Bamboo Innovator

Coffee’s Economics, Rewritten by Farmers; Some coffee farmers are taking control of more of the supply chain, roasting and marketing their own beans for greater profit

March 16, 2013

Coffee’s Economics, Rewritten by Farmers

By NICOLE LaPORTE

IN 2005, Kenneth Lander, a lawyer in Monroe, Ga., moved with his wife, stepdaughter and the youngest three of his seven children to a coffee farm in San Rafael de Abangares, Costa Rica. He always “had a heart,” he said, for Latin America, and after a vacation to the lush cloud forests near Monteverde in 2004, he was determined to return on a more permanent basis.

He was also looking for more balance in his work-driven life. And so, after buying a coffee farm from a farmer he’d met on his earlier trip, he packed up his life and moved.

“It was like Swiss Family Robinson,” Mr. Lander jokes. “We just left.”

In Costa Rica, Mr. Lander, who is now 46, didn’t have to worry about making money. He had received a cash windfall from selling a portion of a residential subdivision he had helped develop in Georgia; the plan was to keep selling more lots and live off the proceeds. So he grew coffee for fun.

Then, in 2008, the financial crisis hit. The value of his subdivision plummeted. Suddenly, he had to support himself as a coffee farmer. Very quickly, he realized how difficult that was going to be. He had just 12 acres that produced 6,000 pounds of specialty-grade coffee beans a year.

He belonged to a “fair trade” co-op, which guarantees farmers a minimum price, but was making only $1.30 a pound on coffee that retailed in the United States for $12 a pound. His net profit was so low that at one point he was down to $120 that had to last two weeks.

“I was at the register debating whether or not to buy shampoo or a bag of rice,” Mr. Lander recalls.

Why wasn’t he seeing more of that final price?

That question has been asked by farmers throughout history, particularly in developing countries, where growers of commodity crops like coffee and cocoa often live in poverty. Over the last few decades, a worldwide movement under the broad banner of fair trade has tried to rectify that imbalance.

In exchange for receiving “fair” prices for their products, fair trade farmers must adhere to environmental and labor standards set by certification groups, the largest of which is Fairtrade International, a nonprofit organization based in Bonn, Germany. It represents 1.24 million farmers and workers in industries including coffee, bananas and honey.

But Mr. Lander started to think that he might improve on the idea. He began to experiment. Using a roaster he had bought in better times, he started roasting his beans and selling them on Facebook to friends in the United States. He also opened a coffee shop, called the Common Cup, in Monteverde, and sold his coffee to tourists.

When he ran out of beans, he teamed up with two other area coffee farmers, Jorge Fonseca and Alejandro Garcia — who also had a coffee shop, the Colibri — and began shipping greater volumes. Suddenly, he was making money. Read more of this post

IMF Says EU Banks Face Further Losses

March 15, 2013, 12:18 p.m. ET

IMF Says EU Banks Face Further Losses

By PAUL HANNON

With anemic economic growth likely to lead to more losses on loans, risks to the financial stability of the European Union remain “elevated,” and urgent action is needed to adequately capitalize the bloc’s banks and establish a shared system for closing down or restructuring failing institutions, the International Monetary Fund said Friday.

In its first-ever review of the health of the financial system across all 27 EU members, the IMF said the bloc has made some progress in addressing the weaknesses that have exacerbated its fiscal crisis and stalled its economic recovery.

But it said much work remains to be done, with banks likely to face higher losses on loans to households and businesses to add to the losses they have suffered on their holdings of government bonds. The Fund added that low economic growth and low interest rates may also weaken insurance companies and pension funds.

“Risks remain elevated, especially in a context of low growth and fiscal retrenchment,” the IMF’s board of directors said. “Regulatory and policy uncertainty, and gaps in policy frameworks also continue to pose vulnerabilities. Further ambitious steps are thus necessary to rebuild confidence and achieve long-lasting financial stability in the region.” Read more of this post

JPMorgan… Or Long-Term Capital Management?

JPMorgan… Or Long-Term Capital Management?

Tyler Durden on 03/15/2013 10:57 -0400

Compare and contrast to the performance of LTCM just before it had to be bailed out, ushering in the modern era of of Too Big To Fail.

Europe Does It Again: Cyprus Depositor Haircut “Bailout” Turns Into Saver “Panic”, Frozen Assets, Bank Runs, Broken ATMs, Bulldozer Parks Outside Bank; After Cyprus, Who Is Next?

Europe Does It Again: Cyprus Depositor Haircut “Bailout” Turns Into Saver “Panic”, Frozen Assets, Bank Runs, Broken ATMs

Tyler Durden on 03/16/2013 10:33 -0400

Europe has done it again.

Late last night, after markets closed for the weekend, following an extended discussion the European finance ministers announced their “bailout” solution for Russian oligarch depositor-haven Cyprus: a €13 billion bailout (Europe’s fifth) with a huge twist: the implementation of what has been the biggest taboo in European bailouts to date – the  impairment of depositors, and a fresh, full blown escalation in the status quo’s war against savers everywhere.

