Glimpses of the Workshop

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FOREWORDToday commercialization of agriculture is an inevitable reality throughout the whole world. There are a number of factors affecting the commercialization process in agriculture. Some of them could be named as rapid growth of economies in the developing and developed countries, introducing of new technologies, market expansion, market liberalization, urbanization, rapid increase of demand for food, decreasing of farming population, liberalized and open economic policies, bilateral and multilateral economic agreements and government agricultural policies.

Commercialization in agriculture is not a new phenomenon and it is not a surprise to the Nepalese farming community. It has been one of the main components of agricultural development of Nepal since Agricultural Perspective Plan (1994/95-2014/15). One of the prioritized outputs of APP is to promote high value crops. For this it has prioritized different crops for different ecological zones of the country: Terai, mid-hill and high-hills. Though APP has not focused coffee as one the high value crops, the subsequent agricultural policies and strategies have paved the way for the promotion of coffee as high value and exportable commodity.

As Nepal is a mountainous country, coffee is the best suitable crop for mid-hills which has multiple advantages: can be grown in the steep hill without much care and has high premium price in niche markets. The ecological settings in the hills provide Nepalese coffee a unique opportunity to enter international specialty markets. It is grown in small family farms under shade with little or no external inputs used.

Though small in amount, the coffee could be an important occupation in the rural economics of Nepal with massive participation of marginalized, poor and down-trodden class of the rural communities in its farming. Additionally, it could be an important means for earning foreign currency and in maintaining a balance in the ecosystem.

Though the coffee industry has been growing fast, there are several problems. The main problem is market. Because of limited quantity, Nepalese coffee has not been able to influence in international market despite being unique in nature. Coffee being relatively a new crop for Nepal, there has been limited research or study on this crop. Resources are also lacking for certification of coffee as an organic product. Similar is the problem in quality, processing and handling.

The workshop was organized to develop an understanding among public sector, non-governmental organization, private sector and donors regarding coffee sub-sector, analyze opportunities and constraints and develop common understanding for the development and promotion of Nepali coffee.

I would like to thank representatives from the World Bank, Coffee and Tea Development Section of DOA, Trade Promotion Center, Agro Enterprise Center, National Tea and Coffee Development Board, Nepal Coffee Producers Association, District Coffee Producers Association, Coffee Promotion Program of Helvetas Nepal and professionals and practitioners dedicated to coffee sub-sector development for making the workshop a success.

Yogendra Kumar KarkiProject DirectorProject for Agriculture Commercialization and Trade (PACT)Maharajgunj, Kathmandu, Nepal

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Table of ContentsFOREWORD i

ABBREVIATIONS AND ACRONYMS iv

1. BACKGROUND 1

2. REVIEW OF THE COFFEE SUB-SECTOR IN NEPAL 4

3. WORKSHOP PAPERS 17

3.1 Importance of Coffee Sub-Sector Analysis 17

3.2 Present state of coffee production in Nepal: Opportunities and Challenges 21

3.3 g]kfnL skmL] lgof{tsf ;+efjgf tyf r'gf}tL 26

3.4 Comments on “Export Potentials and Constraints of Nepalese Coffee” 27

3.5 skmL If]qdf ;+nUg ;/f]sf/jfnfx? / o;sf] Joj;flos pTkfbgdf ltgsf] e"ldsf 28

3.6 Coffee Research and Development in Nepal 31

3.7 Comment on “Coffee Research and Development in Nepal” 36

3.8 Activities and achievements of COPP and its present activities in support of the commercialization of coffee sub-sector 38

4. MAJOR ISSUES AND QUERIES RAISED DURING FLOOR DISCUSSION 42

5. ANNEXES

Annex 1: Schedule of Coffee Sub-Sector Workshop 44

Annex 2: List of Participants 45

Annex 3: Presentation Materials 47

iv

ABBREVIATIONS AND ACRONYMS

ADB Asian Development Bank

AEC Agro Enterprise Center

CoPP Coffee Promotion Program

CTDS Coffee and Tea Development Section

DADO District Agriculture Development Office

DCPA District Coffee Producers’ Association

DFTQC Department of Food Technology and Quality Control

DoA Department of Agriculture

FNCCI Federation of Nepal Chamber of Commerce and Industry

FY Fiscal Year

GAP Good Agriculture Practices

GMP Good Manufacturing Practices

GON Government of Nepal

ha Hectare

HCPCL Highland Coffee Promotion Company Limited

ICO International Coffee Organization

IFOAM International Federation for Organic Agriculture Movement

kg Kilogram

MoAD Ministry of Agriculture Development

mt Metric ton

NARC Nepal Agriculture Research Council

NCPA Nepal Coffee Producers’ Association

NOCP Nepal Organic Coffee Products

NTCDB National Tea & Coffee Development Board

PACT Project for Agriculture Commercialization and Trade

Rs (Nepli) Rupees

ToR Terms of References

VDC Village Development Committee

WB World Bank

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1. BACKGROUND

1.1 The WorkshopThis report provides a short summary of the recent coffee sub-sector workshop organized by the Project for Agriculture Commercialization and Trade (PACT) on 11 April 2011. The workshop was held in Gangjong Hotel, Kathmandu and attended by all key representative stakeholders involved in production, processing and marketing from the public (government), non-government and private sector. Participants from the Ministry of Agriculture Development, Department of Agriculture, Tea and Coffee Section, National Tea and Coffee Development Board, National and District Coffee Producers Association, Trade Promotion Centre, Agro Enterprise Centre (AEC) of the Federation of Nepalese Chambers of Commerce and Industries, and PACT attended the workshop. This report was designed primarily to identify potentialities and constraints towards the improvement of the competitiveness of small coffee farmers and formulate value chain development plan for commercialization of the coffee.

This report has been prepared for circulation to the participants but is also intended to serve as a resource for those interested in the workshop content and agencies involved in the production, processing and marketing of coffee in Nepal.

1.2 Project for Agriculture Commercialization and Trade

The Project for Agriculture Commercialization and Trade (PACT) is a six-year project, of the Ministry of Agriculture Development, Government of Nepal (GoN) and is supported by the World Bank (WB). The grant agreement was signed between GoN and WB on 21 August 2009 and it became effective on 13 November 2009. The project is being implemented in 25 districts located in Central, Western, Mid-western and Far-western development regions of Nepal representing Mid-hills and Terai regions. The project districts are:

The overall objective of the project is to improve the competitiveness of smallholder farmers and the agribusiness sector in selected commodity value chains. It intends to achieve above objectives by:

(i) helping farmer groups and cooperatives engage in profitable market-oriented production and improved access to markets through the provision of technology and information services and critical public infrastructure and linkages to agribusiness;

(ii) creating and strengthening industry-wide partnerships along the value chain, thus forging linkages between producers, traders, processors, and other stakeholders and,

Region Central Western Mid-western Far-western

Mid-hills Kavre Palanchok, Kathmandu, Lalitpur, Dhading,

Tanahu, Lamjung, Surkhet -

Terai Chitwan, Bara, Parsa, Rautahat, Sarlahi, Mahottari, Dhanusha

Kaski, Syangja, Palpa, Nawalparasi, Rupendehi, Kapilvastu

Dang, Banke, Bardiya

Kailali, Kanchanpur

The Project District

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(iii) reducing existing obstacles to agriculture and food trade thereby increasing the ability of farmers and agribusiness to respond to Sanitary and Phyto-sanitary (SPS) measures and food-quality standards to meet domestic and international market requirements.

The project has three components:

COMPONENT 1: Agriculture and Rural Business Development. The objective of this component is to enable farmers to engage in profitable market-oriented production and to promote partnerships and market linkages with other value chain participants and agribusinesses. The component helps agro-enterprises, commodity associations, cooperatives, registered farmer groups/organizations and technology and service providers to actively engage in the development of commodity value chains by partially financing demand-driven investment proposals through competitive matching grants

COMPONENT 2: Support for Sanitary and Phyto-sanitary (SPS) Facilities and Food Quality Management. The objective of this component is to strengthen the efficiency and effectiveness of SPS in order to reduce existing obstacles to agricultural and food trade. It also aims to support the private sector’s efforts to gain market advantage through improved food quality management. It provides critical backing to the value chain investments being supported by Component 1 and other related projects by Development Partners. This component is implemented through three line departments of the MOAC namely, Department of Food Technology and Quality Control (DFTQC), Department of Livestock Services (DLS), and Department of Agriculture (DOA) and the private sector.

COMPONENT 3: Project Management and Monitoring and Evaluation. The objective of this component is to support a Project Management Team (PMT). Activities carried out for overall project management, monitoring and evaluation and reporting are financed under this component.

1.3 Importance of Coffee in NepalA large part of land located in the mid hills of Nepal with an altitude of between 800-1600 meter above sea level, is suitable for coffee cultivation. Available information suggests that coffee cultivation is much more remunerative than the traditional crops being cultivated in the rainfed upland of mid-hill. Coffee

cultivation provides 4.33 times higher net return than maize, 3.30 times higher net return than millet and 1.87 times higher net return than maize and millet combined, per unit land. Those figures would be much higher if coffee is intercropped with ginger and with banana as double purpose tree: fruits and shade. Internal rate of return of coffee orchard are estimated at 19 percent, 26.9 percent and 32.5 percent for coffee alone, coffee with ginger and coffee with banana, respectively assuming a 30 years average life of orchard. Another advantage of coffee farming is employment generation. Coffee cherry picking coincides with a season when there is minimal demand of labor for other crops, providing additional job not only to the concerned farmers but also to marginal farmers and land less laborers.

The PACT has included coffee as its one of the thematic area starting from the first tranche of competitive grant. Among the 48 sub-projects receiving competitive grant under the first tranche, five (more than 10%) were for the promotion of coffee at different levels.

1.4 Objectives of the WorkshopThe main objective of the workshop was to develop an understanding among the different stakeholders including public sector, non-governmental organization, private sector and donors working in coffee sub-sector; analyze opportunities and constraints for the development; and promotion of Nepali coffee. Specific objectives were:

^ to provide opportunities and platform for improving value chain linkages among coffee producers, processors, traders and other stakeholders;

^ to analyze the potentials, constraints and possible strategies for the sub-sector development;

^ to explore opportunities for the improvement of the competitiveness of small coffee farmers; and

^ to explore how the PACT can help the coffee stakeholders involved in different stages of development/promotion of Nepali coffee.

1.5 Workshop ParticipantsMr. Nathu Prasad Chaudhary, Secretary, Ministry of Agriculture Development chaired the entire workshop. In the beginning of the workshop, project director, PACT explained the project itself, objectives of the workshop and expected outputs. A total of six papers

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were presented in the workshop covering Research and Development, policy issues, stakeholders, production to marketing and export of coffee. Brief presentation was also made by District Coffee Producers Associations and PACT’s competitive grant recipients.

Representatives from different ministry, departments, programs of the government of Nepal, National Tea and Coffee Development Board, Tea and Coffee Development Section, Trade and Export Promotion Center, Agro Enterprise Center, Coffee promotion Program of Helvetas Nepal, Nepal Coffee Producers Association, District Coffee Producers Associations, and Private companies participated in the workshop.

1.6 Organization of the proceedingsBrief introduction of the Project for Agriculture Commercialization and Trade, its objectives, scope, coverage; and objective of the workshop are given in Chapter 1. A review of the Nepalese coffee sub-sector is in Chapter 2 and the workshop papers are compiled in Chapter 3. The papers are included either in English or Nepali, as received from the authors. The PACT requested commentators to provide comments on each of the papers in writing. Received comments are placed after the main paper. Major points raised by the participants including suggestions from the chairperson of the workshop are compiled in Chapter 4. Finally, Workshop schedule, participants and presentation materials used by the authors are placed in Annexes.

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2. REVIEW OF THE COFFEE SUB-SECTOR IN NEPAL

Kamal R. Paudyal 1

2.1 BackgroundCoffee is an important high value commodity and a popular beverage. Over 2.25 billion cups of coffee are consumed in the world every day. One of the good things about coffee is that over 90% of its production takes place in the developing countries, while consumption takes place mainly in the developed/industrialized countries. Worldwide, 25 million small producers rely on coffee for a living. In Brazil alone, where almost a third of the world's coffee is produced, over 5 million people are employed in the cultivation and harvesting of over 3 billion coffee plants.

In Nepal there are about 28 thousand farmers growing coffee in 40 mid-hill districts. However, organized coffee farming under Nepal Coffee Producers Association (NCPA) is reported in 14 districts only. Its cultivation is more labor-intensive than most of the alternative crops grown on same land: providing additional employment opportunities to rural populace.

More than 150 million Americans (18 and older) drink coffee on a daily basis, with 65 percent of them consuming their hot beverage in the morning. Average coffee consumption is more than 100 liters per capita in US. Though coffee is not traditional drink of average Nepalese, it is becoming popular drink in Nepal in recent past. According to a survey (COPP 2010) consumption of coffee increased from 156 mt in 2006 to 384 mt in 2010: around 146 percent increase in three year. This quantity converted to drink represents only about three cups of coffee per capita in 2009.

2.2 HistoryThe botanical evidence indicates that the history of the coffee bean began on the plateaus of central Ethiopia from where it was taken to Yemen and cultivated since the 6th century. Gradually coffee cultivation wandered east and west, eventually forming a belt roughly bounded by the tropics of Cancer and Capricorn. Growing regions typically offer moderate sunshine and rain, steady temperatures around 20oC and rich, porous soil (http://www.coffeeresearch.org/coffee/history.htm). Consumption of coffee also started in Arabian Peninsula, where it was commercially roasted, boiled and prepared ‘Gahwa’ meaning beverage made from plant from eleventh century. A history of coffee origin, including the legend of Kaldi the Shepherd, and other activities are listed in Annex II.1.

In Nepal, coffee plantation is relatively new practice. Initially coffee was promoted by some projects and I/NGOs as a soil management for control of soil erosion and other environmental protection practices. This practice led the farmers regard coffee as an easy to grow, and less demanding crop cultivated on marginal upland conditions. After understanding its real importance farmers realized that it needs better management to maintain the quality of the coffee produced.

According to available sources, a hermit, Mr Hira Giri, had brought some seeds of coffee from Sindu Province of Myanmar (earlier called Burma) and had planted in Aapchour of Gulmi District for the first time in Nepal in the year 1938

1 Dr. Kamal Raj Paudyal is Value Chain Development Specialist in Project for Agriculture Commercialization and Trade, Kathmandu. paudyalkr@pact.gov.np

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AD (1995BS). Since then it spread from one farmer to another as a curiosity plant for three decades without external intervention. The first intervention from public sector was recorded when Agriculture Development Bank imported coffee seeds and distributed to interested farmers for growing as cash crop. First commercial nursery was established by an innovative farmer in Aanpchaur village of Gulmi district in 1981. Similarly, distribution of coffee plants at subsidized prices was first initiated by Tinau Watershed Project in 1982.

