MARKET REPORT – OCTOBER 2TH, 2015
Ginger! That’s today’s conversation.
10 years ago, most organic ginger came from Hawaii, and only for part of the year. The only option for consumers was conventional Chinese or Peruvian ginger for most of the year.
Enter Rodrigo Bedoya and three friends, all finishing their agronomy degrees in Lima, and working as organic inspectors to finance their education. They recognized that there was vast potential for organic ginger production in the Peruvian Amazon – in fact most growers were already growing naturally, but making very little money selling to traders in the domestic market. He realized the potential to make some serious change, and began an adventure. There were hundreds and hundreds of small producers, but most were harvesting less than a thousand pounds a year, had no technical training, didn’t know how to clean or process their ginger, and the biggest issue he had to face was that the growers were spread over a vast area, often only connected by barely passable 4 wheel drive roads, often completely impassable during rainy season.
He and his now business partners started working with individual growers, applying their background in agronomy and organics, helping them through the certification process and then picking up their production and taking it back to Lima. That last part requires a little more detail – picking up meant a 9 to 16 hour drive in a 4 X 4 – both ways.
Canada, the US, and countries in the EU are very concerned about dirt. Peruvian dirt has bacteria in it that we don’t want in Canada. We don’t want California dirt either, and Americans don’t want ours. It’s the law. Washing root crops is customary, but in the case of ginger, every grain of sand or dirt has to be scrubbed out from between its little fingers and toes with toothbrushes – so Rodrigo hired women in Lima to wash and brush the ginger and then inspect it to make sure there was no trace of soil. Many containers of ginger are inspected by the USDA, or CFIA, and honestly, if they find just a little bit of dirt on one random sample, the entire container load must be burned or buried several meters down in a landfill.
Slowly and surely, Rodrigo started building relationships with an ever-growing number of producers, established the La Grama brand, and got to the point where he could export full containers of ginger. We have known Rodrigo for many years, and meet regularly in Peru twice a year. However, we’ve never been to the jungle with him – not only a 3 day excursion (2 days of bumpy roads alone), but also an area becoming more and more dangerous because of the coca trade in the same region. Last year, La Grama exported about 55 containers – one a week – 1 million kilos of organic ginger.
Back in 2010 we started talking to Rodrigo about Fair Trade – about guaranteeing good prices to producers, and creating additional premiums. In 2012 he created the first Fair Trade model for ginger in a very unique situation – small producers who are spread out over tens of thousands of hectares, so no chance of creating a cooperative, and having a distinct Fair Trade relationship with each separate grower. He has been certified Fair Trade for the last 2 years with IMO Fair for Life, and the premiums have been used to provide ever-increasing grower support, with one of his team working full time in the Amazon helping growers develop better production techniques, composting and soil improvement.
But, and there’s always a but, many people were watching his company develop this market, and started copying his model, sometimes in producing areas much farther north and south. This is what we call gold-digging – and it’s very common. A grower sees that there seems to be a market for, say, heirloom tomatoes, and starts growing them, without considering that dozens of other growers are seeing the same potential market. But of course they don’t talk, and all of a sudden the market is flooded with heirloom tomatoes, and the price plummets, leaving the first guy on the block now competing at much lower pricing in a now over-saturated market that he or she developed.
The same is now happening with ginger, with dozens of exporters now gathering ginger from producers across Peru. Until very recently, there has been an expanding market that could absorb this extra production – last year that equaled over 10 million pounds – a container a day leaving Peru. But now, at the height of production, a price war has broken out – growers are being offered less and less money, and are forced to sell because they have no control over the marketing and sales of their ginger – they are small families living in very remote areas with no chance of ever having control over their crop, and right now they need to sell what they are harvesting so they can replant. So the inevitable has happened – a price war has broken out.
So back to Rodrigo – after creating the model and the market, and developing a unique and complicated Fair Trade program, many of his customers are demanding much lower prices because they are being offered ginger from Peruvian traders at 50% discounts. To be competitive, and meet his obligations to buy ginger from the producers he has worked with for years, he is forced to go back to them with lower pricing for the first time in his history. Because of his commitment to Fair Trade, all his 50 workers processing and packing ginger in Lima are covered with full health benefits, and La Grama pays for that, but as he points to the very public records of his competitors, published by the Peruvian government, exporters now larger than him apparently only have a handful of official employees, the rest of their work forces being undocumented – no health benefits, no payments to the public health care system on their behalf, or employer paid tax deductions, no Fair Trade, and hence much lower costs.
We of course are in the same boat – we have supported this program for 6 years, and are proud of our relationship with Rodrigo and La Grama, and we are now being offered ginger from brokers out of Los Angeles for far less than our landed cost.
This is just another Fair Trade story, about how producers are continuously marginalized, and in this case because too many gold digger exporters rushed in without well thought out business plans or established markets – which has now negatively affected every one of Peru’s organic ginger producers.
Thanks for listening!
More info on La Grama Ginger and turmeric here
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