Specifically, Cyprus will impose a levy of 6.75% on deposits of less than €100,000 – the ceiling for European Union account insurance, which is now effectively gone following this case study – and 9.9% above that. The measures will raise €5.8 billion, Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of euro-area ministers, said. Read more of this post

Private Equity’s $36 Billion Retail Bet Not Going So Well

Private Equity’s $36 Billion Retail Bet Not Going So Well

In the years before the recession, private-equity firms put so much faith in the future of U.S. brick-and-mortar retailers that they spent $36 billion on them.

That hasn’t worked out so well, especially for the era’s biggest spender, Bain Capital LLC. The firm started by Mitt Romney inked four deals valued at $17 billion from 2004 to 2007 and still owns all of the purchases. The largest of the bunch was Toys “R” Us Inc., which posted a drop in sales during the holidays, followed by Chief Executive Officer Gerald Storch stepping down.

The private-equity model — load up an acquisition with debt, cut costs and take it public — hasn’t gone according to the usual script with most of Bain’s retail acquisitions. That’s largely because the firm, which has $67 billion in assets under management, doubled down on specialty retailers just as they were about to be pummeled by the likes of Amazon.com Inc. (AMZN)

“There isn’t anything special about specialty anymore,” said Leon Nicholas, an analyst for Kantar Retail in Boston. Their advantages on product assortment, expertise and price have disappeared, he said. Read more of this post

China firms desert US stock markets amid scrutiny by US regulators and short-sellers

China firms desert US stock markets

More than two dozen US-listed Chinese companies have retreated from the US stock market in the past 15 months, amid scrutiny by US regulators and short-sellers. -China Daily/ANN
Michael Barris

Sat, Mar 16, 2013
China Daily/Asia News Network

NEW YORK – When 7 Days Group Holdings Ltd announced in September that it had received a buyout proposal to be taken private, the Chinese budget hotel operator’s US-listed shares soared to a four-month high.

Prior to the announcement, the shares, which trade on the New York Stock Exchange, had tumbled 23 per cent in 12 months, amid investor worries over corporate governance that hurt valuations of Chinese companies.

Last week, 7 Days became the latest US-traded Chinese company to go dark, after a group that included Washington-based private equity firm Carlyle Group LP and the company’s co-chairmen sweetened its offer to $688 million (S$854.7 million).

More than two dozen US-listed Chinese companies have retreated from the US stock market in the past 15 months, amid scrutiny by US regulators and short-sellers and shrinking advantages from US listings. Read more of this post

Why some think China is approaching a political tipping point

The old regime and the revolution

Why some think China is approaching a political tipping point

Mar 16th 2013 |From the print edition

FOR some of China’s more than 500m internet users the big news story of the week has not been the long-scheduled one that their country has a new president, Xi Jinping, who already has more important jobs running the Communist Party and chairing its military commission. Rather it was the unscheduled, unwelcome and unexplained arrival down a river into Shanghai of the putrescent carcasses of thousands of dead pigs, apparently dumped there by farmers upstream. The latest in an endless series of public-health, pollution and corruption scandals, it is hard to think of a more potent (and disgusting) symbol of the view, common among internet users, that, for all its astonishing economic advance, there is something rotten in the state of China, and that change will have to come.

Many think it will. According to Andrew Nathan, an American scholar, “the consensus is stronger than at any time since the 1989 Tiananmen crisis that the resilience of the authoritarian regime in…China is approaching its limits.” Mr Nathan, who a decade ago coined the term “authoritarian resilience” to describe the Chinese Communist Party’s ability to adapt and survive, was contributing, in the Journal of Democracy, an American academic quarterly, to a collection of essays with the titillating title: “China at the tipping point?” Read more of this post

China’s ‘new farmer:’ an investor, manager and & decision maker; mass exodus from the countryside has left China asking, “Who will till the farmlands and feed 1.4 billion Chinese people?”

China’s ‘new farmer:’ an investor, manager and & decision maker

• Xinhua

2013-03-15

China is going to great lengths to foster a “new type” of professional farmer to inhabit the empty farmhouses across its vast rural areas and entice more migrant workers to return home to till fields and feed the world’s largest population.

If it succeeds, China will solve a major problem that cropped up after its urbanization process resulted in a population split 50:50 between rural and urban areas. Decades ago, nine in 10 people lived in rural areas, where their lives were not as good as that of their urban peers.

As large numbers of farmers, especially young farmers, have flocked to cities and towns, they have left the countryside largely inhabited by the elderly, women and children.

This mass exodus from the countryside has left China asking, “Who will till the farmlands and feed 1.4 billion Chinese people?” Read more of this post

Crisis bodes grim for Dutch housing market

Crisis bodes grim for Dutch housing market

by Christien van den Brink

English.news.cn   2013-03-15 21:36:28

THE HAGUE, Mar. 15 (Xinhua) — The happily married young couple Petra and Bert live in a suburban area of the fourth biggest city of the Netherlands, Utrecht.

Bert has just signed a long term contract at the ministry of Infrastructure, while Petra holds a part time job. They would be in the perfect position to buy their dream house, and yet, they rent it.

