How climate risk management and insurance can help coffee producers

The coffee industry is well aware of the impact of climate change on production across the Bean Belt. Over the past few decades, we have seen that climate change has increased global average temperatures and altered rain patterns around the world – which naturally has a huge impact on production and the people who work in the sector.

Many producers are already doing all they can within their means to reduce the environmental impact of their farms. But considering how climate change poses significant threats to the sustainable future of the coffee industry, adaptation and mitigation measures need to extend much further beyond an individual basis.

One of the most effective ways to support coffee producers tackling the climate crisis is climate risk management and insurance. So how exactly do these measures work?

To learn more, I spoke to Philippe Vaast, the Regional Director for Mexico, Central America, and the Andean Countries at CIRAD and a member of the scientific committee for the Association for the Science and Information on Coffee (ASIC).

The impact of climate change on coffee production

The continuous effects of the climate crisis on the coffee industry are certainly prevalent. One of the most recent studies published in the journal PLOS Climate in 2023 found that rising temperatures caused by global warming are likely to lead to “ongoing systemic shocks” to coffee production.

Perhaps most obviously, this could mean lower yields and more supply shortages, which would only serve to exacerbate coffee price volatility and put more pressure on producers.

According to Philippe, some of the major risks to coffee production as a result of climate change are:

Damage from frost: With more unpredictable weather patterns, coffee plants can die within a matter of hours when exposed to temperatures lower than 0°C (32°F)

Heavy rainfall: Storms during the flowering stage can damage delicate flowers and decrease pollination, resulting in lower yields

Prolonged dry seasons: Water stress results in premature coffee cherry development, reduced bean size and density, and lower cup quality

Moreover, research has also found that many of the world’s biggest producers of coffee are likely to feel the effects of the climate crisis. As one example of several, some experts estimate that Brazil (the largest grower of coffee in the world) may see up to 75% of its producing regions become “unusable” as a result of rising temperature and shifting rainfall patterns.

From a socioeconomic perspective, climate stressors to coffee production could financially constrain producers – many of whom already live below the poverty line. With smallholders accounting for up to 80% of the world’s producers, a significant proportion of them struggle to adequately support their families and improve their livelihoods already.

Investing in climate adaptation and mitigation

When talking about climate change, the terms “adaptation” and “mitigation” come up often. But what do they actually mean?

Climate mitigation is implementing strategic practices to prevent the exacerbation of the effects of climate change – including avoiding and reducing carbon emissions. According to the United Nations Framework Convention on Climate Change, climate adaptation refers to “changes in processes, practices, and structures to moderate potential damages or to benefit from opportunities associated with climate change”.

So how are climate adaptation and mitigation put into practice in the context of coffee production? One of the longstanding mitigation efforts in the coffee industry is minimising or stopping deforestation, while an increasingly common adaptation strategy is “climbing higher” to cooler growing areas.

Planting shade trees on coffee farms is one of the ways which combines mitigation with adaptation, as trees sequester carbon and increase biodiversity to create more optimal growing conditions for coffee plants.

“By changing their farm management practices, producers can adapt to some extent to climate change,” Philippe says – who spoke on a panel titled Integrating climate risk management and insurance for sustainable coffee production in a changing climate at the 2023 ASIC conference.

“Practices such as agroforestry, irrigation, and using organic fertilisers can be co-developed locally at relatively low costs to help farmers adapt to climate change, and thereby better withstand unpredictable weather patterns,” he adds.

While proper irrigation systems help to combat dry weather, agroforestry management (which includes planting shade trees and intercropping) can buffer the climatic effects within farm microclimates. Producers can also become more self-sufficient by substituting chemical inputs with organic fertilisers and biocontrol agents produced on-farm, along with improving soil health.

Receiving support from the wider industry

As the effects of climate change generally outpace the results of implementing mitigation and adaptation strategies, there has been a greater push within the scientific community to investigate the climate resilience of different coffee varieties and species, as well as to breed stress-tolerant coffee genotypes to prepare for worsening climatic stressors.

In turn, it’s critical that industry professionals along the supply chain lend support to producers.

“With respect to capacity building, farmers need to have access to information and training to apply sustainable agricultural practices,” Philippe explains. “Farmers need financial incentives to stabilise and secure their revenue through premiums paid for certifications and higher prices for growing high-quality coffee.”

He also points out that leveraging indigenous and local knowledge is a key part of successful climate adaptation and mitigation. Carrying out practices such as sequestering carbon and conserving biodiversity must be done in partnership with local and native communities – including selecting species of shade trees and coffee varieties.

How climate risk management and insurance support a sustainable future for coffee production

Alongside adaptation and mitigation strategies, climate risk management and insurance are effective ways to provide coffee producers with more security and support in the face of unpredictable weather conditions.

Climate risk insurance is a type of disaster insurance that reduces the financial risk associated with volatile and changing climatic conditions. Insurance can also be an integral part of a wider and more comprehensive climate risk management strategy. This is because in addition to providing financial relief for vulnerable actors in the value chain after a climate disaster, it also helps to collect data on how to minimise and prevent risk.

Data collection can be used to predict climatic conditions, and potentially provide early warnings for more severe events such as frost and intense storms.

During a talk at the 2023 ASIC conference – which took place from 11 to 14 September in Hanoi, Vietnam – Dr. Jarrod Kath explained that when climate risks are too extreme or costly to be managed with adaptation or mitigation measures, climate risk insurance can be used to transfer risk away from vulnerable supply chain actors to the insurer.

This type of insurance, Dr. Kath said, uses comprehensive assessments to consider climatic risks beyond rainfall and temperature change – providing producers with more protection.

Benefitting the entire supply chain

Plenty of research suggests that the damages of climate change reduce coffee yields and quality, which subsequently negatively affects farmers’ revenue. But effectively, given that the coffee industry wouldn’t exist without producers, this puts the entire supply chain at risk.

“Climate risk insurance is designed to protect coffee farmers, small businesses, and all stakeholders of the coffee value chain,” Philippe says.

He adds that climate risk insurance is designed to help farmers cope with both short and long-term effects of natural disasters by covering the three major risk areas (frost damage, heavy rainfall, and prolonged dry seasons).

Moreover, climate risk insurance can range from microinsurance – such as for property and crops – to much larger-scale catastrophe coverage, meaning producers and farms of different sizes can minimise risk.

Not only does climate risk management and insurance protect producers and their crops by maintaining coffee quality and yields, but it helps to improve their financial security, too.

Climate change is certainly a very real threat to the coffee industry, but by implementing these measures, we can collectively work together to build a more sustainable and resilient coffee sector.

Enjoyed this? Then read our article on how coffee producers can adapt to climate change.

Photo credits: ASIC

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