Last year, while on my annual buying trip in Brazil, I came across a couple of coffees that were new to me but instantly caught my attention. At the time I didn’t realise they were from a brand new farm called Terra Alta, established six years ago and only in its 3rd year of harvest. I ended up purchasing two lots from this farm, one a small lot of natural processed Yellow Catuai and a larger, honey processed IAC-125 RN which is currently being used in our Red Brick.
Most of the farms we buy from have been growing coffee for generations, so I was curious to find out more about the thought process behind starting a farm from scratch. Speaking to Juliana, the owner of Terra Alta, I tried to find out what on earth led to her and her husband being coffee producers?
A: Many young people are leaving coffee farming but you’re going head first into it. What inspired, or possessed you, to start a coffee farm?
J: First of all, we did our homework, built our valuation models and it seemed a good deal. We could see some risks, but we thought we could take them on and build something that would provide for us and our family. This was a requirement, of course.
Second, well, I don’t know… I see that a lot of people enjoy being well dressed for work and going to an office every day, always having lunch at nice restaurants. I always loved to wear jeans and boots, to spend time outdoors… so I feel great in the farm! Starting a coffee farm was a way to be able to enjoy this lifestyle and have a job at the same time.
But farming is hard work – and if you are a small producer or an employee doing manual labor I mean physically too.
If we want to keep people in the farming business, we need to start using more technology in the field, improving working conditions, worker productivity and, consequently, wages, so people can enjoy their jobs. This way, people can work in the farm but still afford nice things from the city, have a better education and afford to travel.
A: Can you tell me a bit about yourself and your background?
J: I will tell you about me and Paulo, because it is hard to separate one from another after so many years. We met at college and have been together since our senior year, 1998 (we both graduated in Electrical Engineering from the University of São Paulo and later got our MBAs from the University of Chicago). After college, we both ended up following traditional executive careers – Paulo in finance (Credit Suisse and hedge funds) and I in Management Consulting (McKinsey & Co). It was interesting, but we had little time together and even less time to travel and share our love for animals and nature. Even before we went to Chicago, when we realized that our two great dane puppies were fully grown in the blink of an eye, we started thinking maybe we should do something different. The coffee farm was a chance for us to work together and build something that we enjoy and can be proud of.
A: Some producers live full time on their farms and some don’t, how much time do you spend on the farm?
J: There are 3 families living on the farm, but we still have a house in São Paulo where we officially live (630 km from the farm, about 7-hour trip). Since we bought the farm in 2010, we spend at least half of our time there and usually live on the farm for about 3 to 4 months during the harvest. During the rest of the year, we live in São Paulo and travel to the farm at least every two weeks.
A: Is there a specific philosophy or larger idea behind what you do on the farm, around what you want to achieve and contribute?
J: When I decided to leave my job at McKinsey I considered going to a non-profit organization focused on environment conservation. But most of my friends who did the transition to non-profits said that they spent most of their time looking for funding. So I thought the farm could fund and be a test bed for environmental protection initiatives. We are in our 3rd harvest and the farm will start to generate some cash in the next year (so I hope!!!) – my plan is to use part of the revenue on conservation initiatives on the farm and then in the region. If I can do it right, I can share the experience with another farmers and help protect the remaining forest and native animals that we have in our region.
On the coffee side, I believe that people deserve to drink better coffee! It is SOOOO GOOOD and still hard to get, and expensive. We believe that we can improve the processes to produce better coffee at reasonable costs.
A: Do you feel that you differ from other coffee farmers in that respect?
J: I believe that the main difference is that, because we don’t have backgrounds in coffee, we are more willing to try new things. Working exclusively with raised beds is one example – nobody does that and most say that we are crazy. But it gave us chills when we saw people stepping on the coffee beans with dirty boots or using a motorcycle to move them on the ground! We believe that our beans deserve the best treatment!
A: Speaking of the raised beds, this is unsual for Brazil. Do you also have patios and/or mechanical dryers?