“Jobwise, it is really difficult to predict where we will be in 3, 4 years. We could be sent to other regions by our employers. Or we could even lose our job. This makes it hard to chose a location for our future house. We don’t want to commit to something until we are more financially stable,” Petra said.

Petra and Bert are not the only ones who have opted for renting in the Netherlands. According to figures published by CBS on Friday, 2.9 million dwellings of the 7.1 million households are rented apartments and houses.

Due to a growing incertainty at the job market, flexibility has become the main argument for renting. Renting offers the ability to pick up and leave if you have to take a job in an other region of the Netherlands. Read more of this post

The man who once saved New York City from bankruptcy explains why Detroit may go under; “We couldn’t do this today,” says Felix Rohatyn. “The various stakeholders are no longer around the same table.”

The man who once saved New York City from bankruptcy explains why Detroit may go under

By Tim Fernholz — 10 hours ago

The US city of Detroit is in deep financial trouble. Years of fiscal mismanagement and a shrinking population have left it with $14 billion in debt and a $300-million deficit last year, the auto capital of the country is headed toward bankruptcy. Michigan Governor Rick Snyder just appointed Kevyn Orr, a Washington bankruptcy attorney, to be the city’s “emergency manager,” a role with the power to implement budget measures without the consent of local officials.

Orr led the 2010 restructuring of Chrysler, the US automaker based in Detroit, during the the American government’s rescue of the auto industry. But his current challenge is what he calls “the Olympics of restructuring.” It might very well be: If the city doesn’t get back on its feet soon, it will become the largest municipal default in US history.

Felix Rohatyn faced similar problems in 1975, when he chaired a commission that extricated New York City from its financial crisis, a similar $14 billion debt load and an astounding $2.2-billion operating deficit (pdf). Rohatyn and a deputy were referred to as the “Batman and Robin of New York.” The legendary Lazard bankertalked to Quartz about his worries that the same tools he used might not be available in Detroit.

“We couldn’t do this today,” says Rohatyn. “The various stakeholders are no longer around the same table.” Read more of this post

Former Thai deputy premier Supachai Panitchpakdi warned that there were signs of a “bubble” in the Thai economy, with massive fund inflows heading mostly to the property sector.

Supachai sees signs of a bubble

March 16, 2013 1:00 am

Unctad chief urges officials to monitor property prices and bank lending

Former deputy premier Supachai Panitchpakdi warned yesterday that there were signs of a “bubble” in the Thai economy, with massive fund inflows heading mostly to the property sector.

Supachai, secretary-general of the UN Conference on Trade and Development (Unctad), expressed concern over a bubble in Thailand’s property sector, which he said could expand and create problems for the economy in the future. 

He called on the responsible agencies to pay attention to property prices, such as for condominiums, and to closely monitor bank lending. Expressing concern over overheated lending by banks, he said asset prices in some sectors are likely to exceed reasonable levels. Read more of this post

Is China’s ‘Real’ Economy Crashing?

Is China’s ‘Real’ Economy Crashing?

Tyler Durden on 03/15/2013 09:55 -0400

As Marc Faber noted, we hardly expect China to report GDP growth rates that do not perfectly fit the goal-seeked solution for utopian society, but under the covers, there appears to be some considerably more ugly real data. One of the hardest to manipulate, manage, or mitigate for a centrally planned economy is Electricity production. The year-over-year drop in China’s electricity production is the largest since the slump in Q1 2009; and the seasonal drop (associated with the New Year) is the largest on record at 25.3%! So on one hand China is discussing tightening monetary policy amid inflation anxiety and a potential real estate bubble – thanks to the rest of the world pumping free money – and on the other hand Chinese officials are faced with the reality of a drastically slowing ‘real’ economy. At the same time, we note that it appearsChina’s export-import data appears overstated. Rock meet hard place. Biggest seasonal drop ever in China electricity production and worst YoY drop since the crash in 2009… And as Bloomberg notes today: Widening differences in bilateral trade data reported by China and Hong Kong suggest export-import activity is being overstated by the mainland as companies report inflated figures, according to Mizuho Securities Asia Ltd. The chart below compares China’s data on monthly exports to Hong Kong the past two years, with counterpart figures from the city on imports.  

China’s numbers were 47 percent higher than Hong Kong’s in January, compared with a 13 percent difference two years earlier. The lower panel shows reports during the same period for China’s overseas shipments to the U.S., using each nation’s official statistics, where the differential has remained more consistent. Exaggerated trade figures would mean that China’s new leaders, who take over the government at the National People’s Congress this week, are failing to get the boost from global demand that the data indicate as they try to sustain a rebound in the world’s second-biggest economy. Hong Kong passed the U.S. in November to become the biggest export market in China data. Exports to Hong Kong from China rose 60.9 percent in the first two months of 2013 from a year earlier, compared with last year’s 20.7 percent gain for the full year. “This seems inconsistent with the pictures of the final demand in both Hong Kong and the countries for Hong Kong re-exporting,”  Read more of this post