Journal

Coffee is traded as a commodity, and, specialty quality or not, the commodity pricing scheme still affects specialty grade coffee pricing. Coffee prices have fluctuated within the same range since the late 1970s (some of the highest prices paid for green coffee were in the late 1970s!), meanwhile the cost of living and the costs of producing coffee have increased with inflation. This globalized trade pays based on quantity over quality, and virtually everyone but producers thrives on market prices remaining low.

The specialty coffee industry offers "higher" prices paid based on quality specifications, but "high" is arbitrary if we don't know a business' costs of production. When and how will a farm actually profit if we don't know their cost of production? Working with farms long term, through the good years and bad, helps mitigate risk for farms, but what good will that do if roasting companies and the intermediaries are the only ones profiting from the transaction? If we want to continue to work with quality coffees and build farm partnerships we must [radically] change the supply stream's current pricing structures [by building in accountability and equity].

The annual Specialty Coffee Association (SCA) Expo was held in Portland this year, and we used this opportunity to share our new Cost of Production Covered (CoPC) questionnaire and template with coffee buyers. Thousands of coffee industry professionals attended the conference, giving us the chance to catch up and share the template with old friends while also making new ones! We had the distinct pleasure of hosting our friend and colleague, Andres Fahsen (Pachuj-Finca Patzibir), who, along with Cristy Guirola (TerraNegra Coffee Imports), helped us start the CoPC Project in the first place. We were also able to spend time with Salvador Melgar and Marielisa Hernandez (Peña Blanca) and Cristy, as they too were in Portland for the convention. We walked the show floor, attended events, visited cafes as a supply stream dream team, and shared the word about collaborative price setting. The convention was the perfect moment to host our Ask Me About Cost of Production: The How To Guide event at our Powell's Books cafe location, and was the perfect opportunity to debut the new template.

The template has gone through a few iterations over the years. We started this project with a questionnaire that was nearly 50 questions long that gathered data for a proforma template that we had built. While we were able to gather loads of detailed data, processing it in a comprehensible way was incredibly time consuming and not always straight forward to share. Sometimes we wouldn't have the cost of production nailed down until months after we received a coffee. We decided to pair down the questionnaire and create a more user friendly template. We wanted to make the project more feasible for other roasters to implement, and we even wanted the template to be able to work with brand new farm partnerships. The template is now 8 questions long in Google Forms, and is linked with a spreadsheet in Google Sheets. We're finding that, as simple as the design is now, we're still able to get representative results; we're still able to base contract prices on a substantive metric.

Green coffee buyers, those that are building and/or signing green coffee contracts (e.g., buyers that work for roasting companies, importers, traders, etc.), should be able to use this template as a starting point. The current iteration uses question categories that are generalized.  Because each farm/region/country will have its own unique context, template users can add their own questions and formulas to fit those contexts.

In order to identify and base prices on a farmer's cost of production and margin it's important to work with importer and/or exporter partners that have close or direct contact with single farms (though we're currently trying to get a project going with a washing station in Burundi at the moment!). This contact will make it more likely that the buyer can identify the price that was actually received by the farmer. This price is called "farm gate" or even "FOB" if the producer is paying exporting and dry milling costs. If the farm gate price that the is lower than the gross margin on a farmer's cost of production, those using the template can build CoPC premiums (the difference) into the contracts with the importer. This will ensure that the producer receives the difference. If the farm gate price is higher than gross margin on cost of production, it would be up to the user whether they wanted to pay a premium higher than a 30% gross margin. We keep our premium at 30%, so if an importer pays more than that it means that the importer pays exceptional prices!

This interview originally appeared in the Community Funded Coffee e-newsletter.

CFC: How would you describe your role as an importer, and often a mediator between coffee producers and roasters?

MS: In Colombia and Guatemala (and as is the case with Jorge’s coffee from El Jardin), Shared Source actually plays the role of both the exporter in Colombia and the importer in the US. As an exporter in Colombia, our job is to pursue and promote relationships with coffee producers, receive coffee samples and evaluate them to make decisions about purchasing them. From there, we purchase coffee in parchment form directly from coffee producers, and then take responsibility for dry milling the coffee and export logistics (and fees!). In practical terms, that means that we’re regularly in touch with coffee producers to understand how things are going- asking about the weather and how that affects harvest, learning about ongoing and new challenges, trouble-shooting some agronomy and processing, and also offering interest-free pre-finance loans to those who need them. We have a Colombian colleague on the ground (who is a remarkable and distinguished coffee producer in his own right!) who plays an important role in that work. We receive coffee samples, roast and cup them multiple times, and then when we purchase coffee, we transfer Colombian pesos directly from our Colombian bank account into producers’ accounts. From there, we manage the dry milling process- that means making decisions about how to create community lots and single producer lots. There’s a lot of important quality control at that phase- making sure that humidities are within an acceptable range, and monitoring water activity to make sure that coffees are stable. This can be an important step in ensuring longevity of the green coffee. From there, we coordinate with a trucker to get the coffee to port, and it’s loaded into a container that’s placed on an ocean vessel. That’s the point where we put on our importer hats! We coordinate with customs brokers to fill out the appropriate paperwork to bring the coffee into the US, and then it’s unloaded into a warehouse. Then, we work with roasters to identify and purchase these green coffees, and make sure that the roasters can receive the coffee in their roasting spaces. 

