Root Capital Launches $7 Million, Multi-Year Initiative to Combat La Roya and Build Farmer Resilience

Posted by Liam Brody  |  Nov 7, 2013 10:07:00 AM

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Last summer, Maria Eufemia Madonado Ocaño (pictured above) watched helplessly as almost all of her coffee trees died. The 52-year-old Peruvian farmer and member of Root Capital client Unicafec was unable to stop the devastating spread of coffee leaf rust, called la roya in Spanish. The fungus has been sweeping through coffee-growing regions in Central America and Peru since late 2012.  “My coffee was beautiful,” she said. “And then it all dried up. It never matured, and it lost all its leaves.” After a substantial harvest last year, her harvest this year—and the majority of her coffee trees—were completely lost.

To buoy hard working farmers like Maria, we are launching our Coffee Farmer Resilience Initiative. The Initiative, a collaborative venture between Green Mountain Coffee Roasters, the Multilateral Investment Fund of the Inter-American Development Bank and Skoll Foundation, is a collaborative venture designed to stabilize supply chains by investing in coffee farmers at the base of the value chain, who are on the front lines of battling the leaf rust epidemic in Latin America. We made the formal announcement yesterday before hundreds of coffee industry professionals at Let’s Talk Roya, a solutions-oriented conference hosted by Sustainable Harvest, a private sector partner helping to implement the Initiative.

The roya outbreak in Latin America has highlighted the fragility of livelihoods largely dependent on agriculture.  Roya is a nightmare for coffee farming families, their communities and the entire region. So far, experts report massive economic disruption, including the loss of 500,000 coffee-related jobs and approximately $1 billion in lost revenue.

The $7 million initiative will allow Root Capital to lend more than $10 million for resilience investments, and provide financial management training, to 50 agricultural enterprises representing 40,000 farmers, reaching approximately 200,000 family members in farming communities in Latin America.

We launched the Initiative with a $2 million loan to an impressive Root Capital client called SOPPEXCCA, a 650-member coffee farmer cooperative based in Jinotega, Nicaragua. SOPPEXCCA will use this loan to renovate farms ravaged by the fungus, replacing dead coffee trees with new, high-quality, rust-resistant varietals.

Here’s a rundown of what else we have planned for the Initiative, in addition to long-term lending for coffee renovation and rehabilitation:

  • Short-term lending: We anticipate making at least $165 million in loans to small and growing agricultural businesses (SGBs), like farmer cooperatives, participating in the initiative.
  • Financial training: Root Capital’s Financial Advisory Services (FAS) will engage with SGBs to build their capacity to manage internal credit systems for on-lending to farmer members.
  • Climate-smart agronomic training coordination: We’ll coordinate with agronomic experts to help SGBs develop and implement renovation and rehabilitation plans built on sound, climate-smart agronomic practices related to varietal selection, seedling production, compost application, farm maintenance, and integrated crop management.
  • Income diversification strategies: We will also support the development and launch of small side businesses for farm families, as well as the planting of short-cycle crops for cash and household consumption. These investments are critical for strengthening food security for farm families, particularly in the short-term as households absorb the shock of lost income tied to roya.

Tackling the interconnected issues of roya, climate change and underinvestment in smallholder agriculture is a massive, long-term effort. We’re grateful to have GMCR, the Multilateral Investment Fund, Skoll Foundation, our clients, and many buyers and traders, like Sustainable Harvest, as committed partners in this ambitious undertaking. Together, we can improve livelihoods and build the resilience of farmers at the base, or the heart, of all agricultural value chains. Doing so is a win-win for farm families, their communities, global buyers, and consumers.

As Ric Reinhardt, the head of the Specialty Coffee Association of America, likes to say, “Coffee is the canary in the coal mine for the effect of climate change on global agriculture.” The time to work together across national boundaries and political persuasions is now. Our morning cup of joe depends on it, as does so much more…

 

Help Root Capital invest in the resilience of thousands of farmers like Maria Eufemia Madonado Ocaño:

 

Topics: Climate Smart Agriculture, South America, Central America, Leadership

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