Initially, coffee seeds were roasted and grinded at household level using traditional technology. Processing of coffee at larger scale started with establishment of coffee mill at Manigram village of Rupandehi district in 1983.

The government established Tea and Coffee Development Section under Fruit Development Directorate of the Department of Agriculture in 1993 to coordinate the coffee development in the country. National Tea and Coffee Development Board was also established under the National Tea and Coffee Development Board Act (1993). In 1994, export of Nepali coffee was recorded first time with dry processed green beans to Japan. Brief historical events of coffee sub-sector in Nepal are listed in Annex II.2.

2.3 Specialty of Nepali coffeeNepalese coffee cultivation practice is environmental friendly and free of harmful pesticides. It is bird-friendly as it is shade-grown coffee where natural shade (canopy trees) is used to shelter coffee plants during parts of the growing season. Nepalese coffee is Organic, grown without the use of potentially harmful artificial pesticides or fertilizers under strict

certification guidelines. The National Tea and Coffee Development Board (NTCDB) and NCPA have guided the farmers not to grow coffee at less than 800 meter altitude. Many of the coffee growing areas also get cool wind from Himalayas that help produce superior quality. As a genuine process of promoting Nepalese coffee the Government of Nepal (GoN) has approved Nepali Coffee Logo (Figure 1) and awarded to three traders that meet the set standards. However, serious concerns have been raised by the people involved in coffee business regarding the enforcement of the implementation guidelines until proper monitoring mechanism is put in place.

2.4 Advantages of Coffee in Nepalese Agriculture

Coffee has been predominantly planted in upland area as an additional /extra crop without disturbing the existing cropping system and on steep hillsides where other crops do not perform well. In such cases, next best alternative use of the land is forage production or grazing. In the recent past, farmers have also started growing coffee in Bari (rainfed upland) where maize could be grown in rainy season. This means maize alone or maize followed by millet/wheat are the next best alternative crop of coffee. Comparative advantages of coffee cultivation vis-a-vis competing crops are discussed in the following paragraphs.

2.4.1 Land Productivity

Coffee plants start bearing fruit from the fourth year of plantation and provide full scale production from its 7th to 30th year. A sample survey conducted in Sindhupalchok district in 2009 reported that average annual cost of coffee cultivation was Rs 43,833 per ha and gross return was 78,023 per ha meaning a net return of Rs 34,190 per ha per annum2 (COPP 2009).

As discussed earlier, coffee is planted on marginal uplands where single crop of maize and in few cases second crop of millet planted. The study reported that annual net return from maize cultivation was Rs 7,890 per ha per annum and it was Rs 10,368 per ha per annum from millet cultivation. From these figures it can be seen that net return from coffee cultivation is 4.33 times higher than maize, 3.30 times higher than millet and 1.87 times higher than maize followed by millet cultivation. Comparative benefits of coffee, coffee with Banana, coffee with ginger, maize, and millet cultivation are depicted in Table 1.

2 Average of costs and returns for 30 years.

FiguRe 1: Nepal Coffee Logo

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2.4.2 Returns over investment

Because there is no production from coffee plantation until third year and less than optimum yield up to sixth year, simple average figures are not enough to judge the additional income derived from coffee production compared to traditional crops. Therefore, payback period and discounted indicators of profitability measurements such as Net Present Value (NPV), Benefit Cost (BC) Ratio and Internal Rate of Return (IRR) are calculated to estimate the level of additional income derived from coffee cultivation compared to traditional crops.

It is estimated that one can earn a net benefit of Rs 151,431 per ha after discounting the future value at 10% over a period of 30 years if only coffee is cultivated on unused land. Similarly, if ginger is cultivated as intercrop with coffee Net Present Value (NPV) at 10 % increases to Rs 206,884 per ha and if banana is cultivated with coffee it increases to Rs 380,068 per ha over a period of 30 years. The IRR is estimated at 19%, 26.9% and 32.5% respectively, with coffee alone, coffee+ginger and coffee+banana cultivation. Benefit cost ratio is 1.5, 1.6 and 1.9, respectively, with coffee alone, coffee+ginger and coffee+banana cultivation. All the investments are recovered in 7.5 years if only coffee is cultivated, in 6.2 years if coffee and ginger is cultivated and in 5.3 years if coffee and banana is cultivated (Table 2)

An estimation of the benefit of coffee cultivation replacing other crops is provided in Table 2. Annual net benefit from the crop being replaced by coffee is subtracted from annual benefit from coffee to estimate those indicators. Estimates of the financial indicators in the case of coffee replacing maize and millets are presented in column 4 and 5 of Table 2 which shows that it takes 10 years to recover all of the investments if coffee replaces millet. Payback period, however, would reduce to 8.1 years and 6.2 years if coffee+ginger and coffee+banana are cultivated on the land being used to cultivate millet.

Crops Net return (Rs/ha/year)

Net returns compared to

Maize Millet Maize+Millet

Coffee 34,190 4.33 3.30 1.87

Coffee+Banana 61,774 7.83 5.96 3.38

Coffee+Ginger 3 51,683 6.55 4.98 2.83

Maize 7,890 1.0 0.76 0.43

Millet 10,368 1.31 1.0 0.56

Maize+millet 18,258 2.31 1.76 1.0

Source: COPP 2009.

Table 1: Comparison of net returns from coffee and its alternative crops cultivation

3. Coffee intercropped for the first four years of plantation only.

Crops Indicators Planted on

Unused land Replaced maize Replaced millet

Coffee Payback period (years) 7.5 9.2 10.0

NPV @ 10% (Rs/ha) 151,431 77,052 53,692

IRR (%) 19.0 14.3 13.0

BC Ratio 1.5 1.2 1.1

Coffee + (Ginger first four years) Payback period (years) 6.2 7.3 8.1

NPV @ 10% (Rs/ha) 206,884 132,502 109,144

IRR (%) 26.9 19.8 17.8

BC Ratio 1.6 1.3 1.2

Coffee +Banana Payback period (years) 5.3 6.1 6.2

NPV @ 10% (Rs/ha) 380,068 305,688 282,328

IRR (%) 32.5 26.8 25.2

BC Ratio 1.9 1.6 1.5

Source: Base data from COPP 2009.

Table 2: Indicators of Rate of Returns from Coffee Cultivation on land used for different purposes

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Based on a survey conducted in Gulmi and Kavre districts Kattel (2009) estimated that coffee accounts for 13.4 percent of total income of coffee farmers, on an average. The author describes this income as 3-Dimensional because it comes from three different outputs of coffee farming: 8.1 percent from coffee in terms of fresh cherry, 3.3 percent from shade trees in terms of fruit, fodder and/or firewood and 2.1 percent from intercrops such as ginger, turmeric and cardamom.

2.4.3 Employment Generation

Coffee is a much more labor-intensive crop than alternative crops of the same regions such as maize, millet and wheat as it is not subject to automation and requires constant attention. Most of the employment is generated during harvesting season, mid-December to end of February in the Nepalese context, when there are very little agricultural related activities to be performed in other crop sector. Nursery management, pit digging, filling and planting are other activities that provide employment to rural populace.

It provides additional employment not only to the concerned farmer but also to those that are not involved in coffee cultivation, especially landless and marginal farmers. This is important at the present context as the industrial growth is disappointing and youths have to resort on foreign employment.

2.5 Production and Marketing

2.5.1 Area and Production

There are two main varieties of coffee being cultivated: Arabica and Robusta. Arabica coffee trees are more delicate, must be grown at higher elevations4, and yield fewer beans per tree per growing season. Robusta coffee trees are much hardier, may be grown at lower elevations, and have a high bean yield. Of the two, Arabica beget the better beans - and about 70 percent of the harvest in the world. The harsher Robusta tree account for about 30 percent of the world's production and are used for "mainstream" (lower quality) coffee blends (http://www.nationalgeographic.com/coffee/frame.html). Arabica is being cultivated in Nepal because of its quality as demanded by specialty market.

Coffee can be commercially produced in many parts of the country. However, there is great potentiality in mid hills region for organic coffee production as it has got suitable climate, topography, soil, relative humidity, temperature and rainfall for Arabica coffee. Some Districts like Gulmi, Palpa, Argakhanchi, Lalitpur,Tanahu, Kavrepalanchok, Sindhupalchowk, Lamjung, Kaski, Gorkha, Syangja, Parbat, Baglung are successfully growing and producing Coffee. Similarly, coffee is being cultivated in other 26 districts of mid-hill region of Nepal (http://www. teacoffee.gov.np/index about coffee.php).

Districts Area ha) Green bean (mt) Districts Area (ha) Green bean (mt)

Palpa 183 19.9 Ilam 42 10

Gulmi 112 44.1 Khotang 7 2

Arghakhachi 76 13 Panchthar 12 4.5

Syangja 230 47.2 Udyapur 5 2

Kaski 85 24 Lalitpur 99 44

Parbat 45 9.5 Sindhupalchok 85 15.8

Lamjung 149 14.5 Kavrepalanchok 112 33.9

Gorkha 95 5 Nuwakot 77 27.7

Baglung 39 12 Dhading 30 4

Tanahu 52 4 Makawanpur 25 2

Mayagdi 12 2 Other Districts 40 12

Sankhuwashava 18 2 Total 1630 343

Source: National Tea and Coffee Development Board, 2068 (page 66)

Table 3: Area and Production of Coffee in Nepal, 2009/10

4. In Nepal, mid-hill locations with an altitude of 800 to 1500 meters above sea level are considered suitable for organic coffee cultivation.

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In 2009/10 a total of 1,630 ha of land was planted with coffee and production was recorded at 343 mt green beans. The low yield rate was because large parts of coffee plants are young (less than five years of age) that have not started bearing fruit or are producing small quantity. Syangja district had the largest area under coffee (230 ha) that produced over 47.2 mt green beans in 2009/10 (Table-3).

2.5.2 Processing and Marketing

In Nepal, wet processing technique is used to process coffee cherry to beans, except in a few cases where either farmers are too far from pulping facility or they try to use rejected cherry (those that float on normal water). Four steps are followed in processing cherry to parchment at the village level.

Ripe fresh cherry are put into water and those that float are rejected. Rest of the cherry are pulped using manual or semi-manual pulping machine, at

the village level. Pulping is done within 24 hours of picking the cherry. After pulping, fermentation is required to remove mucilage from parchment. The parchment is then fermented for 24 to 48 hours, depending upon temperature of the location, in plastic drums or plastic bags. Timing of fermentation is very important as less than enough fermentation results in mucilage remaining on parchment and more fermentation results in foul smell. The wet parchment is then washed 3 to 4 times manually to remove mucilage completely. It is dried for several days until moisture content drops to 11 to 13% (refer Figure 2 for processes and recovery rates). The dried parchment is stored or sold to traders or District Cooperative Union/Federation that have hulling facility. Most of the export of coffee from Nepal is in term of green bean that is produced by hulling the parchment.

Nepali coffee had a long way to travel from a means

Source:

(1) Process and product - Dhungana, GP, 2068, COFFEE PRASODHAN PRABIDHI, in Tea-Coffee Smarika-2068, National Tea and Coffee Development Board, Kathmandu.

(2) Values estimated based on consultation with key informants.

100 kg Fresh Cherry (Rs 30-40/kg)

Pulping

Fermentation & Washing

Drying

Hulling

1.5 kg green beans for local market (Rs. 500-600/kg)

16.5 kg green beans for export ($7-10/kg)

46 kg Pulp 54 kg Parchment+Mucilage

11 kg Mucilage 43 kg Parchment

20 kg Moisture 23 kg dry parchment (Rs 145-175/kg)

4.5 kg Pulp 18.5 kg green beans

Sorting

Roasting

0.4 kg moisture +silver skin

0.4 kg roasted beans

2.8 kg moisture +silver skin

13.9 kg roasted beans

FiguRe 2: Wet Processing Process and Average Recovery of Coffee

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of soil conservation plant, to traditionally processed household drinks to international market as specialty coffee. According to NTCDB record about 5 mt coffee was exported in 1995/96 which declined to 4 mt and 2 mt in subsequent year. Export increased to 3 ton in 1998/99 and continued increasing with a record export of 120 mt in 2009/10 (Figure 3).

Coffee stakeholders estimate that about 65 percent of coffee produced in Nepal is exported. However, official record shows that about 36 to 53% of total green beans were exported in last three years. Table 4 shows time series data on production and trade of

coffee. The US, Japan, South Korea, Canada, UAE and European countries are the major buyers of Nepali coffee.

According to a recent report of Nepali daily, export of green beans to third country touched 120 mt marks in the first 8 months of current fiscal year 2010/11. This quantity is at par with last year’s total export. It is expected that total export in the current fiscal year will be more than 150 mt5. Coffee export also has been contributor of foreign currency. Value of coffee export was worth about 40 million Rupees in 2006/07. Value of export in recent years is, however, not available.

Despite increasing production of coffee in Nepal import of the same has not been declining in the past. This may be due to the lack of information and adequate publicity about Nepali coffee and the taste preference for the imported instant coffee: almost all the coffee that is imported to Nepal is instant type. One of the reasons of increased consumption of Nepali coffee in domestic market is due to foreigners preferring filter coffee than the instant (Kattel, 2009).

2.6 Major StakeholdersNepal Coffee Producers’ Association (NCPA) record shows that 27,730 farmers are cultivating coffee in Nepal, only a few of them in commercial

5. The Kathmandu Post, June 14, 2011.

Year Dry cherry Production (mt) Parchment Production (mt) Green Bean Export (mt) Export (Rs. 000) Import (Rs. 000)

1995/96 29.20 5.04 638 23,832

1996/97 37.35 4.25 6 ,023 15,316

1997/98 55.90 2.00 318 16,264

1998/99 44.50 3.1 634 32,471

1999/00 72.40 4.25 1,415 36,437

2000/01 88.70 3.68 673 43,200

2001/02 139.20 9.08 2,455 4,621

2002/03 139.20 16.86 5,205 142

2003/04 217.60 24.30 5,947 410

2004/05 250.00 35.68 1,966 168

2005/06 391.00 91.50 27,678 2,265

2006/07 270.00 100.18 40,117 56,000

2007/08 265.00 112.00 64,481

2008/09 334.00 112.00 NA 84,400

2009/10 417.00 120.00 NA 54,400

Source: National Tea and Coffee Development Board, 2068 (page 65)

Table 4: Production and Trade of Coffee in Nepal

FiguRe 3: Trend of Coffee Export from Nepal

1995/96

150

100

50

0

1997/98

1999/00

2001/02

2003/04

2005/06

2007/08

2009/10

Expo

rt (m

t)

Year

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scale. Majority (90%) of those coffee farmers are associated with DCPA. Scattered settlements, inaccessibility of the specific locations and very small scale (less than 50 plants) are some of the reasons that 2,750 coffee farmers have not joined the DCPA.