With all of this, you can see that our role as exporter/importer is really as a link between coffee producers and roasters. There’s a lot of communication on both ends- communications with producers to understand their expected volumes, to get a sense of challenges that may affect their costs of production, to identify and negotiate pricing that allows for long-term sustainability, and to communicate our purchasing intentions so that producers can confidently make sales decisions with all of the relevant information in their hands. We’re having many of the same conversations with roasters too- understanding their projected volumes, matching their needs up with coffee from specific producers, and sharing what we learn from producers. It’s also important to hear from roasters about their challenges and to work together to find solutions. 

CFC: As Community Funded Coffee’s 1st quarter importer, Shared Source has led us to work with Jorge Rojas of El Jardin in Colombia. Can you tell us a little bit about how and why Shared Source began working with El Jardin?

MS: We met Jorge many years ago, probably at least six years ago, and we met him through the cooperative where he’s a member, ASOPEP. Meeting him predates my time at the company, but he’s such a specifically talented producer that it’s pretty easy to imagine what happened- a sample of his coffee was probably included in sample pack from ASOPEP, and it probably stood out as delicious! I’m sure that Shared Source probably asked to meet him- or maybe he was even there at the cupping, since Jorge has helped ASOPEP out with a lot of quality control over the years! From there it has developed into a relationship of mutual admiration. We love Jorge’s curiosity, desire to experiment and learn, and clear interest in coffee- it’s remarkable that he is a skilled cupper, and often cups his own experiments to identify the best way to process. Jorge’s values also align closely with ours- he is a conscious farmer, interested in tending to the soils on his land, and recognizing soil health as an important part of overall farm health. And in us, Jorge found a committed buyer- someone willing and interested in buying his harvest year after year, and offering high prices that reflected the work involved with producing specialty coffee.

CFC: There is a socioeconomic and politically-motivated strike happening right now in Colombia, led by a left-wing group called the ELN, that has placed a freeze on cargo exports. Can you tell us a little more about how this affects the Colombian coffee sector, and specifically El Jardin coffee?

MS: This question is a little less relevant since I first mentioned it to you- the armed strike lasted three days, from Feb 23 - 26. It definitely affected us- we had a truck with milled coffee (green coffee) that was delayed on its way to the port of Cartagena, and it wasn’t allowed to travel on the roads at night (and was forced to wait for a day in some sections of the road where cargo trucks were told not to pass). Its delay at the port is still being felt- we weren’t able to unload and reload the coffee into the container, and it’s still possible that we’ll miss the shipment because of the delay (we’ll find out more tomorrow morning when we’ll see if the coffee is able to be loaded before the 10am cutoff). But logistics have and will plague us throughout the process of buying coffee! This will surely not be the only delay/concern we’ll face- I’m sure there will be delays when the coffee arrives at the port in the US as well!

CFC: Is there anything else you’d like to share with CFC’s members and coffee lovers who might be reading this?

MS: The more I learn about coffee, the more I appreciate what a goddamn miracle of hard work it is that any of us so far away ever get to enjoy delicious coffees! It’s far from unskilled labor that gets us here. Instead, it’s the work of knowledgable farmers working to combat the effects of climate change in an agricultural product that is heavily dependent on the weather- both in terms of managing their farms, and in terms of processing coffee. Differing levels of sugar in coffee cherries (and warmer or cooler weather) can influence fermentation times, and producers always need to make adjustments as needed. From there, skilled mill workers follow instructions for microlots to a T to make sure that the coffee isn’t mixed with other lots, and then port workers operate heavy machinery to allow us to move coffee between far-flung locations. And then we get into the work of roasters, who use the experience of thousands of prior roasts to inform their choices of how to perfectly draw out sweetness from green beans. Finally, baristas expertly dial in coffees on espresso machines, making adjustments based on roast levels, ambient temperatures, and desired profiles- and then they work magic with milk to create perfectly micro-foamed drinks! Enjoying great coffee is such a relatively approachable luxury that it’s easy to forget all of the hands behind it! And it’s worth taking a moment to savor in it all.