J: No patios! Our coffee never touches the ground. Patios are expensive to make, to maintain and need dedicated equipment to operate. We wanted to have only one option, so that we would focus on it and make it work. All our coffee goes from the wet mill to the raised beds, where the drying process is slower than on a concrete patio and the cherries or parchments are much less prone to damage. The raised beds also allow us leave all mucilage on the pulped naturals, and play with different kinds of fermentation. It is a way to make coffee with particular cupping notes.
We use mechanical dryers to finish the drying process (we use only gas driers, at low temperatures, with long pauses during the process).
A: So how does starting a coffee farm from scratch even work? There are so many things to consider! How do you choose your varieties and processing methods, where do you get your trees, how do you decide planting patterns, spacing, shade trees etc.
J: It’s a lot of work, especially since we had to learn almost everything along the way. But this way we know everything was done properly. We could choose the best technology, including the best varietals, to make sure that the plantations will be productive for a long time. We felt much safer doing this than buying a fully grown plantation that might hide a number of problems that would only surface later in the future.
The secret was bringing the best people to work with us. We recruited our agronomist even before we bought the farm – we spent 3 months talking to convince him! Then we hired our farm manager, Carlinhos. Both are great guys, with great hearts and many years of coffee experience. We relied a lot on their experience to decide what to do, and used our own experience in finance and project management to ensure that we could implement the plan.
After the first year, we built our own nursery to guarantee healthy seedlings. We were the first in our region to use reusable PE tubes, instead of the usual disposable plastic bags. The PE tubes proved much better than the bags, especially with mechanized planting.
We chose the varietals for their cupping potential, productive potential and disease resistance. Our agronomist helped us to make a blend of traditional and new varietals that were showing promise in the region. The main varietals are IAC 125 RN (my favorite), followed by Yellow Catuaí and Red Catuaí. We also have small test areas with Caturra Amarelo, Obatã Amarelo, Catiguá MG2 and Paraíso.
The spacing is 3,5m x 50cm, leading to a high plant density per hectare, but still with plenty of space for mechanization. We don’t use shade trees (it is not common in our region) but we are considering performing a shade test in one area where the sun causes some damage to the coffee trees.
We are not pruning yet. Since our oldest trees are 5 years old, and we use only shorter varietals, we still have about 3 to 5 years before we start pruning.
A: That is a lot of work before you even get your first trees in the ground. How far ahead do you have to plan and think while coffee farming?
J: Yes, we spent about a year looking at the financial side, building a business plan and talking to producers. Once we decided to do it, it took us about 6 months to find and buy the land and then it was a race to be ready to start planting the first project in 6 months (we planted the 210 ha over three years, from 2011 to 2013). Doing it in 3 steps was a very good decision, because we could improve our processes each year.
In the 6 months between buying the land and starting planting we had to choose the varietals with our agronomist, then buy the the seeds and outsource the seedlings to an outside nursery (huge mistake, the following year we built our own). Then we started working on the irrigation. We also didn’t have proper industrial grade power lines reaching the farm, only residential ones, so we had to start working on that. Believe it or not, we only got rid of our diesel pumps and generators by 2013. By late October, we started preparing the soil for planting, and in early December we started installing the irrigation system. By then we saw that labor for planting might be a problem, had to look for alternatives and decided to go with mechanized planting, which wasn’t common in our region at the time (it worked great).
After planting, besides building our nursery and preparing to plant the second plot, we had to start planning for the harvest, still 2 years away (our first harvest was in 2013). This was the most difficult part, because there are a lot of possibilities and we had to make some big investments on equipment before experimenting with the first harvest.
A: So your setup is quite comprehensive, you have your own nursery, wet mill, dry mill and warehouse?
J: Yes, on the farm we have our own nursery. The post-harvest equipment includes a wet mill, a dry mill, raised beds and a warehouse where we leave the coffee resting in wooden bins or big bags for about 90 days. When the coffee is hulled we ship it off to a warehouse in the city (it is not safe to keep hulled coffee on a farm in Brazil, the risk of robbery is too high).
A: What’s in the nursery right now that you’re planning to plant out?
J: We still have to adjust some processes before thinking about planting new plots (especially on the post-harvest and marketing/selling fronts). It is a lot of investment too… we have to plan it well. Currently, our nursery is on hiatus!