Apart from growers there are several individual and organizations involved in coffee value chain, especially in trading, processing and export. Of the eleven institutions involved in coffee processing and trade, two are cooperatives and remaining 9 are registered as companies. Four of them supply to domestic market and to exporters while six of them export coffee in addition to supply to domestic markets. A list of registered coffee processor and traders can be found in Annex II.3. The Coffee and

Tea Development Section (CTDS) under the Fruit Development Directorate of the Department of Agriculture, National Tea and Coffee Development Board (NTCDB), Nepal Coffee Producers’ Association (NCPA), Coffee Promotion Program of Helvetas Nepal have been assisting coffee production and trade in domestic and export markets. At the district level there are 14 District Coffee Producers Associations and more are under process of registration. Each of those institutions is involved in promotion and/or value addition in coffee sub-sector. Functions within the coffee value chain, actors involved in different stages and enablers are depicted in Figure 4.

FiguRe 4: Simplified Value Chain Map of Nepali Coffee

Source: Mapped based on interaction with concerned stakeholders.

Retailing

Trading

Hulling/Roasting

Primary Processing

Cherry Production

Input Supply

Inputs/machinery equipment suppliers

Coffee Growers

Plumping Centre

District Traders

Domestic Consumer (Ground Coffee)

International market (Mostly Green Beans)

Exporters

District Cooperative Unions

Processors cum Traders

Nursery Owners

Nep

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esea

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Coun

cil

Dist

rict C

offee

Pro

duce

rs A

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Agric

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2.7 PotentialsExperts working in coffee sub-sector opine that there is substantial scope of increasing organic coffee production in the country. A GIS database developed with PACT initiation shows that out of 9,108 ha land suitable for coffee cultivation in Kavrepalanchok district, only 112 ha is planted to coffee at present. This clearly means that coffee area can be increased by more than 80 times in the district. Though, there has not been detailed survey of potential coffee area, the example of Kavrepalanchok districts seems to be true for most of the coffee producing district as well. Assuming five percent of the potential land can be brought under coffee in near future, area under coffee can be increased to 6500 ha in 5-6 years from 1630 ha in 2009/10.

Experience has proved that coffee cultivation is much more remunerative that traditional crops. A farmer can earn 4.3 times more than maize cultivation and 3.3 times more than millet cultivation from coffee. Employment generation and environmental protection are other obvious benefits from coffee. Marketing of organic coffee has not been a problem in the past which can be seen from growing quantity of export every year. There is also large scope of import substitution as Nepal has been spending 54 to 84 million Rupees for import of coffee in the recent past.

Nepal can greatly benefit from increasing organic farming practices as the country does not produce chemical fertilizer. Very small quantity expensive imported fertilizer is being used in cultivation of other crops. Hard earned currency can, therefore, be saved and utilized for other development purposes if organic coffee replaces existing cereal crop production.

2.8 Constraints Despite Nepalese farmers accepting coffee as high value agricultural commodity, commercialization has not been happened in its real sense. Most of the coffee production takes place in small plots, involving large number of small farmers resulting in scattered plants along large geographic area. Being marginal and small farmer his/her first priority goes to crops that provide return in shortest possible time. As coffee production at full scale starts from 5th to 6th year, poor farmers cannot wait without any alternative sources of livelihood.

Nepali coffee has also faced problem to maintain its inherent quality due to poor processing facilities. Pulping, fermentation and drying facilities at farmers’ field level are poor.

Though Nepal has initiated organic production program, quantity is very small to compete into international market. In many instances traders complain that they were not able to sell in international market due to limited consignment or paid higher prices due to air transport.

There is almost no or negligible Research and Development (R&D) works done in coffee in Nepal. It is not properly known about which variety is suitable for certain altitude, aspect and soil type. White stem Borer has been a serious threat to increase the production as many coffee plantations have been wiped out due to its attack. There is no sufficient technical manpower to tackle such problems.

2.9 Possible intervention areas:Past experience of coffee development in Nepal shows that this sub-sector requires multi-dimensional development plan to harness the potentials. Following are some of the major programs that will yield desirable results.

2.9.1 Research and development

A well equipped research center need to be established within coffee growing region. Major research thrust need to be on identification/development of varieties suitable for different altitude, aspects and soil types. Appropriate method for white grub and other pest control is urgently required. Research is also required on most suitable types of shade trees, spacing, and other agronomic practices.

2.9.2 Increased size of orchard

Most of the coffee production takes place in small-scale orchards. This practice makes organic certification not only expensive but also almost impossible in some cases. Small holding of the farmers and their immediate need of food crops prevents them to bring all of their land under coffee cultivation. There are two options to tackle this problem: one, that some sort of alternative means of livelihoods be provide until coffee starts bearing fruit in its full swing, and two, expand coffee production to remote inner parts of rural area with provision of extended road infrastructure.

2.9.3 Organic certification and quality control

Part of the certification process is internal control system. Farmers need to be trained on this practice. Arrangement is also required to recruit technicians who will regularly visit the farmers to provide much

12

needed technical help. In national level, an accredited certifying institution should be developed and/or strengthened. A system of branding specialty coffee is also required to sustain the export market. One of the examples is separate treatment of coffee produced in certain altitudes.

2.9.4 Infrastructure and Mechanization

Coffee being relatively new comer in Nepalese agriculture, it is lacking in infrastructure. Often the quality is deteriorated in the absence of appropriate drying and storage facility. Similarly, quality also deteriorates as parchments from different small pulping centers (mostly using manually operated pulper) are mixed to make sizable amount. A few better quality and larger scale processing facility will be great help to this sector.

2.10 Summary and ConclusionEntered in to Nepal without fanfare by a hermit, coffee passed several stages from interesting plant, soil conserving plant etc. to commercially viable high value agricultural commodity. Its specialty of being organic, Himalayan, and high altitude has attracted attention of international market. Contribution of NCPA, DCPA and coffee farmers and traders has been commendable. The government of Nepal has approved Nepali coffee logo and awarded to three traders in 2010. However, there are bigger efforts required to maintain the prestige of Nepali coffee.

Despite Nepalese farmers accepting coffee as high value agricultural commodity, commercialization has not been done in its real sense. Most of the coffee production takes place in small plots, involving large number of small farmers. Almost 90 percent of those farmers are organized in to groups and cooperatives and are registered to DCPA and Department of Cooperative, respectively. NCPA in consultation with NTCDB and COPP of Helvetas Nepal have developed and enforced the standards to be maintained in organic coffee production. Remaining 10 percent coffee farmers are continuing coffee production on

their own and are not abided by the set standards. They are also vulnerable in marketing of their product.

Coffee production increased by almost 12 times in the last one decade. Similar is the case of export. It has been one of the major sources of foreign exchange earnings. In the domestic front, consumption of Nepali ground coffee is not catching up fast mainly due to lack of awareness of the benefits from organic coffee and habit of consuming tea and instant coffee. Concerned authorities need to give attention on this matter for two reasons: first, it saves hard earned foreign currency being spent on instant coffee import and second, we cannot always depend on foreign market for our products.

Coffee cultivation is much more remunerative compared to traditional crops such as maize and millets. It provides 4.3 times higher net return than maize, 3.3 times higher net return than millet cultivation and 1.9 times higher net return than maize and millet combined. Those figures would be much higher if coffee is intercropped with ginger as intercrop and banana as double purpose plant: fruits and shade. Internal rate of return of coffee orchard are estimated at 19 percent, 26.9 percent and 32.5 percent for coffee alone, coffee+ginger and coffee+banana, respectively assuming a 30 years average life of orchard. Since these estimates are based on average figures derived from a survey of farmers including small-scale that kept less than 50 plants, the benefit from commercial orchard would be higher. Another advantage of coffee farming is employment generation. Coffee cherry picking coincides with a season when there is minimal demand of labor for other crops, providing additional job not only to the concerned farmers but also to marginal farmers and land less laborers.

In the background of obvious comparative advantage of coffee cultivation and growing international demand of specialty organic Nepali coffee, it is high time to consider commercialization of this high value commodity from all sectors including government, donors, investors and coffee stakeholders.

13

Year Activities

850 First known discovery of coffee berries. Legend of goat herder Kaldi of Ethiopia who notices goats are friskier after eating red berries of a local shrub. Experiments with the berries himself and begins to feel happier.

1100 The first coffee trees are cultivated on the Arabian peninsula. Coffee is first roasted and boiled by Arabs making "qahwa" --- a beverage made from plants.

1475 The world’s first coffee shop opens in Constantinople. It is followed by the establishment of two coffee houses in 1554.

1600 Coffee enters Europe through the port of Venice. The first coffeehouse opens in Italy in 1654.

1607 Coffee is introduced to the New World by Captain John Smith, founder of Virginia at Jamestown. Some Canadian histori-ans claim it arrived in previously settled Canada.

1652 The first coffeehouse opens in England. Coffeehouses are called "penny universities" (a penny is charged for admission and a cup of coffee). Edward Lloyd's coffeehouse opens in 1688. It eventually becomes Lloyd's of London, the world's best known insurance company. The word “TIPS” is coined in an English coffee house: A sign reading “To Insure Prompt Service” (TIPS) was place by a cup. Those desiring prompt service and better seating threw a coin into a tin.

1672 The opening of the first Parisian cafe dedicated to serving coffee. In 1713, King Louis XIV is presented with a coffee tree. It is believed that sugar was first used as an additive in his court.

1683 The first coffeehouse opens in Vienna. The Turks, defeated in battle, leave sacks of coffee behind.

1690 The Dutch become the first to transport and cultivate coffee commercially. Coffee is smuggled out of the Arab port of Mocha and transported to Ceylon and East Indies for cultivation.

1721 The first coffeehouse opens in Berlin.

1723 Coffee Plants are introduced in the Americas for cultivation. Gabriel de Clieu, a French naval officer, transports a seedling to Martinique. By 1777, 1920 million coffee plants are cultivated on the island.

1727 The Brazilian coffee industry gets its start from seedlings smuggled out of Paris.

1750 One of Europe's first coffeehouses, Cafe Greco, opens in Rome. By 1763, Venice has over 2,000 coffee shops

1822 The prototype of the first espresso machine is created in France.

1885 A process of using natural gas and hot air becomes the most popular method of roasting coffee.

1900 Kaffeeklatsch, afternoon coffee, becomes popular in Germany.

1905 The first commercial espresso machine is manufactured in Italy.

1908 The invention of the worlds first drip coffeemaker. Melitta Bentz makes a filter using blotting paper.

1933 Dr. Ernest Illy develops the first automatic espresso machine.

1938 Nescafé instant coffee is invented by the Nestlé company as it assists the Brazilian government in solving its coffee surplus problem.

1945 Achilles Gaggia perfects the espresso machine with a piston that creates a high pressure extraction to produce a thick layer of crema

1991 Caffè Carissimi Canada, a network of espresso service providers is formed in Canada, modeled after a visit to Franco Carissimi (roaster and equipment manufacturer) in Bergamo Italy. It becomes the fastest growing network of private and independent super automatic machines providers in Canada.

1995 Coffee is the world’s most popular beverage. More than 400 billion cups are consumed each year. It is a world commod-ity that is second only to oil.

annex ii.1: World Coffee History

Source: http://www.koffeekorner.com/koffeehistory.htm

14

Year Activities

1938 Introduction of coffee in Anpchaur, Gulmi district by Mr. Hira Giri from Myanmar.

1968 Seeds from India were distributed by ADB/N in Gulmi, Palpa and Arghakhanchi.

1977 Import of seed from India for distribution.

1981 Initiation of commercial coffee production and nursery establishment at commercial scale. First commercial nursery established by Pareshwor Kharal in Aanpchaur, Gulmi.

1982 First sapling distribution at subsidized rate in Palpa by Tinau Watershed Project of the then SATA

1983 Nepal Coffee Company (NeCCo), first coffee mill in Nepal, established in Manigram, Rupandehi.

1984 Establishment of Coffee Development Centre in Aanpchaur, Gulmi.

1989 Ghimire Nursery and Coffe Production Centre initiated organic coffee production in Palpla, Madan Pokhara.

1990 Group of farmers organized in Madan Pokhara, Palpa and formed Coffee Producer Group Madan Pokhara. (30 Kartik)

1991 Registration of Nepal Coffee Producers Association Palpa in Palpa district.

1993 Formation of district committee of the coffee producers association (DCCPA) in Syangja

Establishment of Tea and Coffee Development Section under the Fruit Development Directorate of the Department of Agriculture

Tea Development Corporation was reorganized into the National Board, coffee was also incorporated and the board renamed as National Tea and Coffee Development Board under the National Tea and Coffee Development Board Act 2049 (1993).

1994 District Coffee Producers' Association (DCPA) Kavre registered with District Administrative Office (DAO).

Formation of DCCPA in Gulmi.

First recorded export of green beans (dry processed) by ECM (coffee collected from NeCCO) to Japan.

1995 Establishment of Nepal Organic Products in Palpa.

Establishment of Plantec Incorporated

DCPA Kaski registered with DAO.

Establishment of Regional office of NTCDB in Palpa.

1996 LISP, in collaboration with coffee producers association, initiated coffee related activities in Palpa

Establishment of Everest Coffee Mill in Kavre.

Organic Certification of coffee under District Cooperative Federation, Gulmi.

1997 First training on organic coffee production (one week long training attended by Leader Farmers from Gorkha, Lamjung, Palpa, Gulmi, Syangja, Kavre, Kaski and Baglung) organized at Madanpokhara, Palpa.

NCPA Palpa decided to go organic with the consent of the coffee producers.

Formation of Central Committee of Nepal Coffee Producers Association (NCPA).

1998 Registration of NCPA as a central association of the coffee producers.

1999 DCCPA Sindhupalchowk formed.

SSMP in collaboration with NCPA initiated coffee related activities in Syangja, Parbat, Kavre and Sindhupalchowk

Introduction of wet processing technology (11 pulpers from India) by AEC

2000 DCCPA Parbat formed

DCCPA Gulmi formed.

Establishment of Highland Coffee Promotion Company in Kathmandu.

2001 Multi stakeholder workshop to explore the potential role of SDC for coffee promotion in Nepal.

2002 Initiation of coffee FFS in Palpa, Parbat, Syangja, Kavre and Sindhupalchowk (LISP/NCPA)

Initiation of Farmer to Farmer Program in Syangja (Winrock/NCPA/DADO).

