February 6, 2023

What’s the difference between coffee estates and coffee co-operatives?


In many coffee-producing countries around the world, there are a number of ways in which farms are operated and managed. Understandably, this has a significant impact on how coffee is processed and sold, as well as the prices that farmers receive.

Two of the most widespread coffee farming models are estates and co-operatives. The former is simply a coffee farm (usually a large one) which generally processes and sells its coffee alone. The latter, meanwhile, is a model which encompasses a group of farmers who process and sell their coffee collectively in order to gain better access to equipment, facilities, and business opportunities.

While both models have their advantages and drawbacks, in recent years, smallholder producers in some countries have started to leave co-ops in favour of alternative farming models. The reasons for this are complex, however, it has ultimately led to the formation of new hybrid models – including the concept of “coffee farmer collectives”. 

To learn more about the differences between coffee estates and co-operatives, as well as farmer collectives, I spoke with Symon Sogomo, a producer at Sogomo Coffee Estate in Kenya, and Alejandro Hernandez, a coffee quality control manager in Colombia. Read on for more of their insight.

You may also like our article on why people are calling for reform in Kenyan coffee production.

Co-operatives vs estate farms: What are the main differences?

Before we explore the issues with these two models, we first need to understand how they work and how they are different – mainly when it comes to size.

Essentially, a coffee co-operative is a group of producers who join together to collectively improve their access to a number of resources. These can include fertilisers, farming tools, seeds, and loans. 

As well as this, farmers can also have more access to formal training programmes and can leverage better marketing and business opportunities. In theory, this can help them to receive higher prices for their coffee, or improve stability by committing to selling a larger volume of coffee on a repeat basis.

Coffee co-operatives have been prominent across the industry for decades. When well-managed, they offer a number of benefits to farmer members – typically smallholder producers who own smaller parcels of land. However, the model has received its fair share of criticism in recent years.

In Kenya, for example, co-ops receive money once a coffee has been sold. The co-op then deducts fees and remits money to individual members, but this can sometimes lead to disagreements over the final amount.

“For a number of complex reasons, not all of Kenya’s coffee-growing regions have well-developed co-operatives,” Symon says. “For instance, in areas where there is plenty of land, there are more coffee estates.”

Looking at coffee estates

In comparison, estate farms are much larger in size than each co-operative member’s individual farm. First and foremost, this gives producers ownership over more of the production process, including how they process and sell coffee. 

Farmers can carry out post-harvest processing on-site, and will often process and sell their coffee separately to other producers in the area – although this isn’t always the case.

However, this increased ownership also means increased responsibility. On estates, there isn’t a support network of other co-operative members and professionals to help with the processing, marketing, and sale of their coffee. Similarly, the party which owns the estate must deal with any financial issues.

Are more farmers leaving co-ops?

As previously mentioned, in recent years, we’ve seen more and more producers choose to leave co-operatives in some countries. There are a number of reasons for this.

Firstly, many co-op members depend heavily on their collective access to resources, formal training, and business opportunities, farmers may also have to deal with collective burdens. For instance, co-operative-wide financial issues (such as unforeseen costs or issues with debt) affect the entirety of its membership.

Decision making and autonomy over the processing and sale of coffee can also be difficult at co-ops. Although coffee remains the property of the producers, co-op management makes the majority of decisions about the processing and sale of coffee. 

This means that an individual farmer has much less ownership over their coffee – they are, for instance, often unable to process their coffee in a different way to other members. Furthermore, while they may have a say, they also don’t get to individually choose the price the coffee sells for.

“In Colombia, we don’t have many large coffee estates,” Alejandro explains. “Most of the varieties grown in the country are traditional, such as Caturra and Castillo, and the National Federation of Coffee Growers of Colombia (FNC) mainly wants to buy washed coffee, too.

“Co-operative members receive more money for fully washed coffees than estate farmers,” he adds. “Most producers in Colombia belong to co-operatives because growing specialty coffee is still a relatively new concept here.”

What about estate production?

For the most part, owning a coffee estate is down to the amount of land that a producer has access to. This provides a greater scale of production, as well increased autonomy – estate owners can choose to pivot and experiment a bit more easily.

For example, we’re seeing a lot of younger producers becoming more aware that certain processing methods – especially more experimental techniques – can add value to their coffee in specific markets, which can potentially increase the prices they receive.

“With estate production, farmers can have full control over their operations, including processing,” Symon says. “In theory, they can reap more rewards when they put more effort into their coffee production.”