A: What about the climate where you are, what are your growing conditions?
J: We are in the Cerrado Mineiro region. The weather is good for coffee, it rains about 1400mm/year, but it is dry during the harvest. The soil is relatively poor, but we can correct it with the right nutrition and weed management. We use very little herbicides and leave an undisturbed vegetation cover of grasses and weeds between the coffee rows, to serve as protection and later provide biomass for the coffee trees.
Next year we will test some organic nutrients in one part of the farm where the soil is particularly poor, with a lot of gravel.
A: You mention using few herbicides and trialling organic fertilisers, what other ecological measures do you take in relation to composting, water etc?
J: We address sustainability on two main fronts: (i) protection and regeneration of our conservation areas; and (ii) constant increase of our operational efficiency, to reduce our environmental footprint.
The first front covers our conservation areas (roughly 30% of the farm’s total area). The conservation and protection activities include soil erosion correction, reforestation, forest enrichment and local fauna protection (artificial nests, population control of domestic animals). All the initiatives are detailed in an environmental work plan, which is submitted for the review of an UTZ auditor every year.
We started the farm using the best available equipment in terms of reducing water and energy consumption (drip irrigation system with valves that avoid water waste, wet mill equipped with water recycling system, electrostatic nozzles on our sprayers). We also have specific plans and processes to reduce water consumption both in irrigation and wet mill, reduce energy consumption, and improve residual management. These are some examples:
Our domestic trash is recycled and the residuals from the operation (parts, used oil, pesticides containers) are separated and disposed of correctly.
We disabled the “desmuciladores” (mucilage removers) in the wet mill, which was the equipment mainly responsible for water consumption.
The residual water from the coffee processing is being treated in a series of pools and, we are running the first tests to pump it back to the crops via our irrigation system.
We also use the compost made from coffee shells as organic fertilizer in the areas where the soil is poorer.
A: Sounds like a fairly tight looped system. How self sustainable are you, and what do you have to buy in for the farm that you don’t already have there?
J: In terms of coffee nutrition, we use the organic sources on the farm (mainly grass/weed management and coffee-shells composting) but we also complement nutrition with non-organic sources. We do that because the impact on production is huge (our average production per hectare is about the double the national average), and we believe that using less land to produce more coffee is essential to guarantee the conservation of the remaining natural forests.
In terms of the self sustainability of the people, the three families living on the farm keep a kitchen garden and raise chicken for their own consumption. We also have some good fruit trees on the orchard, such as mango, bananas and blackberry. Some other supplies they buy from neighbor farms such as milk, cheese and meat. But we all use the supermarket too!
A: Few farms are the same all over, do you have several aspects and microclimates within the farm or is it very homogenous? How do you manage or take advantage of your situation?
J: I think the main difference is the soil – we have some areas with a lot of gravel, which makes production much more difficult. We are trying to improve those parts using organic fertilizer.
In some areas, because of the inclination, the exposure to the sun is much higher and sometimes the coffee trees get damaged by the excessive temperatures. We leave the grass higher in those areas so it provides some protection but we are considering doing a test with shade trees.
A: Thinking back to your planting pattern, how do you harvest and what is your yield like- you mentioned it was double the national average?
J: We use mechanical selective harvest. We use a machine regulated to leave the green berries on the tree. So we pass twice in each area in order to complete the harvest. The result is very similar to a manual selective harvest, but it is much cheaper.
The 2014 drought was pretty rough on our region – our yield fell to 46 60kg-bags per hectare. But we expect to return to an average yield of 55 60kg-bags per hectare.
A: You don’t have many shade trees, but do you do any intercropping with other plants, or have you plans to do so? Do you produce anything else on the farm such as other food crops or livestock?
J: No! Coffee is hard enough and we still have a lot to learn. We prefer to focus all our efforts on producing the best coffee!
A: Coffee is definitely not an easy crop. What threats are specific to you and your area when it comes to pests, diseases, or natural conditions…?
J: It is the same as of most Brazil. In terms of natural conditions, our region is more susceptible to drought but less susceptible to rain during the harvest and frost. As with every other region we a suffering with the borer beetle.