Registration of DCPA Kavre renewed with District Administrative Office (Chaitra 2058).

Registration of DCPA Syangja with District Administrative Office (Chaitra 2058).

First recorded export of wet processed green beans (estate coffee) by Plantec to UK

annex ii.2: History of development of Coffee Sub-sector in Nepal

15

2003 NTCDB for the first time fixed dry cherry price based on the quality (three grades) of dry cherries.

Introduction of wooden Hand-pulpers from Indonesia by Holland Coffee Inc.

2004 DCPA Lalitpur (Magh 2060), Parbat (Magh 2060), Palpa (Magh 2060), Gulmi (Chitra 2060), Sindhupalchowk (Chaitra 2060), Lamjung, Gorkha, Tanahu, Arghakhanchi registered with respective DAOs.

Coffee policy implemented

NCPA registered as the federation of DCPAs.

Tea and Coffee Development Section was reorganized with increased program thrust on coffee and additional man-power.

2005 First training on internal control system and Internal Inspection conducted at Gulmi by CoPP/HN in collaboration with DCF/G.

2010 Nepal Coffee Logo approved by the Government of Nepal

2011 Nepal Coffee Logo awarded to three traders.

Source: Office record of Coffee Promotion Program, Helvetas Nepal

annex ii.3: Major Coffee Processors and Traders of Nepal, 2009

Processor/Traders Brand Name Market Contact Person Telephone E-mail

Plantec Nepal Incorporated (P) Ltd., Kathmandu, Nepal. URL: www.plantecnepal.com

Jalpa Gold (for regional sales) and Mount Everest Su-preme (for export)

Export and Domes-tic (Roaster)

Mr. Ujjal Rana 977-1-4416327 unicorn@ccsl.com.np

District Coopera-tive Federation Ltd., Coffee Purification Centre , Johang, Gulmi

Gulmi Organic Coffee

Export and Domes-tic (Roaster)

Mr. Pharsu Ram Acharya

977-79-520320 gulmi_coffee@yahoo.com

Royal Everest Coffee Mills, Keshar Mahal, GPO Box: 3479, Kathmandu, Nepal

Everest Filter Coffee Export & Domestic (Roaster & Brewer)

Mr. Phul Kumar Lama

977-1-4280258, Fax: 4410925

information@ever-estcoffee.com

Highland Coffee Promotion Co. Ltd., Narephant, Kotesh-wor, GPO Box: 21037, Kathmandu, Nepal

Him Café Export and Domes-tic (Roaster)

Mr. Krishna Ghimire 977-1-4229796, 977-1-6220474, Fax: 4267239

hcpcl@info.com.np,info@highlandcof-feenepal.com

Buddha Organic Coffee Industries P. Ltd., Kirtipur-2, Kathmandu, Nepal

Buddha Organic Coffee

Export and Domes-tic (Roaster)

Dhruba Raj B.K. 9851081427 buddha.organic@yahoo.com

Kathmandu Interna-tional Coffee House, Himalayan Java, Kathmandu, Nepal

Himalayan Java Domestic (Brewer) Mr. Gagan Pradhan 4416692, 4422519 himalayan-java@hotmail.com

Nepal Organic Coffee Products, Madanpokhara, Palpa, Nepal

Morning Fresh Domestic (Roaster & Brewer)

Mrs. Shanti Devi Ghimire

977-1-6215842, 9851091677

nocp@wlink.com.np

High Mountain Or-ganic Coffee (P) Ltd., Bhaisepati, Saibu-3, Lalitpur, Nepal

Organic Coffee Domestic (Roaster) Min Raj and Ramesh Dulal

9841411344 minrajlcl@wlink.com.np

16

Source: Office record of Coffee Promotion Program, Helvetas, Nepal

Shiva Agro Tour-ism Private Ltd., Pokhara, Nepal

Himal Coffee Domestic (Roaster) Bishwabandhu Pokhrel

9804151503, 9804178930

himalcoffee@yahoo.com

Gaurishankar Organic Coffee Industry, Panchkhal, Kavre

Gaurishankar Coffee Roaster & Brewer Yet Raj Timilsina 9741048014, 6212859

Coffee Cooperative Union, Lalitpur

Lalitpur coffee, Jureli coffee

Export and Domes-tic (Roaster)

Mr. Balbahadur KC Lalitpur-coffee@yahoo.com

ReferencesDhungana, GP, 2068, COFFEE PRASODHAN PRABIDHI, in Tea-Coffee Smarika-2068, National Tea and Coffee Development Board, Kathmandu.

Coffee Promotion Program 2011. Annual Plan 2011. CoPP, Helvetas, Kathmandu.

Coffee Promotion Program 2010. Annual Report 2010. CoPP, Helvetas, Kathmandu.

Agribusiness Promotion and Market Development Directorate, 2010. Cost of Productionand and Marketing Margin of Cereals, Cash crops, Vegetable & Spices Crops, Nepal. DOA, Kathmandu.

Agri-business Promotion & Marketing Development Directorate, 2009. Agricultural Marketing Information Bulletin, Special Issue-2009. APMDD, DOA, Kathmandu.

Agri-business Promotion & Statistic Division, 2010. Statistical Information on Nepalese Agriculture 2009/10. APSD, MOAC, Kathamndu.

National Tea and Coffee Development Board, 2009. Strategic Plan for Moving Forward Nepal’s Coffee Sector for 2009 to 2011. NTCDB, Kathmandu.

COPP, 2010, A Study of Domestic Coffee Market in Nepal, Report prepared by Ashok Poudyal and Rajendra Pandit for Coffee Promotion Program, Helvetas, Nepal, Kathmandu.

COPP, 2009. A Study on Production Cost and Margins of Coffee in Sindhupalchok District, Report prepared by KR Kandel for Coffee Promotion Program (COPP), Helvetas Nepal, Kathmandu.

Kattel, RR, 2009. The impact of coffee production on Nepali smallholders in the value chain, MSc thesis submitted to Leibniz University, Hannover, Germany.

Websiteshttp://en.wikipedia.org/wiki/ economics of coffee

http://www.coffeeresearch.org/coffee/history.htm

http://www.nationalgeographic.com/coffee/frame.html

whttp://www.teacoffee.gov.np/index about coffee.php

17

3. WORKSHOP PAPERS

3.1 Importance of Coffee Sub-Sector AnalysisYogendra K. Karki6

Coffee in Nepal

The importance of agriculture sector in Nepal is reflected by its 35% share to national GDP and absorption of 66% labor force. This sector has been, however, characterized by traditional subsistence orientated farming. Around 47% households have less than 0.5 ha of lands (CBS, 2006). The subsistence orientation of Nepalese farming practice also limited contribution to income growth and poverty reduction. The situation is changing slowly after Agriculture Perspective Plan (APP 1994/95-2014/15) strategy and importance given to commercialization of high value crops by the periodic plans implemented after APP. Coffee is one of the new comers in the list of high value crops. It is being cultivated in 40 mid-hill districts and also slowly expanding to other mid-hill districts recently (Figure1).

China

India

Latest available data shows that 1,650 ha of land was planted with coffee producing 308 mt of green beans in 2009/10. District wise data on coffee area and production is compiled in Table 1.

With the existence of favorable climatic condition together with characteristics of coffee plants that grow well on rainfed uplands less suitable to other crops, the smallholder farmers are being positively attracted toward coffee farming in Nepal. Coffee provides 5 times more income than that of maize and millets and 2-3 times

6. Mr. Yogendra Kumar Karki is the Project Director, Project for Agriculture Commercialization and Trade, Kathmandu, Nepal.

FiguRe 1: Major Coffee Producing Districts

18

more yield than that of any other cash crop (Kattel, 2009). As a result, the area of coffee in Nepal has been increasing. As per official statistics, the area under coffee was 220 ha in 1995/96 which increased to 1650 ha in 2010/11. Similarly, the production of coffee increased several times since then (NTCDB, 2011).

The ecological settings in the Himalayan hills provide Nepalese coffee a unique opportunity to enter international specialty markets. Nepali coffee has been exported as high altitude grown coffee produced by resource poor smallholders under organic conditions. However, coffee being relatively new crop the entire sub-sector chain from certified organic production, through quality processing and handling, to domestic and international marketing is yet to be established properly.

Since coffee in Nepal is planted mostly by resource

poor smallholder farmers, coffee has become source of cash income to fulfill the household requirement. Present trend to expansion in farmers’ level shows that coffee could be one of the high value agricultural produce as a niche product for export. The trend of export has been very impressive. The total export of coffee from Nepal increased to 120 MT in 2009/10 from 5 MT in 1995/96. Coffee has huge opportunity to export in international market, which would provide higher economic benefit to the smallholder.

However, there is a lack of sufficient market information, quality improvement and value additional scheme in Nepali coffee sub-sector. The farmers do not have adequate opportunities to add value. Due to the scattered and remote area of coffee plantation and also insufficient processing facilities, the marketing of coffee is not within the control of farmers.

Districts Area ha) Parchment (mt) Districts Area (ha) Green bean (mt)

Palpa 188 22.7 Ilam 45 15.0

Gulmi 112 45.2 Rasuwa 32 1.0

Arghakhachi 76 23.5 Panchthar 33 7.0

Syangja 230 48.4 Lalitpur 115 47.8

Kaski 95 24.6 Sindhupalchok 87 17.3

Parbat 45 9.5 Kavrepalanchok 130 35.0

Lamjung 149 15.0 Nuwakot 79 30.5

Gorkha 95 5.5 Dhading 35 6.5

Baglung 42 14.7 Makawanpur 25 4.0

Tanahu 52 4.0 Other Districts 47 19.3

Mayagdi 12 2.0

Sankhuwashava 18 3.0 Total 1752 401.5

Source: National Tea and Coffee Development Board, 2069 (Page 79)

Table 1: Area and Production of Coffee in Nepal

Source : Coffee Promotion Programme, Helvetas, 2010

FiguRe 2: Sales of Nepali Coffee in Domestic and International Market Year 2006 to 2010 (in mt)

Domestic Market

International Market

Total

250

200

150

100

50

0

110

179 171

233

177

2006 2007 2008 2009 2010

19

Because coffee is relatively new crop, its trade has not been as common as other crops. A few traders have established linkages with importers in destination countries. Farmers have very few choices of outlets. Even for local markets it is not easy for commoners to enter into market as it needs specific handling/processing techniques to maintain the quality. As a result large volume of coffee is being imported for domestic consumption (Figure 3).

Though the coffee industry has been growing fast, there are several problems. The main problem is market. Because of limited quantity Nepalese coffee has not been able to influence in international market despite being unique in nature. It is very important to understand the stakeholders and their value addition activities to improve the performance of the sub-sector.

Value Chain Concept and its Importance

The value chain concept was developed and popularized in 1985 by Michael Porter in “Competitive Advantage,” a seminal work on the implementation of competitive strategy to achieve superior business performance. Porter (1998) suggested that a set of interrelated generic activities, primary and Support activities, (Figure 4) within the organization add value to the service and product that the organization produces.

The value chain describes the full range of activities, which are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various producer services), delivery to the final consumer, and final disposal after use (Kaplinsky & Morris, 2001).

This idea was built upon the insight that an organization is more than a random compilation

of machinery, equipment, people and money. Only if these things are arranged into systems and systematic activated it will become possible to produce something for which customers are willing to pay a price. Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage.

The importance of value chain analysis is that it can help to assess costs in production /marketing chain that might be reduced or impacted by a change in one of the chain’s processes. By comparing value chain of the competitors, one can often find the areas or links of the chain where others might be more efficient than him that points the direction for improvement.

Structure of Coffee Value Chain in Nepal

Nepal Coffee Producers Association (NCPA) is an umbrella organization of coffee producers. There are 14 District Coffee Producers Association (DCPA) associated with NCPA. The NCPA record shows that 27,730 farmers are cultivating coffee in Nepal, only a few of them in commercial scale. Majority (90%) of those coffee farmers are associated with DCPA. Scattered settlements, inaccessibility of the specific locations and very small scale (less than 50 plants) prevented the rest of the farmers to join DCPA.

Apart from growers there are several individual and organizations involved in coffee value chain, especially in trading, processing and export. The Coffee and Tea Development Section (CTDS) under the Fruit Development Directorate of the Department of Agriculture, National Tea and Coffee Development Board (NTCDB), Nepal Coffee Producers’ Association (NCPA), Coffee Promotion Program of Helvetas Nepal have been assisting coffee production and trade in domestic and export

Source : Coffee Promotion Programme, Helvetas, 2010

Import 56%

Domestic 44%

FiguRe 3: Sources of domestic coffee consumption

Firm Infrastructure

Suup

port

Act

ivity

Primary Activity

Margin

Margin

Human Resource Management

Technical Development

Procurement

Inbound Logisticcs

Outbound Logistics

Marketing & Sales ServicesOperations

FiguRe 4: The Basic Model of Porter’s Value Chain

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ReferencesCBS, 2006, Statistical Year Book of Nepal, Central Bureau of Statistics, Thapathali, Kathmandu.

CoPP 2011. Annual Plan 2011. Coffee Promotion Program, Helvetas, Kathmandu.

CoPP, 2010. Annual Report 2010. Coffee Promotion Progra,m Helvetas, Kathmandu.

Agri-business Promotion & Statistic Division, 2010. Statistical Information on Nepalese Agriculture 2009/10. APSD, MOAC, Kathamndu.

NTCDB, 2009. Strategic Plan for Moving Forward Nepal’s Coffee Sector for 2009 to 2011, National Tea and Coffee Development Board, Kathmandu.

Kaplinsky, R. and Morris M. 2001. A Handbook for Value Chain Research, Report prepared for IDRC.

Kattel, RR, 2009. The impact of coffee production on Nepali smallholders in the value chain, MSc thesis submitted to Leibniz University, Hannover, Germany.

Porter, ME, 1998. Competitive Advantage: Creating and Sustaining Superior Performance. Free Press New York.

markets. At the district level there are 14 District Coffee Producers Association and more are under process of registration. Each of those institutions is involved in promotion and/or value addition in coffee sub-sector through different functions as depicted in Figure 5.

