Episode 5: The Future Price of Coffee

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WAVE COFFEE

The sustainable future of coffee

Pricing is a major issue across the specialty coffee industry. As retail prices for roasted coffee and coffee beverages continue to climb, the price we pay for green coffee produced at origin has remained stagnant—creating a huge discrepancy and unsustainable livelihood for farmers. In this episode, we discover why commodity pricing is a terrible way to price specialty coffee and what coffee companies can do to help bridge the gap.

Meet the Guests

Camilo Enciso Suarez is the director of ASOPEP, (Asociación de Productores Ecológicas de Planadas) in Tolima, Colombia. Chad Trewick, a specialty coffee consultant with more than 30 years of industry experience (LinkedIn.) Grayson Caldwell, Senior Sustainability Manager at Bellwether Coffee (LinkedIn.)

Key Takeaways from the Episode

The conversation around specialty coffee is filled with misconceptions and biased data. If there’s one thing you take away from today’s episode, it’s that the commodity price (or, C‑market) is a terrible way to price specialty coffee.

Coffee Farmers Need to Be Incentivized to Remain in Coffee

The episode begins with a conversation with Camilo Enciso Suarez, the director of a coffee cooperative in Tolima, Colombia. ASOPEP, which stands for the Asociación de Productores Ecológicas de Planadas, is a cooperative made up of 384 coffee farming families, each selling their coffees to the cooperative.

Camilo owns a small farm in the region as well.

During the conversation, Camilo tells a story of a young barista from Paris who visited his farm. She agreed to pick coffee cherries for the day, in exchange for free lodging and the equivalent of a day’s wages at the local rate. After a long day of labor, she received the compensation and confronted Camilo, asking why he was not paying his workers more.

By explaining that for $150 you could buy roughly 50 coffees in Paris or thousands of coffees in Colombia, Camilo demonstrated the coffee price crisis to this barista.

“We’re not the ones perpetuating the injustice. It’s the people at the other end of the supply chain whose dollars are not funneling back to us meaningfully.”

If Camilo could receive better pricing for the green coffee, that money would funnel back to the workers—many of whom work on multiple farms or are trying to grow other crops to generate more income.

Between the coffee pricing crisis, climate change, and the remote locations of most coffee farms, farmers need a reason to stay in the industry. Otherwise, we’re bound to see farmers slowly transition to more lucrative crops or forms of work.

We Know the C‑Market Price, But What About Specialty Coffee?

The C‑market measures the price of coffee as a commodity worldwide. And, this price has remained relatively flat over the last 40 years while the price we pay in retail environments has doubled, if not tripled. Meaning, farmers haven’t seen a substantial price increase in decades.

Chad Trewick, a specialty coffee consultant, describes a moving experience from his years as a green coffee buyer for a large specialty roaster in the United States. This story—which we won’t spoil for you here—radically shifted how Chad thought about specialty coffee prices.

“… it was really my own adherence to the for‑profit companies’ target prices that were leading to this specific family’s ongoing financial hardship and the loss of opportunity for this kid who had these cool dreams to see the world. And honest to God, once I felt that and saw that, I couldn’t unsee it.”

Even though Chad and his employer were paying well above commodity coffee prices, it still wasn’t enough to cover the cost of production or provide a livelihood for this family of coffee producers.

It was this experience, among others, that led Chad to help create the Specialty Coffee Transaction Guide. This guide uses data volunteered from roasters around the world and calculates the Return to Origin percentage (how much of each retail sale makes it back to the producing country where the green coffee was grown.)

“We have 81 data donors. At this point, we’re in the process of onboarding, probably another 10 to 15 more. We have $2.1 billion of coffee transactions in there, just over 1.09 billion pounds of green specialty coffee…”

While this guide is ever‑evolving, roasters and green coffee buyers can use the aggregated data to measure against their company transactions and answer the question, “Am I paying enough—or higher than average prices—for the quality coffee I am purchasing from this region?”

Free on Board (FOB) Price vs. Farmgate Price

The Specialty Coffee Transaction Guide does a phenomenal job of collecting transactional data from across the industry. However, much of this is FOB (free on board) pricing.

Free On Board is a global commodity shipping term referring to the price for the coffee to be farmed, processed, put on a boat, and sent to importers and roasters around the globe.

Farmgate prices are what the producers responsible for growing and picking coffee cherries receive. Sadly, anywhere from 50% to 80% of the FOB price doesn’t make it back to the producer.

The Specialty Coffee Transaction Guide highlighted this discrepancy and proved that there was much to be done about better understanding farmgate prices.

With this in mind, Grayson Caldwell and the Bellwether Coffee team set out to study the cost of production and determine what a true living income in coffee farming communities would be.

⭐ Remember, the commodity market doesn’t take into consideration the cost of production, location of the farms, regional laws, or other factors affecting coffee farming.

The Verified Living Income white paper explored how much a coffee producer needs to produce a pound of coffee as well as how much they need to earn to live a dignified life.

“… and it comes up with a living income base pricing per pound of coffee that not only covers the cost of production, but it enables coffee producers to reach that living income.”

The pilot study partnered with Camilo Suarez and ASOPEP to examine the expenses of the farmers in the Tolima region of Colombia.

Based on this research, they discovered that each farming household would need a $4,000 surplus per year.

As a result of this study, Bellwether Coffee signed a 2021 contract with ASOPEP based on the pricing reported in this study—20% higher than the year before.

What Can You Do to Help?

For those starting out in coffee, it’s easy to feel as though you don’t have enough purchasing power to influence farmgate prices.

In reality, it all starts with a conversation.

Ask your coffee supplier to provide pricing about what they paid for the green coffee. See if they’re willing to report their transactions to the Specialty Coffee Transaction Guide.

And, if you’re met with resistance, there are plenty of other coffee suppliers willing to help improve the quality of life for those in producing countries.