delighted, but not as much as Starbucks shareholders who saw their beloved SBUX stock climb almost 3 percent to a record high.

The battle between Green Mountain and Starbucks came down to a single-cup espresso brewing machine for the home and office that the Seattle cafe icon calls Verismo. Starbucks and espresso coffee drinks have become synonymous over the last couple of decades, and the company decided it was time to enter the lucrative single-cup brewing market that Green Mountain has dominated since 2006.

According to figures released by Green Mountain in 2010, its Keurig single-serving coffee pods are responsible for brewing 6 percent of all coffee consumed in offices across North America, or more than two million cups a day. The K-Cup system is more expensive per serving than brewing an entire pot of coffee, but those who have a K-Cup machine at home or at work aren’t drinking the Brazilian and Colombian roasts found in Folgers or Maxwell House brands. When compared to the cost of going to a Starbucks cafe and ordering an espresso or latte of a fine roast on a daily basis, the K-Cup system is at an advantage in terms of savings.

The popularity of Starbucks guarantees that their Verismo single-serving coffee system will pounce on Green Mountain’s K-Cup system. When it comes to K-Cups roasts and flavors, a wide variety of brands can be found -from Van Houtte to Dunkin’ Donuts and from Emeril to Starbucks. The Verismo is bound to introduce coffee drinkers to different Starbucks roasts, and this is where Tico growers of organic and shade-grown coffee have a great opportunity to profit.

Eco-Certifications for Coffee Farms

A previous article in The Costa Rica Star dealt with the art of coffee cupping. Coffee lovers who practice cupping are likely to be very interested in knowing what type of certification their coffee roast obtained. Some finicky coffee lovers will only drink organic or shade-grown coffee. How can these coffee connoisseurs determine if their coffee was grown organically or in the comfortable shade of leafy trees? They can check their coffee’s certification.

Bird-Friendly Coffee

This can be a difficult certification to obtain for many farmers. It is the most eco-friendly of all certifications, as it requires that the farm contains at least 11 species of trees providing shade for the coffee shrubs. The shaded area of the farm must be 40 percent. This certification guarantees that birds, squirrels, snakes, bugs, and other adorable creatures can enjoy the coffee farm and that the soil will not be robbed of nutrients. The certificate-granting institution is the Smithsonian Migratory Bird Center. The certificate can be quite expensive and laborious to obtain, and currently no Costa Rica coffee farm bears one.

Rainforest Alliance

This certificate is granted to sustainable farms that are proven to follow a series of ecological and fair community guidelines, but coffee bearing these certificates is not necessarily 100 percent shade-grown nor organic. Quite a few coffee farms in Costa Rica enjoy this certificate and thus can sell their beans at a higher price.

Arbor Day Foundation

The Foundation has its own specialty coffee that only buys beans grown under the shade of trees in the rainforest. In a recent post on their blog, the Arbor Day Foundation explained that a development manager was recently in Costa Rica to evaluate the landscape for shade-grown coffee farms. What the Arbor Day envoy found was a lot of deforestation caused by sun coffee farms that yield a greater crop but end up disrupting ecosystems. A previous article in The Costa Rica Star mentioned that iCafe, a government-sponsored institution, is working on rotating 30 percent of all crops in the country to address this very serious matter.

United States Department of Agriculture – Organic Certification

Americans drink more coffee than any other nation in the world, and their taste is gravitating towards the organic. The requirements are particularly strict against the use of pesticides and synthetic fertilizers, plus there are other sustainable and community issues covered under this certification. Given the size of the U.S. coffee market, this certificate should attract many Tico growers, as the premium per pound can be up to 15 cents.

The Profit-Making Potential of Eco-Friendly Coffee

Starbucks follows its own code of standards: the Coffee and Farm Equity (CAFE) Practices. These practices include a certain degree of shade management, biodiversity protection, social responsibility, and transparency. From time to time, Starbucks also purchases organic and shade-grown coffee that bears the certificates explained above.

Do shade-grown and organic coffee beans taste better than their mass-farming counterparts? Probably so. Gourmet coffee tends to be of the organic and shade-grown variety, and it can be quite pricey. Take, for example, Tesco-brand coffee in the United Kingdom that is certified as Fair Trade and organically grown in Costa Rica. According to British newspaper The Sun, a pack of 227 grams is going for almost 3 pounds sterling. A 340 gram bag of our own Cafe Britt that is certified organic and shade-grown goes for $13.45 on their website.

There is a clear economic incentive to organic and shade-grown coffee farming as can be seen by the prices above. Now that Starbucks will be present in millions of North American households thanks to its Verismo single-serving coffee machine, it is very likely that the appetite for roasts that are certified organic and shade-grown will increase.

Organic and shade-grown coffee, as opposed to sun-farmed coffee, involves a lot of time, patience and hard work, but it may just pay off in the end. An inverse economy of scale applies since small family farms are better suited to obtain the certifications explained above.

Meanwhile, traders in Wall Street are waiting for the Monday morning showdown between Green Mountain and Starbucks.