Source: CoPP, 2011

FiguRe 5: Coffee Stakeholders and their Major Functions

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3.2 Present state of coffee production in Nepal: Opportunities and Challenges

bhola Kumar Shrestha 7

AbstractCoffee, the second largest commodity next to petroleum traded in the world market is produced in more than 100 countries. Total production in the world was 128.2 million bags in 2008 ( www.ico.org). Brazil is the world leader in production and America in consumption. Coffee, entered Nepal from Burma in 1939 has been extended to about 40 districts in the mid hills of Nepal with significant potential as export commodity. More than 25000 small growers have been involved in coffee cultivation in about 1630 ha with 343 tons of green bean production in the year 2010. The export of Nepali coffee is in an increasing trend. Importers consider it as a specialty product and demand outstrips supplies. Nepali coffee has specialty quality potential as good as Mexican coffee. Cup testing result showed 82-86 percent specialty quality. Lack of human resources and problems due to diseases such as white stem borer are the area to improve for coffee sub sector development.

IntroductionCoffee, the second largest commodity next to petroleum traded in the world market is produced in more than 100 countries. Of the four main species of coffee, (Arabica, Robusta, Liberica and Excelsa), only Arabica (Coffee Arabica) and Robusta (Coffee canephor) are in consumption where Arabica has 62 percent share in world production. Arabica is the only species grown in Nepal.

Coffee was brought into Nepal by a Monk in around 1939 after almost 14 centuries of its discovery in the world in Ethiopia, Africa. Among the various cash corps cultivated in Nepal, coffee is a high value cash crop commercially grown in the country with environmental importance. Though it is extended to around 40 districts of the mid hill regions of Nepal, 23 districts are growing it on commercial basis. Major coffee producing districts are given in the table below.

Robusta, 38%

Arabica, 62%

Production by type

S.N Dev. Region Districts

1 Eastern Ilam, Udayapur, Sankhuwasabha, Okhaldhunga

2 Central Lalitpur,Sindhupalchowk, Kavrepalanchowk,Dhading,makawanpur, Nuwakot, Rasuwa, Ramechhap

3 Western Arghakhanchi, Gulmi, Palpa, Shyangja, Kaski, Baglung, Parbat, Myagdi, Tanahun, Lamjung, Gorkha

Nepal’s Main Coffee Growing Region

7 Technical Officer, National Tea and Coffee Development Board, New Baneswar, Kathmandu,Nepal, ntcdb@hons.com.np

Among them the top seven district in production of dry parchment on the basis of 2009/10 harvest are presented in the table below. The table below shows that

22

Nearly all coffee is grown by small holders. The number of growers in 2006 was 12000 which has increased to 25000 growers as of 2010. The area of coffee plantation is in increasing trend

Which in 2006 was 1285 ha has reached 1630 hectares in 2010 which indicates an annual rate of increase is about 15 percent. Similarly the production of dry parchment was 256 ton in 2006 which has increased to 429 ton of dry parchment ( 343 ton Green bean) in 2009/10. There is about 25 percent annual rate of increase in production.

Sangjya is the leading district in case of production, and area but Kaski leads in regards of number of coffee growers. Lalitpur has fairly big coffee farmers with an average production of 56.2 Kg green bean per grower. Palpa, Gulmi were the district to initiate coffee production but still lack behind in production.

Districts Farmers Area (Ha)

Green Bean (GB) Production (Kg)

GB Prod./ Farmer (Kg)

Shayangja 3186 230 47229 14.8

Lalitpur 785 99 44119 56.2

Gulmi 2498 112 44001 17.6

Kavre 2565 112 33958 13.2

Nuwakot 1023 77 27750 27.2

Kaski 3392 85 24099 7.1

Palpa 2476 183 19920 8.0

Parchment Production (ton)

Year 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

Pa r c g n e b t (mt)

108 114 156 270 265 334 429

Coffee Farmers

Fiscal Year

Farm

ers

Num

ber

30000

25000

20000

15000

10000

5000

0

Year 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

No of Farmers 7000 10000 12000 15000 18000 21000 25000

Fiscal YearPr

oduc

tion

(Uni

t)

Year 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

Plantation(Ha) 925 1078 1205 13596 14850 1531 1630

Fiscal Year

Are

a in

Hac

Top 7 Districts

Coffee Plantation

23

Country RECM NOCP HCPCL Planteck Gulmi Coop Coffee Coop. Lalitpur

Buddha Organic

Germany 13000 16000 1500

Belgium 1145

Japan 12340 12000

Italy 500

Australia 500 6000

Switzerland 1375

Canada 3200

Korea 310 32000 600 28000

Taiwan 17000 4000

Dubai 500

Jordan 500

Netherlands 500

Portrico 500

UK 700

Internal 6600 6000 17000

Total 30795 6600 38000 38875 40000 16000 11500

Nepali coffee has been exported to more than 15 countries. Export destinations have been increasing every year. Japan, Korea, the USA, Germany, the

Table below shows an overview of the major export destinations with tentative volume by the company.

Market for Nepali coffee has increased both in domestic and international level. Coffee green bean exported in 2005/06 was 1525 Bag (60Kg/ Bag) which in 2009/10 increased to 1867 Bags.

Netherlands, Canada, Belgium are the major countries where coffee is being exported. At this point, Korea is the leading buyer, followed by Japan. Around 60 percent of the production is exported. Sales in the domestic market are also increasing and the present sale is about 40 % of the total production. There are six companies including cooperatives exporting coffee to different destinations.

OpportunitiesThere is a great potentiality for specialty coffee cultivation in the mid hills of Nepal due to suitable climate, topography, soil structure, relative humidity; temperature and rainfall, The ecological settings in the Himalayan hills provide Nepalese coffee an exceptional opportunity to enter international specialty markets.

The Specialty coffee is categorized as organic, High Altitude Grown, One variety, Estate Coffee and De-caffeinated. Nepali coffee consists of all the characters (Organic practice, only Arabica). Some specialty coffee known in the world is listed below:

^ Jamaican Blue mountain

^ Tanjanian Pea Berry

^ Hawain Kona Coffee

^ Ethiopian Yarga Chaphe

Year 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

Export 405 595 1525 1867 2117 1867 2000

25000

20000

15000

10000

5000

0

Expo

rt (B

ag)

Fiscal Year

Coffee Export (Bag)

24

Nepali coffee is considered specialty coffee grown in higher altitude away from the main coffee growing Capricorn and cancer belts (above 23degree latitude) of the world. One of the international buyers disclosed that he is paying almost 50 percent premium price just for origin for Nepali coffee. Nepali coffee stands at 40 -50 percent of specialty coffee standard which can be upgraded to a level of about 80 percent. The team also tested the Nepali coffee and was found Specialty Quality potential as good as Mexican (NTCGDA, 2005). This has been proved with many test results that showed 82-86 percent specialty quality in cup testing.

Moreover the coffee cultivation practices currently used is 70 – 80 percent organic (NTCGDA, 2005). There are strong organized groups of producers at village, districts and national level with more than 25000 coffee growers. The coffee enterprise has also been initiated at different levels with strong network between producers and traders. In addition there are many stakeholders (I/NGOs, NTCDB, CTD etc) supporting in the promotion of coffee production, processing and marketing. Certification Body at local level has already been providing their services on organic certification of coffee for international market. NTCDB has developed 3 years Coffee Development Strategic Plan in collaboration with all stakeholders. NTCDB has also developed and distributed Nepal Coffee LOGO for quality assurance of coffee.

The government policy is also positive towards organic production practices for which the National Guideline for organic agriculture production and processing 2064 (Amendment 2065) has been approved. The government has also allocated budget for organic certification and organic fertilizers.

Coffee involves many steps to bring in to final cup stage (Seed to Cup), thus, creates employment. It also helps in the promotion of agro-ecotourism, import substitution and GDP contribution through export.

ChallengesThere are many challenges in commercialization of coffee. Some of them are list below: The demand exceeds the supply: the major coffee traders in the country reported that there is increased demand of Nepali coffee in the international market but the production volume is very small. It is grown as a subsidiary crop in the marginal land sometimes as curiosity plant The table below shows that 81 percent of the growers has less than 100 plants and produce about 400 Kg of fresh cherry or less than 80 Kg of Green Beans and only one percent grower have more than 500 plants. Thus, increased production to meet the demand needs a strong strategy to expand coffee in all possible plantation sites including community forest.

Growing demand for Nepal Coffee

GDP contribution

Increasing food securing livelihoods of small-holders

Employment opportunities

Agro-eco tourism

Opportunities

Potential in International markets: 1500 tons

Potential in domestic markets: 500 tons

Organic and Fair Trade

Speciality markets

Defined areas of origin branding

Existing government policies on organic agriculture

Agro-ecological conditions favourable for organic production

Producers in favour of going organic

Niche Markets

Favourable conditions for expanding organic coffee production

Import substitution (Current value of imports 50 millions NRs or around 0.75 million USD)

Opportunities for the Development of Nepal’s Coffee Sub-Sector

25

Size of coffee Plant

<50 51-100 1 0 1 -500

>500

% of HHs 39 42 17 1Big Farmers in Lalitpur – 12 percent; Gulmi, Palpa, Sangjya, Kaski and Kavre – 1 percent

Maintenance of quality: Nepalese coffee, though consists of specialty quality, has faced problem to maintain its inherent quality due to poor processing facilities. Pulping, fermentation and drying facilities at farmers’ field level would greatly help maintain the quality. Many countries have shifted from conventional coffee to organic production practices with huge government support. Though Nepal has initiated organic support program, it is very small to compete in the international market.

Limited technical manpower: There is shortage of technical manpower to support coffee. Technical knowledge required for production, harvesting, value addition etc is limited which has hampered the entire coffee sector.

Limited research and development activities: There are very limited research initiatives on coffee variety, fertility and many others for which NARC and other related organisations role has to be increased.

Delay in payment: Farmers were reluctant to increase the plantation as they need to wait more than six month to get the payment for the coffee cherry. Creation of Coffee development fund could be helpful to encourage small farmers to increase the plantation.

Lack of required coordination: There are many organizations working for coffee with little or paper coordination which need to establish a functional coordination to bring a synergy in coffee sub sector development.

Diseases: Coffee White Stem Borer has become a serious threat to increase the production as many coffee plantations have been wiped out due to its attack.

26

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3.3 g]kfnL skmL] lgof{tsf ;+efjgf tyf r'gf}tLljdns'df/ g]kfn8

8 lgb]{zs, Jofkf/ tyf lgsf;L k|j4{g s]Gb|

27

3.4 Comments on “Export Potentials and Constraints of Nepalese Coffee”

Kamal Raj gautam9

First off all I will like to thank PACT team for providing me the opportunity to participate in this valuable coffee sub-sector workshop for Nepal. I hope while participating in this event will enhance my knowledge in this sub sector. Here I have tried to analyze the paper in the context of value chain as an actor-oriented approach and is highly effective in tracing product flows, showing the value-adding stages, identifying key actors in the chain and assessing the relationships among them.

The paper presented by the writer even though the title is not the same as provided for him, but during his presentation he has justified why he has refined the title on which I’m convinced. Considering this basic constraint the specific findings and comments are:

Mr. Nepal has clearly mentioned the role of Coffee in the world market and in Nepalese context due to exposure of Nepalese people with out-side world; its internal consumption is also in increasing trend. By stating this point he is trying to indicate the increment in the internal demand as well as international market. In the same way he has tried to identify the factors playing role for the attraction of pesticide free coffee i.e. organic coffee demand.

Here, I think he has presented the strength of Nepalese coffee product which is one of the major aspects of the coffee sub-sector. In the same way he has presented the environmental and health issues crucial for increasing the demand of coffee in internal and external markets. By analyzing these aspects author has tried to show the opportunities for Nepalese coffee. In this context if he had added the different stakeholder i.e. Local/Sub-national/National supporting institutions that play key role for its production and promotion including the coffee farmers and nurseries then it would have added value to his paper.

In the aspect of trader, there is an encouraging level of traders’ interest and participation despite limited effort to promote export. If he had analyzed the weakness of Nepalese coffee industry, it might have provided crucial points to support trade facilitation for the end markets. Whereas in this regard he has tried to mention quantity, production – quality, primary-secondary processing- well managed promotion activities in world market, Trade –guaranteed qualitative and quantitative supply as of importing countries demand, End Markets as sub-sector analysis.

Thus, I think paper presenter has tried to analyses the coffee sub-sector as aimed by the project for its promotion.

Lastly I would like to thank paper writer for his effort to present such an informative and synthesized paper.

9 Programme Director, Agribusiness Promotion and Market Development Directorate, Department of Agriculture, Harihar Bhawan, Lalitpur, Nepal, krgkrishi@yahoo.com

28

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$ nIoo; ;+:yfsf] d'Vo nIo skmL s[ifsx?sf] xs, lxt ;'/lIft ub}{ g]kfnL skmLsf] u'0f:t/ ;'wf/ u/L jhf/sf] dfu cg';f/ pTkfbg ug]{ lgltut Joj:yf u/L Joj;foLs/0f ub}{ lbuf] / ;+:yfut u/fpg k'j{wf/ ljsf;, ;+:yfut ljsf;, h}ljs (organic) k|ljlwsf] ljsf; Pj+ k|j4{g ug]{, /x]sf] 5 . o;sf nfuL pTkfbg j[l4 / jhf/ k|j4{g ug{ ls;fg ;d'xx? k|f/lDes

10 cWoIf, g]kfn skmL Joj;foL dxf;+3

29

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Table 1: Coffee Production and Plantation in Different Years

Fiscal Year Plantation Area (Ha)

Production (Mt.) Dry Cherry

Parchemoant Prod. (Mt.)

2051/052 135.70 12.95

2052/053 220.30 29.20

2053/054 259.00 37.35

2054/055 272.00 55.90

2055/056 277.10 44.50

2056/057 314.30 72.40

2057/058 424.00 88.70

2058/059 596.00 139.20

2059/060 764.00 139.20

2060/061 952.20 217.60

2061/062 1078 250

2062/063 1285 391

2063/064 1295.5 270

2064/065 11450 265

2065/066 1531 334

2066/067 1630 417

;|f]tM NCPA

30

Table 2: Coffee Plantation Area & Production 2009/10 (2066/67)

Table 3: Export and Import of coffee

S.N. District Total Area Ha Green Bean Production (Mt.)