A: This is a question that obviously gets different answers everywhere I ask: what is your production cost for a lb or kg of coffee?
J: This is changing a lot with the inflation in Brazil and depreciation of Real (which increased the price of fertilizers in R$). Last harvest our cost per bag was very high because of the drought, about R$600/bag or R$10/kg. Considering normal productivity, our cost would have been about R$470/bag or R$7,7/kg.
Here we consider all coffee produced in the farm, including the lower grade coffee such as cherries that fell from the trees and ‘grinders’, which are usually sold for half of the price of good coffee.
A: Coming into it with fresh eyes, what do you see as the main challenges for the coffee industry, and what do you think some of the solutions are?
J: This is a hard one…
Speaking from the growers side, the main challenge is to make the farm profitable, while keeping the highest standards regarding the environment, our employees and coffee quality.
On the farm, we work to reduce costs by investing in mechanization and new processes, and improve coffee quality. It is not easy, but it is something that motivates us.
The hardest part is to increase the revenue we get from the coffee, i.e., to get extra money for the extra work we put in. Coffee in Brazil sells mostly to exporters who pay a relatively low price for it. When we talk about specialty coffee it can be even worse, the premiums for quality stay mostly with the middlemen. Some exporters, like ours, are moving towards a more transparent way to work with producers, showing all the exporting costs and the price paid by the final client. We believe this is the way of the future. In our case, besides working with more transparent exporters, we are also starting to export directly, but it requires a lot of investment and time.
Looking at the industry as a whole, I think one of the major problems is the concentration and lack of transparency in the market. There are just a handful of big players who dominate the market and there is so much information asymmetry, lack of transparency that one could really make the case for market manipulation. The result is increased volatility which benefits only funds and traders. Growers, roasters and coffee drinkers would benefit much more from an efficient market where prices would fluctuate less. At the very least, it would make hedging more efficient and cheaper. At best, it would help better regulate supply and demand, which would be beneficial to everyone in the long run.
This is a hard problem to solve, but bringing roasters and growers closer together can mitigate this problem, allowing both sides to have more visibility of the future.
A: Coffee growing land is disappearing and people talk of it becoming extinct, do you have any thoughts on that?
J: I believe that the climate change is a real threat and I don`t think that we are doing enough to avoid that. But I have a more immediate concern with the remaining forests – in a way it seems that the climate change discussion took away the focus on the conservation of our remaining natural areas and biodiversity.
A: What’s the easiest thing about coffee farming, and what’s the hardest thing?
J: One of the hardest things is working and making plans with the volatility we see in the market. The easiest, as in most rewarding, is selling a coffee lot to someone who likes it for a fair price.
A: When you started out, what was the best and the worst advice you got?
J: The best: (More a warning than advice!) Growing coffee is not just a business, it soon becomes a passion. True.
The worst: You don’t need to worry about quality in the Cerrado, the coffee will drink anyway. By “drink”, people usually mean hard cup, 75 or better.
A: Any regrets? Would you do it again? If you could start over what would you do different?
J: If I was starting again now I would do a lot of things differently, based on the errors we made on the process. But mostly technical things… No big regrets!!
A: Can you reveal any future dreams and projects? (I won’t think you’re crazy!)
J: I’m not crazy, but Paulo certainly is! We have a few projects, especially involving drying and fermentation. The coolest project we have for next year is an automated coffee turner for the raised beds. According to professor Borém we should move the coffee about 10 times per day. We manage to do that 4/5 times using manual labor and it is already very expensive. The idea is to make an electric “car” with a few sensors and microcontrollers, that keeps revolving the coffee all the time. Let’s see if it works!
And a dream we have, I think all growers have, is to work closer with the roasters, to be certain we will be paid a fair price for our coffee, to get away from the volatility of commodity prices. It would make it much easier to work and plan ahead.
A: Juliana and Paulo, thank you so very much for your patience in answering all my questions, between the farm, the dogs and your second pregnancy I really appreciate you taking the time! We will continue following and supporting your work and progress with Terra Alta in the coming years, and thank you again for your committment to coffee and the future of the industry!