This is actually in response to two posts that I have read in the past few days one here on roaste written by Gazy and then another written by James Hoffman. They both are just talking about the prices of coffee and the impact and low price for it really.

It should be noted that the prices that are both shown in these two blogs are talking about the commodity price of coffee, these prices are not what most of the retailers on Roaste pay. However, as it was noted by James Hoffman they are most of the time tied to the commodity price, i.e. they may have a contract stating they are going to get paid two dollars above the commodity price. So that tie to the coffee we drink and the commodity price that is determined by a myraid of market forces, from the  esoteric to the real world ones are what determine the price.

My thought on this is that a lot of these commodity prices really are favored to large farmers that can operate on an economy of scale, and thus can afford to have a really low margin on their coffee. Or so I believe by my own experiences in agriculture, I grew up on a farm here in the USA, These pries just like corn or anything else here in the USA probably are squeezing out the small farmers that make the good coffee.

This leads me to believe like I believe was said by James, and insinuated by Gazy, there should be less focus on the price of coffee at the commodity level. I would be interested to know how the direct trade contracts are written up in coffee, and if it might be possible for some of them to start being written without regard to the commodity price. Having spend a brief amount of time in the wine industry, very brief, I know that at the time I was working the boutique wine maker that I was with had just inked a deal in which he agreed to buy grapes before they were even planted. So I would be interested to know how long term some of these deals are for.

Any deal that is written based on the commodity price of coffee is always going to carry risk for the farmers or the roasters. One side has the potential to win if any number of factors leads to the price either booming or crashing, it seems to me that contracts with each other that maybe are tied to something like inflation would be a better deal for both. However, how do you gauge inflation on the macro level?

Blogs:

Gazy, "Coffee: costs and price"

James Hoffman, "The absurdity of the C"

Picture from Direct Trade Intelligentsia (I think it's pretty)

Blog Category: 

Comments

Submitted by jbviau on
Here's what TW paid last year for his coffees: http://timwendelboe.no/2012/02/coffee-prices-2011/ It's well above the "C" price, which is great.

I am pretty interested to know how they came to those prices, while above the commodity price were they somehow tied to it?

I like that level of transparentcy (spelling?) and really appreciate and makes it a lot easier to buy from themseeing why they are doing with the producers.

That is an interesting thought regarding coffee price and most specifically Specialty grade coffee that we are interested in. Less focus on price is a good idea but ultimately that is what going matter the most to the farmers.

Well I am thinking that you need to create stability for both the farmer and the roaster. If I know I am going to pay x amount over the course of a few years it might allow both of them to be able to take more steps for the future, updating farm practices, or buying better equipment for a roaster. However, it doesn't allow for say the price to fall out the bottom and the roaster to get a screaming profit margin for a while if they keep their high adjusted prices, or vice versa. However, I am fully aware that it is hard to come to this consensus.

Submitted by Gazy on
Excellent followup on prices, Intrepid. Totally agree with you: raise quality, deal directly and decomoditize (?) the price of coffee. The way I see it, there are three sides in this market. The general public (coffee guzzlers, if you will) who settle for any caffeine source; the soluble (instant) coffee, where quality is not as important and the coffee lovers (us). If and when the roaster deals directly with the grower the situation is best for both. My belief is that all of us involved in the coffee market chain must endeavor to support this type of operation. On the grower's side, they must commit to selecting the best beans and produce the highest quality (not the largest quantity) so that their customers will always be happy. The roaster should then commit to pay a fair price and roast carefully, also in order to satisfy their customers. So, what is a fair price? For the grower, it is the amount that makes it profitable to produce very selected coffee. For the roaster, ditto. Anyway, it is the market that finally dictates the most reasonable price for good quality. If all involved in this market chain commit ourselves to this end, it's a win for everybody from grower to consumer. Besides, if coffee is sold by quality, not quantity, we might stop "that"company from thinking that they can genetically manipulate our coffees the same way as corn, etc.

I imagine that it must be hard for a grower to find the roaster that will work with them to improve their growing conditions in order to get that good quality. However, it seems like the chicken and egg thing, in any case I will continue to look for those direct trade coffees.

Coffee Prices

| by

This is actually in response to two posts that I have read in the past few days one here on roaste written by Gazy and then another written by James Hoffman. They both are just talking about the prices of coffee and the impact and low price for it really.