1 Palpa 183 19.9

2 Gulmi 112 44.1

3 Arghakhachi 76 13

4 Syangja 230 47.2

5 Kaski 85 24

6 Parbat 45 9.5

7 Lamjung 149 14.5

8 Gorkha 95 5

9 Banlunga 39 12

10 Tanahu 52 4

11 Mayagdi 12 2

12 Sankhuwashava 18 2

13 Ilam 42 10

14 Khotang 7 2

15 Jhapa

16 Panchthar 12 4.5

17 Udyapur 5 2

18 Lalitpur 99 44

19 Sindhupalchok 85 15.8

20 Kavrepalanchok 112 33.9

21 Nuwakot 77 27.7

22 Dhading 30 4

23 Makawanpur 25 2

24 Other Districts 40 12

25 Total 1630 343

Fiscal year Export (Green bean) Import

Quantity (kg) Value (Rs) Quantity (kg) Value (Rs)

2051/052 14660 1643015 1823200

2052/053 5040 637560 23832000

2053/054 4245 6022569 15316000

2054/055 2000 318000 16264000

2055/056 3160 634000 32741000

2056/057 4254 1415000 36437000

2057/058 3677 672914 43200000

2058/059 9075 2455250 4621057

2059/060 16861 5204526 141968

2060/061 24295 5946890 409972

2061/062 65000 1966000 168841

2062/063 91500 27678000 2265000

2063/064 100180 40117000 56000000

2064/065 112000 107800000 64481000

2065/066 112000 84400000

2066/067 120000 5440000

& cj;/

;j}eGbf a9L cS;Lhg h]g]/]6 ug]{ lkknsf] ?vnfO{ dflgG5 , Tof] h:t} skmLsf ?vaf6 cS;Lhg h]g]/]6 x'G5 . h:t} ! x]S6/ skmLsf] ju}rfaf6 k|ltlbg *@ kf}08 cS;Lhg h]g]/]6 ub{5 . To;}n] jftfj/0f cg's'n, u|Lg8n/, hnjfo" kl/jt{g cg's"n e"ldsf, sfj{g Jofkf/ /fi6«nfO{ 7"nf] of]ubfg k'/\ofpg] . cGt/fli6«o jhf/df skmL kf/vLx?df ljlzi7 :jfb / k|sf/sf] skmL vfg] k|rng j9\bf] 5 . hdfO{sfsf] æANo" dfp06]g skmLÆ sf] :yflkt jhf/nfO{ æg]kfnL skmLn] cg';/0f ug{' kg]{ cj:yf oxfsf] ljz]if k|sf/sf] lEfGg xfjfkfgL lxdfn, e"–w/ftnsf cj;/ ;[hgf ePsf] 5 .

* ;d:of tyf ;dfWffgsf pkfox?

• pTkfbg If]qlj:tf/, k|zf]wg, cg'udg

• Organic dn÷ljiffbLsf] Joj:yf

• ICS (cfGt/Ls lgoGq0f k|0ffnL_ cuf{gLs ;l6{lkms];g Joj:yf

• g;{/L k|df0fLs/0f / /lh:6«];gsf] Joj:yf

• prfO{ kNkLË s]Gb| k|ljlwsf] Joj:yf

• :6]l/h, kNkLË u'0f:t/ -kNk/ ;+rfns_ lj?jfnfO{ vfBtTJf Joj:yfkg cg'udg

• ;+sng tyf e08f/0f Joj:yf

• ;fdfu|L cfk"tL{

• ahf/ cg';f/ k|zf]wg k|ljlw

• c:j:Yo k|lt:kwf{sf] cg'udg÷lgoGq0f

• Sjf/]G6fO{g Joj:yfsf] ;/nLs/0f / cg'udg

• Hulling , granding coc nufPtsf] Joj:yf

• skmLsf] u'0f:t/ cup-testing rosting ;+jlGw Joj:yf / cg'udg

• lglirt lgsfo -skmL lglt / (NCPA) sf] cg'dltaf6 dfq Joj;fosf] Joj:yf / cg'udg

• skmL nf]uf]sf] Joj:yf / cg'udg

• ;j} If]qsf] ;dGjo / ;xsfo{ .

31

3.6 Coffee Research and Development in NepalRam bahadur KC and Krishna bahadur Thapa 11

Introduction

Coffee (Coffea spp) is newly introduced crop for Nepal. According to past evidence Sadhu Hira Giri introduced and propagated some seeds of coffee in Gulmi Anapchaur in 1938 (1995 BS). It means Gulmi was first avenue district of coffee plantation in Nepal. It is cash crop that is grown commercially in 23 districts. Most of the coffee grown area are confined in Western and Central Development Region mid hills of Nepal.

Botanically, coffee is a perennial shrub which belongs to the genus Coffea of the family Rubiaceae. There are more than 70 species under the genus Coffea, most of which are native of Africa (Coffee guide, 2000). However, four species under Coffea are economically important. These are arabica, liberica, excelsa and canephora (robusta). The Most popular coffee species grown in Nepal is Coffea Arabica which accepted as high quality coffee in the world. It is tetraploid species with 2n=44 chromosomes and self fertile in nature (Coffee guide, 2000). Different varieties/collection of Coffea arabica are collected and cultivated in Nepal so far has beeb n presented in Table 4.

Potentiality of Coffee in NepalCoffee is second largest traded commodity of world after petroleum products. Climatically and geo-physically the coffee grown at higher altitude (more than 800 m) with cool climate is recognized as specialty coffee in the world. Nepal has special production niche as it poses 42% of land lies in mid hill situation (Manandhar and Shakya, 1996). Climate, soil and altitude are the major factor to grow the production of quality coffee. Furthermore, unemployment is the main constrain in rural areas. So coffee farming would be the potential alternative way to mitigate such problem. The demand of organically grown coffee product is increasing day by day in national and international market. It is reported as environment/bird friendly plant which helps to reduce soil erosion and fit in three tier plantation system.

Coffee Development Process at a glance ^ In the beginning coffee was introduced firstly in 1938 (1995 BS)

^ In 2042, establishment of Coffee Development Center for work carried out coffee development and training

^ Establishment of Nepal Coffee Company in 1983 (2040 BS), at Manigram, Rupendehi

^ Coffee growing got accelerated when coffee grower established the ‘Nepal Coffee Producer Association’ (NCPA) in 1992 (2048)BS

^ National Tea and Coffee Development Board was established in 1993 (2050 BS) for coffee promotion in Nepal

^ Formulation and Implementation of National Coffee Policy was in 2003 (2060 BS)

11 Senior scientist, ARS (Hort.) Malepatan, Pokhara

32

Coffee Research in Nepal

^ By the directive of late king Birendra, Coffee Development Center was established in 2042 at Anapchaur VDC of for the purpose of research and training on coffee.

^ Coffee varieties were introduced from International Coffee Research Center, Brazil at ARS, Malepatan during the FY 2051/52 by LARC (Now RARS, Lumle). Varieties were Bourbon Amarillo, Bourbon Vermelo, Catimore, Catuai Amarillo, Catuai Vermello, Catura Amarillo, Catura Vermello Mundo Novo (Chaudhary 2009).

^ Some seeds of coffee varieties such as ‘Pacas’, ‘Tekisic’, ‘Pacamara’, ‘Catisic’ was introduced from L-Salvadeur and distributed to different agri-farms by Winrock International in 2054 BS.

^ In 2061 NARC, DOA, Nepal Tree Crop Global Development Alliance and Winrock International planted coffee varieties to study varietal performance in Panchkhal farm.

^ Study in relation to coffee entitled ‘Development of Eco-friendly Management Practices for Coffee Stem Borer’ was carried out by the ARS Malepatan during FY 2064/65 and 2065/66.

1st category (>100 ha) 3rd catagori (>25 ha)

District Area District Area

Syangja, 221 Parbat 46

Palpa 196 Ilam 45

Lamjung, 159 Baglung 38

Gulmi 118 4th catagori (<25 ha)

Kavre 118 Makawanpur 20

Lalitpur 104 Sankhuwasava 19

2nd catagori (>50 ha) Myagdi 11

Gorkha 97 Panchthar 10

Kaski 86 Khotang 8

Sindhupalchok 86 Udayapur 3

Arghakhanchi 80 Other districts are

Nuwakot 67 Rasuwa, Okhaldhunga, Dhading, Ramechhap, Ilam

Tanahu 54

Total area: 1650 ha

Involve farm family 21400

Table 1: Distribution of coffee growing areas in Nepal

Source: NTCDB

^ An experiment entitled ‘Development of Improved and Sustainable Package of Production Technology for Commercialization of Coffee Cultivation’ was started in ARS, Malepatan during the FY 2060/61.

^ Similarly in 2062 BS another research project on coffee entitled ‘Selection of Suitable Genotypes of Variety grown under different Organic Means’ for better quality coffee production was initiated at ARS, Malepatan condition in collaboration between NARC and NTCDB.

Other research activities on progress under ARS (Hort), Malepatan

^ Varietal physio-morphological characterization of coffee

^ Varietal evaluation in different elevation (800, 1000, 1200, 1400 masl)

^ Shade management on coffee

^ Collection, conservation and evaluation of coffee genotypes

^ Study on quality brandy preparation from fresh cherry pulp

^ Designing of low cost parchment drying house

^ Technical backstopping to the clients

^ Publications

Research Findings so far

1. Performance evaluation of coffee geno-types in Western hills of Nepal

Super imposed experiment was conducted at ARS Malepatan in eight years old orchard under Siris (Albizia sp.) shade condition. Experiment was laid out in RCB design replicated three times. The highest mean marketable fresh cherry yield (4.32 kg /plant) produced by genotypes ‘Caturra Amarillo’ followed by Bourbon Vermelo (4.18 kg/plant). In case of caffeine percent genotype Mundo Novo contained higher caffeine (1.578%) and the lowest in Caturra Amarrillo (1.324%).

2. Development of improved and sustaina-ble package of production technology for commercialization of coffee cultivation

In coffee, the combination of double dose of farmyard manure (@10 t ha-1) and single dose of chemical fertilizer (NPK @ 100:30:60 kg ha-1, respectively) found to be most suited to grasp the higher yield of fresh

33

Treatment/Variety Pacamara Pacas Tekisic Chhetra Deep Mean

FYM @ 10 t ha-1 1212.5 1750.5 2060.8 2320.0 1835.95

Pig litter @ 10 t ha-1 1432.5 1468.0 2593.0 2509.5 2000.752

M. oilcake @2.5 t ha-1 1547.3 1547.5 3359.8 2292.5 2186.781

Poultry manure @ 5 t ha-1 1325.0 1541.5 2860.5 1328.8 1763.95L

Mean 1379.33L 1576.88 2718.531 2112.72 GM= 1946.80

Table 2: Fresh cherry yield of coffee (kg ha-1), 2066 (4th year plant age)

Note: 1= Maximum value, 2=Second higher value, L= Minimum value, GM= grand mean

cherry (988.2 kg ha-1) of coffee as compared to either single dose of farmyard manure only or chemical fertilizer only.

The maximum yield of fresh cherry (1228.45 kg ha-1) was observed in variety ‘Yellow Caturra’ and followed by ‘Selection-10’ (758.80 kg ha-1).

3. Selection of suitable variety of coffee grown under different organic means for better quality and production at malepatan condition

This project was started in collaboration between ARS, Malepatan and NTCDB, Regional Office at Malepatan during Mangsir 2062 BS. The finding of the is presented in Table 2

4. Loss assessment survey and pest status monitoring in Syangja and Kaski district

White stem borer is very challenging coffee insect now a days in Nepal. Usually orchard over six to seven years old, poor shade management and careless condition are found more conducive to the insects. Following observations were concluded from the conduction of the survey in the following sites.

^ At Bahakot, Syangja (1100-1300m), mostly 3-4 years old orchard were observed free from white stember borer (WSB).

^ At Karendada, Syangja (1100m), the plant lost from the insect was observed to be 25%.

^ There was about 20 per cent plant loss due to WSB at Malunga, Syangja (700 m).

^ In kaski - Deep, Puranchaur, Begnas area no infestation was observed

^ Insect traps installed by Nepal-SIMI in Arjun Chaupari and Malunga Syangja found ineffective to trap the adult WSB.

5. Varietal physio-morphological characterization

For physio-morphological and genetically variability to evaluate varietal similarities and dissimilarities characterization (both quantitative and qualitative) was initiated in some varieties/collections at ARS, Malepatan.

6. Varietal evaluation in different eleva-tions (800, 1000, 1200, 1400 masl)

Different varieties/collections are cultivated by many farmers in different part of the country. However suitable cultivar for specific location is not identified so far. In Nepal several cultivars are available and

farmers themselves have been cultivating saplings varieties distributed by the nursery grower in their locality. Therefore different varieties/collections of coffee have been planted in different locations of the western mid hills to identify suitable cultivar of better quality and production.

Location Altitude (masl)

Location Altitude (masl)

ARS ( Hort), Malepatan

850 Lewade, kaski 1200

Sumrekhola (Syangja)

900-1100 Dhikurpokhari, Kaski

1400

Armala, kaski 1200 Bhadaure Tamangi, Kaski

1400

Pumdibhumdi, Kaski

1400

Table 3: Different locations of coffee plantation under ARS, command area

34

clean them and dry them to obtain the marketable products, green or clean coffee. According to Wrigley 1988, the harvested fruit of Arabica coffee consists roughly of

39 percent pulp, 17 percent mucilage, 7 percent parchment husk, 37 percent of green bean

The following activities were carried out at the Station for postharvest processing of coffee.

Study on quality of coffee brandy prepared from fresh coffee cherry pulp

Last year (2066), coffee Brandy was prepared from fresh cherry pulp and its contents analyzed. The content of pH, alcohol, amyl alcohol (higher alcohol) total solid, lead, copper, iron, and methanol on Brandy was tested. Among them methanol content was <0.01 and lead was 0.77 mg/l. Both need to be free for human consumption, so this product was not recommended for human use. It was doubt on contamination from materials used during preparation. In this year the coffee Brandy was prepared with high precaution and will be analyzed for confirmation to human use. Similarly a local type plastic solar dryer was designed and developed by the Station. It helps to dry the parchment in faster rate than the normal sun drying in winter and may help in maintaining the quality of the product.

Publications

ARS (Hort.) is publishing research findings regularly on coffee to share ideas and views among the concerned stakeholders.

^ Annual Technical Report 2007/08

^ Annual Technical Report 2008/09

^ Annual Technical Reports 2009/10

^ Selection of suitable variety of coffee grown under different organic means for better quality and production at Malpatan condition. Annual progress report (I, II, III, IV) from FY 2006/07 to 2009/010. Jointly published by ARS (Hort.) and NTCDB.

^ Research Attempt coffee farming. 2067. Published by NARC/ARS (Horticulture), Malepatan, Pokhara (Nepali version).

7. Shade Management on Coffee

Coffee is shade loving plant. It requires at least 60% shade for better quality and production. In Pokhara, winter temperature during December-January drops down to 3-4 0C and frost appears occasionally. An experiment showed that in this situation the survival rate of coffee planted under non shade condition was observed to be almost nil. When two or more different plant species were grown in same land there will be competition in so many growth factors. Therefore, it is important to study about the suitable shade tree for better coffee production at ARS Malepatan under mid hill domain of western hills of Nepal. Following shade provider plants trees are planted for the purpose such as Litchi (Litchi sinensis), Epil-Epil, Siris (Albizia sp), Macadamianut (Macadamia sps), Pumelo (Citrus grandis Osbeck), Guava (Psidium guajava).