In some producing countries (such as Kenya), land inheritance can force farmers to leave the co-operative model behind. Furthermore, older producers often carry out most of the decision making in co-operatives, which can leave younger generations of farmers disillusioned. As a result, some of them register as estate farmers, which allows them to have much more control over coffee production.

The drawbacks of estate farming

However, just because estate farmers typically have larger farms does not mean they are without their own unique problems. For example, in some producing countries, farmers need a licence to operate estates.

“In Colombia, the FNC manages the majority of coffee exports,” Alejandro says. “The FNC deducts a small percentage of total sales of coffee (known as ‘coffee contribution’) to be used to support farmers.

“However, if you are not a member of the FNC, you need to have a license to operate as an individual or estate farmer,” he adds.

There are several requirements which coffee farmers need to meet to receive an estate licence. Although these can vary between producing countries, they generally include a number of minimum coffee plants, the acreage under coffee production, and total production volume.

Alongside licence fees, establishing a coffee estate can be expensive and time consuming. It’s likely that farmers will need to invest in a substantial amount of equipment and resources, which represents a significant upfront cost. Furthermore, estate farmers need to manage production and labour costs themselves, as well as the processing and marketing of their coffee – all things that co-operative management would often take care of.

What are coffee farmer collectives?

Although co-operatives and estates are two of the most common coffee farming models, Symon tells me that more “coffee farmer collectives” are starting to emerge in some producing countries – particularly Kenya.

“It’s a hybrid model – these collectives are like estates, but they operate in a similar way to a co-operative society,” he says. “The owner of the estate maintains their independence.

“A co-operative has to have at least five members or so to become established, whereas a farmer collective requires less members,” he adds.

Farmer collectives tend to include producers who don’t own or lease farms which are large enough to register as estates, but they are also not willing to join a co-operative.

In these cases, a small group of producers from the same region can form a farmer collective, which can be registered as a coffee business with the local authority. Each farmer can retain control over their respective farm, however, coffee processing can be carried out collectively at local micro mill facilities.

Coffee farmer collectives are also able to own and operate their own dry mills, where they can remove parchment from beans, as well as grade, sort, package, and export their coffees. This way, members of the collective can retain more of their coffee’s value.

Unlike coffee estates, larger areas of land aren’t required to establish a farmer collective. In some cases, the requirements to join a farmer collective can vary widely, so smallholder producers are also able to become a member.

Individual members of coffee farmer collectives are also able to directly interact with buyers, which means they are able to negotiate prices. However, Symon points out that this can be a problem, too.

“As a collective, you can negotiate prices and conditions more effectively,” he says.

Women coffee workers winnow coffee cherries at on a coffee estate.

What does the future hold for coffee estates and co-ops?

Irrespective of the emergence of the coffee farmer collective model, we know that estates and co-ops are far more prominent across the industry. But how might this change in the years to come?

“Well-managed co-operatives ensure that all members abide by the required guidelines and standards, which in turn means producers have better access to resources,” Symon says. “Co-op managers can also restrict a member’s earnings if they don’t produce coffee to a high enough quality, [which can be an incentive to maintain quality standards].”

Co-operatives can also act as a safety net for some smallholder producers, as they provide easier access to facilities, resources, and business opportunities. Moreover, the costs of production can also be reduced, while estate production can be costly for individual farmers.

Weighing the pros and cons

If well managed and with proper oversight, some buyers often prefer to purchase coffee from co-ops rather than estates – largely because they often have a better reputation for quality control. For instance, cherries need to be sorted before they can be accepted by co-operative management, which in theory means only ripe cherries are processed.

Furthermore, estate farmers generally hire seasonal labour to help across the harvest season. If pickers are paid for the amount of cherry they harvest, this could be an incentive to focus on volume over quality – although this is not always the case.

“Estate farmers need more time and equipment to harvest ripe cherries, which is not always easy,” Alejandro says. “Co-operatives, however, don’t always face this issue.”

However, at the same time, the increased autonomy of estate production remains a key factor: farmers who have more scale can add more value to their coffee through processing, branding, and marketing.

In short, for individual farmers who operate on larger amounts of land, the economy of scale simply means estate farming can be more profitable in the medium and long term.

At the same time, for many smallholder farmers around the world, there is simply no choice but to operate as part of a co-operative – without the access to infrastructure and other resources in this way, many of them wouldn’t be able to process and effectively sell their coffee.

Ultimately, the size of a producer’s farm largely dictates which farming model they will follow, however, it’s clear that alternative models – such as farmer collectives – are also beginning to emerge.

Enjoyed this? Then read our article on how price increases affect coffee co-operatives.

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