It should be noted that the prices that are both shown in these two blogs are talking about the commodity price of coffee, these prices are not what most of the retailers on Roaste pay. However, as it was noted by James Hoffman they are most of the time tied to the commodity price, i.e. they may have a contract stating they are going to get paid two dollars above the commodity price. So that tie to the coffee we drink and the commodity price that is determined by a myraid of market forces, from the  esoteric to the real world ones are what determine the price.

My thought on this is that a lot of these commodity prices really are favored to large farmers that can operate on an economy of scale, and thus can afford to have a really low margin on their coffee. Or so I believe by my own experiences in agriculture, I grew up on a farm here in the USA, These pries just like corn or anything else here in the USA probably are squeezing out the small farmers that make the good coffee.

This leads me to believe like I believe was said by James, and insinuated by Gazy, there should be less focus on the price of coffee at the commodity level. I would be interested to know how the direct trade contracts are written up in coffee, and if it might be possible for some of them to start being written without regard to the commodity price. Having spend a brief amount of time in the wine industry, very brief, I know that at the time I was working the boutique wine maker that I was with had just inked a deal in which he agreed to buy grapes before they were even planted. So I would be interested to know how long term some of these deals are for.

Any deal that is written based on the commodity price of coffee is always going to carry risk for the farmers or the roasters. One side has the potential to win if any number of factors leads to the price either booming or crashing, it seems to me that contracts with each other that maybe are tied to something like inflation would be a better deal for both. However, how do you gauge inflation on the macro level?

Blogs:

Gazy, "Coffee: costs and price"

James Hoffman, "The absurdity of the C"

Picture from Direct Trade Intelligentsia (I think it's pretty)

Category: BLOG

@gazy

April 18, 2012 | by intrepid510

I imagine that it must be hard for a grower to find the roaster that will work with them to improve their growing conditions in order to get that good quality. However, it seems like the chicken and egg thing, in any case I will continue to look for those direct trade coffees.

Cost or price?

April 14, 2012 | by Gazy

Excellent followup on prices, Intrepid. Totally agree with you: raise quality, deal directly and decomoditize (?) the price of coffee. The way I see it, there are three sides in this market. The general public (coffee guzzlers, if you will) who settle for any caffeine source; the soluble (instant) coffee, where quality is not as important and the coffee lovers (us). If and when the roaster deals directly with the grower the situation is best for both. My belief is that all of us involved in the coffee market chain must endeavor to support this type of operation. On the grower's side, they must commit to selecting the best beans and produce the highest quality (not the largest quantity) so that their customers will always be happy. The roaster should then commit to pay a fair price and roast carefully, also in order to satisfy their customers. So, what is a fair price? For the grower, it is the amount that makes it profitable to produce very selected coffee. For the roaster, ditto. Anyway, it is the market that finally dictates the most reasonable price for good quality. If all involved in this market chain commit ourselves to this end, it's a win for everybody from grower to consumer. Besides, if coffee is sold by quality, not quantity, we might stop "that"company from thinking that they can genetically manipulate our coffees the same way as corn, etc.

@son ton

April 11, 2012 | by intrepid510

Well I am thinking that you need to create stability for both the farmer and the roaster. If I know I am going to pay x amount over the course of a few years it might allow both of them to be able to take more steps for the future, updating farm practices, or buying better equipment for a roaster. However, it doesn't allow for say the price to fall out the bottom and the roaster to get a screaming profit margin for a while if they keep their high adjusted prices, or vice versa. However, I am fully aware that it is hard to come to this consensus.

interesting thought!

April 11, 2012 | by sontondaman

That is an interesting thought regarding coffee price and most specifically Specialty grade coffee that we are interested in. Less focus on price is a good idea but ultimately that is what going matter the most to the farmers.

@bro

April 10, 2012 | by intrepid510

I like that level of transparentcy (spelling?) and really appreciate and makes it a lot easier to buy from themseeing why they are doing with the producers.

@jbviau

April 10, 2012 | by intrepid510

I am pretty interested to know how they came to those prices, while above the commodity price were they somehow tied to it?

I believe CCC also publishes

April 10, 2012 | by donnedonne

I believe CCC also publishes the prices they pay for green coffee, which is still rare in the industry

Some good points

April 10, 2012 | by jbviau

Here's what TW paid last year for his coffees: http://timwendelboe.no/2012/02/coffee-prices-2011/ It's well above the "C" price, which is great.

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