7. Collection, Conservation and Evaluation of Coffee Genotypes

As a leading centre of coffee research system under NARC, ARS, Malepatan collected and maintained

following genotypes at the station for further research and together maintained a field gene bank. Station requested all concerned stakeholders involved in coffee promotion in Nepal to provide coffee genotypes available them to ARS, Malepatan to conserve as a future assets.

8. Postharvest study on coffee

The coffee cherry as it is harvested cannot be used. It is necessary to remove the beans from the cherries,

S.N. Varieties/Collection S.N. Varieties/Collection

01 Arghakhanchi Local 13 Indo Timtim

02 Bourbon Amarillo, 14 Kaski Local

03 Bourbon Vermelo 15 Mundo Nuvo

04 Catisic 16 Pacas

05 Catimore, 17 Pacamara

06 Catuai Amarillo 18 Puranchaur Local

07 Catuai Vermello 19 Syangja Special

08 Catura Amarillo 20 Selection-10

09 Catura Vermello 21 Sanroman

10 Chhetra Deep 22 Tekisic

11 Hawai Kuna 23 Yellow Caturra

12 Indonesia

Table 4: Collection of coffee genotypes in ARS, (Hort.) Malepatan, Pokhara

35

References:

Chaudhary J.N., Y. R. Bhusal, C. Adhikari andR.P. Yadav. 2009. Performance evaluation of coffee genotypes in western hills of Nepal. Proceedings of the "Fifth National Seminar on Horticulture held on 9th – 10th June, 2008 at Kathmandu, jointly published by NAST, NARC and NHS.

Coffee Guide. 2000. Central Coffee Research Institute, Coffee Research Station, Chikmaglur, Karnataka, India.

Manandhar D. N. and Deep M. Shakya. 1996. Climate and Crops of Nepal. NARC. Swiss Agency for Development and Cooperation , Nepal.

Thapa, K.B. ; R.B KC, Y. R. Bhusal, and Pathak, H.P 2009. Effect of different organic and inorganic fertilizer combinations on plant growth of coffee. Proceedings of the "Fifth National Seminar on Horticulture held on 9th – 10th June, 2008 at Kathmandu, jointly published by NAST, NARC and NHS.

Thapa, K.B., R.B KC, R. Chaudhary, Y.R. Bhusal, and D.D. Paudel 2010, Selection of suitable variety of coffee grown under different organic means for better quality and production at Malepatan condition. Annual progress report (IV), FY 2009/010, jointly published by ARS (Hort.), NARC and NTCDB, Regional Office, Malepatan, Pokhara.

Thapa, K.B., RB KC, and D.D. Paudel. 2067. Attempt on Coffee Research. NARC/ARS (Horticulture), Malepatan, Pokhara.

Thapa, K.B., RB KC, and D.D. Paudel 2067. Researc attempts on coffee farming NARC/ARS (Horticulture), Malepatan, Pokhara.

Wrigley G. 1988. Coffee. John Wiley and Sons Inc. New York, USA.

36

This paper on coffee research and development covers many aspects of coffee research and development history of coffee, involvement of farm families, area, production, processing, varietals trials in different elevations, publications on coffee. We have to appreciate the efforts made by Malepatan based research on coffee and the other line agencies including private sectors. With limited budget and infrastructures like laboratory facilities, this much output is appreciable.

Manpower generation

As coffee is a new technology for Nepal, the key persons involved in coffee research and development still lack basic exposure on coffee research made so far by the developed countries. Such exposure can guide key people in the right way while formulating the research and development program on coffee. No one from the research center nor from Coffee & Tea Development Section have any Indian or foreign exposure on coffee

Nutrient Management

Our coffee is organic coffee and therefore we should be able to recommend organic ways to supply fertilizers for coffee. In Indian conditions, 6000 kg fresh cherry give 1000 kg green bean which is extracted In India. It was found that for every 6,000 kg of ripe coffee cherry (1 MT of green bean) removed from the plants, approximately 40 kg nitrogen (N), 2.2 kg phosphorus (P) and 53 kg potassium (K) must be replaced yearly. (www.fao.org/docrep/008/ae938e/ae938e00.htm). The byproduct like coffee pulp can be good source of organic fertilizer. We cannot rely on Indian or other organic fertilizer without authorized tests. To ensure good coffee production, reliable supply of organic fertilizer must be ensured. Our research must take this point into consideration. Strong integration of livestock with coffee is essential to ensure organic fertilizer for coffee plant.

Shade management

Coffee is shade loving plant; there are many shades that are in practice in Nepal and other countries. The shade should be friendly to coffee and income generating. There are two types of shade a) Temporary b) Permanent. Our research has to emphasis on finding which particular shade for any specific elevation and posture will be economically good. We can review Indian and Myanmar practices and replicate them in our conditions.

Variety Selection

World's most costly coffee is from blue mountain of Jamaica. There is a coffee variety named Blue Mountain. We have to keep in mind on such things while selecting coffee variety. In coffee, cup quality is more important than quantity. In yellow catura of coffee, two picking is sufficient to harvest coffee, tekasic may need four pickings. We have to judge them from labor cost point of view. Performance of the variety may not be always true for all areas; the pacamara (most popular variety of Alsalvador) is poor for soil condition of Pokhara.

3.7 Comment on “Coffee Research and Development in Nepal”

Surendra P Rijal 12

12S CT D O, CTDS.

37

Quality Improvement

Single variety, single estate grown, organically grown, decaffeinated coffee, high elevation coffee fetch better price in the international market. Our research and development must take these points into consideration. Myanmar is entertaining such standards for quality improvement on coffee. Our research and development should take these points into consideration. How far we can practice them? How far our manpower and laboratory facility permit them to practice? These points are in floor for discussions.

A. Minimum standards for exportable coffee

1. Exporting Members shall not export coffee that:

(a) for Arabica, has in excess of 86 defects per 300 g sample (New York green coffee classification/Brazilian method, or equivalent); and, for Robusta, has in excess of 150 defects per 300 g (Vietnam, Indonesia, or equivalent);

(b) for both Arabica and Robusta, has a moisture content below 8 percent or in excess of 12.5 percent, measured using the ISO 6673 method.

2. Where moisture percentages below 12.5 percent are currently being achieved, members shall endeavor to ensure that these are maintained or decreased.

3. Exceptions to the 12.5 percent maximum moisture content shall be permitted for specialty coffees that traditionally have high moisture content, e.g. Indian Monsoonal coffees. Such coffees shall be clearly identified by a specific grade nomenclature.

B. Certificates of Origin

4. Exporting members shall only issue ICO Certificates of Origin for consignments of coffee

that meet both the minimum defect and moisture standards.

C. Cooperation by importing Members in verifying compliance

5. Importing members shall make their best endeavors to support the objectives of the Program.

D. Measures to be taken in cases of non-compliance

6. If coffee failing to comply with the above standards is identified through the normal course of trade, importing members shall endeavor to notify the ICO of such shipments. As an example of what is meant by 'equivalent', 20 broken beans shall be considered as equal to 1 defect rather than 5 broken beans per defect in the case of coffees containing large numbers of broken beans arising naturally, as a feature of a particular cultivar. Such coffees shall be clearly identified by a specific grade nomenclature.

E. Measures for controlling the application of the standards in exporting Member coun-tries

7. Each exporting Member shall develop and implement national measures which ensure that no exports of green coffee fail to meet exportable standards.

8. Exporting Members shall also endeavor to ensure that sub-standard green coffee is not included in the manufacture of processed coffee (roasted and soluble) that is exported.

F Other measures

Alternative uses

9. Members shall seek immediately to identify sources of external finance from appropriate institutions for studies and measures that support the implementation of the program and, in particular, efforts to identify and put into practice cost-effective alternative uses for coffee of non- exportable quality.

Labeling

10. All coffee supplied for export shall be labeled to indicate that it is coffee as defined in Articles 2 and 36 of the International Coffee Agreement 2001. Coffee by-products shall be labeled as such.

Reporting

11. Members shall report to the Council on the measures they have taken to implement this Resolution and inform the Council of any difficulties in this connection. If such be the case the Council, if so requested by a Member, may agree to give that Member time to resolve such difficulties.

38

3.8 Activities and achievements of COPP and its present activities in support of the commercialization of coffee sub-sector

Prachanda Man Shrestha13 , badri Prasad bastakoti14

Background

Among various potential cash crops for commercialization by small holder farmers in the mountains, coffee has proven to have a great potential to provide farmers a good on-farm employment and income generation opportunities, and is well adapted to the climatic conditions especially in the mid-hills at the altitude range of 800 m to 1600 m for production of superior quality highland specialty coffee. The ease of production of coffee and low input requirements means that even marginal lands are suitable for the cultivation of coffee and even small holder farmers can grow coffee in their existing farming systems with additional benefit of soil conservation and positive environmental impact.

Despite these benefits, coffee has so far received little attention from Government and other development agencies. There is no clear policy support for the production, processing and marketing of coffee in the country. However, there have been fragmented efforts to support the coffee sub-sector by motivating farmers to grow coffee for domestic as well as international market. The major bottleneck in the promotion of coffee in Nepal is the lack of resources to continue the coffee promotion programme in the expanded area and continue the initiatives of Helvetas Nepal to strengthen the producers' association to produce and market the coffee certified as organic and fair-trade and to establish the coffee sub-sector approach through the coordination. There is also need to support the government develop human resources and improve collaboration and coordination among coffee stakeholders including traders.

According to National Tea and Coffee Development Board (NTCDB) there are 32 districts producing coffee where production data is available. Fourteen districts have established District Coffee Producer Association (DCPA) to support coffee producer groups in the areas of technology dissemination and organizational capacity building. Five Coffee Cooperative Unions (CCU) have been established in Lalitpur, Syangja, Gorkha, Lamjung and Tanahu. CCUs are the federations of primary coffee cooperatives (PCC) at the village level with the defined role of collecting coffee from the farmers and processing it to produce dry parchment. Similarly, CCU’s role is to collect dry parchment from the PCCs and depending on the capacity, either process it to make green bean for marketing or supply dry parchment to the traders.

It is anticipated that Project for Agriculture Commercialization & Trade (PACT) will have significant role in developing the coffee sub-sector since the project has included coffee as one of the major commodities for intervention.

Role of Helvetas in Coffee Sub-Sector Development

Realizing the need of systematic support on coffee production, processing, marketing and organizational capacity building of the producer groups and their associations to develop sustainable coffee value chain for the benefit of

This paper presents a short overview of the efforts made by Coffee promotion Program (CoPP) Helvetas Nepal for the commercialization of coffee sub sector in Nepal. Also, the paper highlights the key achievements, opportunities and problems faced by this sub sector.

13 Team Leader, Coffee Promotion Programme, Helvetas Nepal14 Senior Programme Officer, Coffee Promotion Programme, Helvetas Nepal

39

the small holder farmers, Helvetas Nepal has been implementing Coffee Promotion Programme since 2003.

The programme established a system of group approach for coffee production and processing at the village level and disseminated organic production and processing technology for the production of high quality coffee.

The Government, and more specifically the Ministry of Agriculture Development (MoAC) and the Tea and Coffee Development Board (NTCDB) have recognized the potential role of coffee for improving the livelihood of many smallholder farmers and for developing a new cash crop that can fetch foreign currency significantly. Over the past years the Government has cooperated closely with Helvetas in the development of the coffee sub-sector. With the support from Helvetas the Board established the Coffee Sub-Sector Working Group bringing together the key stakeholders such as the Ministry of Agriculture Development, the National Agricultural Research Council, representatives of the group of coffee traders, representatives of producers. In 2008 the Working Group developed strategies for the development of the coffee sector.

The Coffee Promotion Programme (CoPP) has been able to disseminate organic coffee production and processing technology to the small holder farmers to capacitate them for conversion to organic production and processing. The producers' associations at the district and central level are strengthened and formation of cooperatives are on going task with the Associations' own initiative for marketing of coffee to benefit the producer members.

Major achievements

Establishment of a Coffee Sub-Sector Working Group

^ Development of a strategic plan for the sub-sector by the Working Group

^ Total production of coffee green beans in nine CoPP districts increased from 191 mt in 2009 to 247 mt in 2010. Where as, coffee production within the coffee producer groups increased from 156 mt in 2009 to 218 mt in 2010.

^ Percentage of wet processed coffee increased from 90% in 2008/09 to 93% in 2009/10, thus increasing the quality of coffee.

^ Farmers’ cooperative of Lalitpur established central processing unit with facilities of hulling, grading, roasting, grinding and

packaging. Established linkage with fair-trade buyers. First shipment by coffee producers’ cooperative sent in 2010

^ Number of Primary Coffee Cooperatives registered increased from 21 to 36 and members with 1000 to 1741 in 2009 and 2010 respectively.

^ Drafted operating manual for organic operator on organic production and certification of coffee grown by smallholder farmer groups in Nepal

^ Traceability system for organic coffee handling developed and piloted

Opportunities for Coffee in Nepal

High quality coffee can be produced in Nepal

^ Generates significant income for farm household (upland)

^ Organic production methods compatible with existing farming practices (No yield reduction in conversion)

^ Easy integration of coffee into existing farming systems

^ Coffee producers are organized at village,

Indicators Year 2003 Year 2010

Number of Coffee Producer Groups

221 624

Number of CPG Member Households

6291 13216

Area Under Coffee (hectare) 326 595

Area Under Coffee Within CPGs (hectare)

NA 556

Coffee Production (metric ton) 38 247

Coffee Production Within CPG NA 218

Total Coffee Sales in Domestic Market (metric ton)

16 88

Total Coffee Sales in Interna-tional Market (mt)

21 145

Productivity (kg/ha green beans)

488 658

Number of Primary Coffee Cooperatives

None 36

Number of District Level Coffee Cooperative Unions

None 2

Number of Cooperative Members

None 1741

Coffee in CoPP Target Districts then and now

40

district and central level

^ Existing trade relationships with international buyers, long term trading relationships with Fair Trade buyers in Europe / Korea

^ Several certifying agencies active in Nepal: NASAA, One Cert, Cert All, Ecocert..

^ Many stakeholders in organic coffee promotion:

^ Producer groups/associations; Processor/traders; INGOs/NGOs, GOs, World Bank

^ National Organic Standard developed and approved by GoN

^ Government fund available for external inspection and organic certificate

^ Nepal coffee logo approved and awarded to three processor/traders

Major problems in coffee sub-sector

At producer level:

^ Initially coffee introduced as a crop suitable for marginal uplands for soil conservation;

^ Effective and sustainable support for smallholders still weak:

^ Expand coffee production;

^ Produce the quality and quantity of coffee which the market demands

^ No incentive to farmers for production of organic and better quality coffee (price difference)

^ Late payments to producers by traders

^ Producer groups do not have expertise to establish and manage internal control systems ICS) for organic certification of production

^ Government support on organic certification not targeted to small farmers (Subsidy for organic certification provided only for external inspection not for ICS);

^ Groups lack the capacity to link and deal with markets which are beyond their local level

At processor/trader level:

^ Quality management and monitoring systems are very weak.

^ Communication between traders and producers weak.

^ Lack of institutionalized collection and supply system

^ Quality management and monitoring systems do not exist/Nepal coffee logo

At sub-sector level:

^ Lack of coordination and collaboration among stakeholders

^ Systems still lacking to actively manage the reputation of Nepali coffee in international speciality markets

^ Facilitation and support for close collaboration between smallholder farmers, processors, traders and regulators still weak. Mandates and lead functions need to be developed

^ Weak research in development of organic coffee production and processing technologies. In addition, there lacks structures which can facilitate to ensure quality systems e.g. cup testing laboratory, standard regulation and trade promotion

^ Lack of organic regulation: all coffee produced in Nepal sold as organic in the domestic market

Suggestions

^ Impact of PACT could be significant when PACT interventions use the base already developed by CoPP

^ Develop and establish systems to ensure the reputation of Nepali coffee in international speciality markets (Nepal coffee logo).

^ Allocate fund for research and development of organic coffee production and processing technologies

^ Establish cup testing facilities at coffee cooperative union level

41

Supply chain structure for institutionalized collection and supply of coffee

^ Equipment support (hulling and roasting) from PACT if provided, should go with long term vision after analyzing the present situation.

^ Provide support on area expansion to commercialize coffee production.

^ Provide support to set up ICS and certification of producer groups.

^ Provide support to improve pulping and storage facilities.

^ Need more bilateral interactions between PACT consultants and CoPP personnel

^ If PACT supports new districts outside present coffee producing districts, support should continue for at least five years.

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4. MAJOR ISSUES AND QUERIES RAISED DURING FLOOR DISCUSSION

Ms. Jiwan Prabha Lama, DFTQC

1. There should be a study to find out shelf life of green beans

2. Coffee quality standards are prepared, but need to be harmonized

3. Need to follow Good Agricultural Practices (GAP)

Mr. Badri Prasad Bastakoti, CoPP, Helvetas

1. Major problems in coffee production and marketing are lack of working capital. No need of subsidy if working capital is supplied easily from financing institutions.

Mr. Binayak Kumar Misra

1. Allow coffee cultivation in community forests

2. Need to work on value addition

3. PACT should work in the districts that are not included by other I/NGO or projects

4. Financing institutions should supply loan to coffee farmers at reasonable rate

5. Trade mark is provided to NCPA. It is OK for the time being

6. Every effort on coffee need to carry with harmonization with NTCDP

7. Coffee development Fund should be established

Mr. Gopi Prasad Dhungana, NCPA

1. Need to maintain revolving fund

2. There are many institutions involved such as HELVETAS, NTCDP, NCP, NARC, DOA and others without proper coordination.

Mr. Hem Raj Regmi, MOAC

1. Make a high level team to prepare long term vision in this sector

Mr. Haribabu Tiwari, MOAC

1. Need to analyze value addition and comparative advantage of coffee Vs other crops before promoting it

2. In many instances coffee can be grown in marginal lands and provide employments: good alternate to those going abroad for employment

3. Irrigation should be arranged through rain harvesting

4. Coffee cultivation should be consolidated in bigger blocks rather than scattered in different places.

Dr. Bhabeswor Pangeni, Highland Coffe

1. Government should arrange proper coordination

2. Some companies eg. Highland Coffee have started cultivation on leased land which should be promoted

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3. Altitude should be considered in coffee cultivation, plant die after a few years if cultivated in low altitude

4. Payment issue (delayed payment to farmers by traders) is a issue of past, now there is no such issue

5. Coffee starts production from 6th year, full payback in 15 years and continues economic production up to 50 years

6. Research should come up with the best varieties of coffee for different altitude and micro-climates

7. Disseminate technology of cultivating multiple cropping (multi storey farming) with coffee : shading trees, coffee, under crops

Mr. Durga Prashad Uprety, Agricultural Product Export Promotion Center

1. Government has already allocated fund for certification which can be partly used for Internal Control System (ICS) of coffee production

Mr. Shyam Bhandari, Nepal Coffee Producers Association

1. No real effort has been made to commercialize coffee production: most of the past efforts were concentrated on employment and income generation of Dalit, Janjati and deprived communities

2. Single institute should be coordinating the coffee production/trade related activities

Mr. Purna Chhetri, World Bank

1. Ethiopia is the country that competes directly with Nepal: need to study their modality

2. Special attention required in market promotion

3. Politics should not destroy the quality of coffee

Ms. Gayatri Acharya, World Bank

1. Observe what other countries with similar condition are doing?

2. Raise the number of opportunities to every stakeholders

3. United coordinated effort are required

4. Continue this type of interaction among the stakeholders

Mr. Nathu P. Chaudhari, Secretary, MOAC

1. Lack sufficient area coverage and production technologies

2. Lack of quality assurance is the major problem

3. Note that only 2% of the marketed product is organic certified in the world

4. More certifying agencies are required to cover all products

5. Don’t always promote large farmers: small farmers can be organized for larger quantity production

6. Government will continue all the effort made by I/NGOs and PACT after they cease to continue

7. Coordination/collaboration required among GON, private sector, public sector and NGOs.

8. Promote bio-technology, bio-pesticide and appropriate technology

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Time Activities

9:00 Chairing of the Workshop: Mr. N.P. Chaudhary, Secretary, MOAC

9:15 - 9:25 Welcome and Importance of Value Chain in Coffee Sub-Sector Analysis, Mr Yogen-dra Kumar Karki, Project Director, Project for Agricultural commercialization and Trade (PACT)

9:25 – 9:35 Opportunities and Challenges of Coffee Production and Marketing in PACT Districts, DCPA Lalitpur, Syangja, Kaski and Kavre. Ms. Maya Tiwari, District Coffee Producers Association (DCPA), Syangja

9:35 – 10:05 Activities and achievements of Coffee Promotion Project and its present activities in support of the commercialization of coffee sub-sector, Mr. Prachand Man Shres-tha, Coffee Promotion Program (COPP), Helvetas NepalComments by: Mr. Dhakeswor Ghimire, Nepal Organic Coffee Product…..

10:05 – 10:45 Actors and stakeholders involved in coffee sub-sector and their roles in commer-cial production of coffee, Mr Shyam Bhandari, Nepal Coffee Producers Association (NPCA)Comments by: Mr Binaya Mishra, Coffee Sub-sector Specialist, Tea and Coffee Development Board (NTCDB)

10:45 – 10:55 Tea Break

10:55 – 11:30 Present State of Coffee Production in Nepal: Opportunities and Challenges in Com-mercialization of Coffee sub-sector, Bhola Kumar Shrestha, NTCDBComments by: Dr. Pradip Maharjan, Agro Enterprise Center (AEC), Federation of Nepalese Chambers of Commerce and Industry (FNCCI)

11:30 – 12:00 Marketing of Coffee in Nepal with focus on Import and Export Market, Mr. Vimal Nepal, Trade Promotion Centre (TPC).Comment: Mr Kamal Gautam, Agribusiness Promotion and Marketing Directorate

12:00 – 12:30 Research and Development in Coffee Sub-sector, Ram Bahadur KC, Nepal Agricul-tural Research Council (NARC)Comment: Mr. Surendra Rijal, Tea and Coffee Development Section, Department of Agriculture (DOA)

12:30 – 12:40 Summary and conclusions, Dr Kamal Raj Paudyal, PACT

12:40 – 13:10 Comments and suggestions from the floorJiwan Prabha Lama, DFTQCBadri Prasad Bastakoti, COPP, Helvetas,Binayak Kumar Misra, Tea and Coffee Development BoardGopi Prasad Dhungana, NCPAMr. Hem Raj Regmi, MOACMr. Haribabu Tiwari, MOACDr. Bhabeshwor Pangeni, High Land CoffeeMr. Durga Prashad Uprety, Agri-Commodity Export Promotion ProgramMr. Shyam P. Bhandari, NCPAMr. Purna Chhetri, Worldbank

13.10 – 13:15 Few Words: Ms Gayatri Acharya, Senior Economist, World Bank

13.15 – 13:20 Vote of Thanks, Dr. Ram Kumar Mandal, PACT

13:20 – 13:30 Remarks from the Chairperson and Closing

Annex 1: Schedule of Coffee Sub-Sector WorkshopDate : 11 April 2011 (2067/12/28, Monday)

Venue : GANGZONG Hotel, Lazimpat, Kathmandu

Time : 9:00 - 14:00

Chair Person: Mr Nathu Prasad Chaudhary, Secretary, MOAC

5. ANNEXES

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Annex 2: List of Participants

S.N NAME Designation Office Contact No.

1 Nathu Prasad Chudhari Secretary Ministry of Agriculture & Cooperatives 9841392220

2 Jiwan Prava Lama DG. DFTQC 9841491721

3 Purna Chhetri Senior Rural Development Officer World Bank 9851127253

4 Y.K. Karki P.D. PACT 9841275895

5 B.K. Mishra Director CTEVT 9841241925

6 Surendra Prashad Rijal Senior C.T.D.Officer Coffee & Tea Dev.section,Kritipur 9841406829

7 Dr. Binod Sharma Govt. Prog. Dev. Specialist IDE -Nepal 9851077576

8 Chut Raj Gurung Program director Fruit Dev. Directorate 9841352756

9 Ajay Bajracharya Manager Agi.&Income Generation Education for Income Generation,Winrock

9851107182

10 Govinda Raj Giri Manager DCPA. Kavre 9849470465

11 Gopi Prashad Dhungana General Secretary. NCPA 9841237906

12 Vijay Mallick DG. DOA 9841335130

13 Hem Raj Regmi Sr.Statistician MOAC 9841324802

14 Dhakeswar Ghimere Adviser NCPA 9841210677

15 Shyam Prashad Bhandari Chairman NCPA 984150907

16 Narayan Prashad Dahal Acounts Officer PACT 9841562280

17 Dr. Kamal R. Paudyal VC Development Specialist TSG, PACT 9851047345

18 Dr. BIRENDRA BIR BASNYAT Monitoring and Evaluation Specialist TSG, PACT 9851098861

19 Bhola Kumar Shrestha Technical officer National Tea & Coffee Dev. Board 9841224605

20 Maya Tiwari T.C. DCPA Syangja 984613050

21 Om Nath Adhikari Chairperson DCPA -lalitpur 9741230375

22 Kamal Raj Gautam Program Director Agri-business Promotion and Market-ing Development Directorate

01-5522439

23 Durga Prashad Uprety Agri-Economist Agri-Commodity Export Promotion Program

01-5552971

24 Kulchandra Adhikari Program Director D.C.P.A. -Kaski 9846198162

25 Dr. Punya Prashad Regmi Professor IAAS 9851067238

26 Tika Ram Sharma Sr.M&E Officer PACT 9841215339

27 Bharat Bahadur Karki FM Specialist TSG, PACT 9851033962

28 Prem Prashad Dhungana Procurement Specialist TSG (PACT) 9841255898

29 Dr. Hari Babu Tiwari Sr.Agri-Economics Ministry of Agriculture 9841441383

30 Dr. Bhaveshwar Pangeni Director Highland Coffee Promotionco.Ltd.ktm.

31 Prachand Man Shretha Team leader COPP,HELVETAS 9851073957

32 Badri Prashad Bastakoti Sr.Prog.Officed COPP,HELVETAS 9849295710

33 Ram Bahadur K.C. Sr. Scientist NARC, ARS,Malepatan 9846020019

34 Janak Raj Sapkota S. Editor Kantipur,Publication/Nepal 9841557664

35 Rajesh Verma Sr. Sub-Editor Annapurna post 9849017401

36 Hari Bahadur Bohora Chaiman RAD,Nepal 9841643811

37 Krishna Gautam Reporter R.S.S 9841609329

38 Ramesh Pant Camera person mountain T.V 9849375823

39 Bishnu Marasini Reporter mountain T.V 9849663071

40 Rajeswar Karki Chair Person Mount Digit Technology 9851034016

41 Shekhar Singh Thapa Finance Officer Mount Digit Technology 9849035726

42 Netra Bahadur Bhandari Agri-Extension Officer Market Research & Statistics Mng. Prog. MOAC

9841572079

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43 Lakshan Kumar Pokhrel Joint Secretary M.O.A.C 9841222977

44 Pradip Maharjan C.E.O. AEC/FNCCI 9851007865

45 Bhagirath Acharya Procurement Assistant PACT 9841244800

46 Dharma Laxmi Shrestha Asdministrative Officer TSG 9841514277

47 Gayatri Acharya Senior Economist World Bank

48 Deep Narayan Gupta Computer Operator PACT 9849594845

49 Dr.RAM KUMAR MANDAL Nodal Officer PACT 9849594843

50 Sabin Shrestha Computer Operator PACT 9841881623

51 Mani Raj Paudel Sub-Editor Progress Magazine 9841264650

52 Govinda Chimauriya Senior Repoter Radio Nepal 9841322751

53 Vimal Nepal Director Trade Promotion Center 9851056883

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Annex 3: Presentation Materials

1. Introduction and ObjectivesMr. Yogendra Kumar Karki, Project Director, PaCT

48

49

2. Present State of Coffee Production in NepalMr. bhola Kumar Shrestha, Technical Officer, nTCDb

50

51

3. Export scenario of Nepal CoffeeMr. bimal nepal, Director, TePC

52

4. Actors and Stakeholders in Coffee Sub-sectorMr. Shyam P. bhandari, Chair person, nCPa

5. Opportunities and Challenges in Coffee ProductionMrs. Maya Tiwari, DCPa, Syangja

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6. Research and Development in Coffee Sub-sectorMr. Ram bahadur KC, naRC

54

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7. Activities and achievements of CoPP and its present activities in support of the commercialization of coffee sub-sector

Mr. Prachanda Man shrestha, CoPP, Helvetas

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The Coffee

Government of NepalMinistry of Agriculture Development

Project for Agriculture Commercialization and Trade Sallaghari, Maharajgunj, Kathmandu, Nepal

Phone: +977-1-4017765 | Fax: +977-1-4373236Web site: www.pact.gov.np, Email: mail@pact.gov.np