Coffee prices nowadays at the farm level

[Andres Castro]

Hola, I just wrote this article on our Blog site. I would like to share it with you and hear your thoughts.

Mar 15th, 2009
by Andres.


Not long ago, I wrote an article about the prices of the 2008-2009 coffee crop. I mentioned the pricing was not falling too low because of the possible shortage of coffee. I still believe that the low supply forecast of coffee and steady consumption has kept coffee prices not as low as they were in the late 90’s and early 2000’s.

I hope this statement continues to be true throughout this year, as many growers are already suffering today. Because of the lower prices, the cost of production for many growers can no longer be met. For instance, when I visited Mr. Cifuentes on his farm Marilandia, located in San Pedro Necta province in the northwest part of Guatemala, the closing C Market price was $1.08 per pound that day. If he received at least this price he could possibly make it. In addition, the crop yield of his farm was down by 40%, putting more pressure on his final cost of production for the year.

As we travelled with Mr. Rolando Cruz, an experienced researcher from Anacafe, he helped me to understand how difficult times are for today’s growers. The network of local buyers called “Coyotes” (local buyers that usually buy coffee based on a price that works for them) impact the rate at which the grower’s are paid. In addition, most growers are disconnected from the outside world. For instance, the C market drives prices up and down, making the local prices even more vulnerable. Not to mention, the ‘middlemen’ and logistics costs between the producers and the roasters deduct a lot from the final value received by the growers.

We found out that the final price per pound of parchment (green bean + husk), paid to Mr. Cifuentes was around $.96 to $.98 (US Currency). After converting this to the green bean alone, he received an average of just $.70 to $.72 cents per pound. As you can see, this is very low compared to the $1.08 per pound on the C Market and even below cost of production. So, the question remains, what steps can be taken to help Mr. Cifuentes’ farm become a more sustainable, profitable business? From my previous experiences, before the next harvest starts, I do believe Mr. Cifuentes, as well as millions of other growers should do the following:

v Assess the quality of the coffee at different stages of the farm, investing as much as possible in good fertilizers

v Find a buyer in importing countries, building direct relationships with international buyers. A good way to build a direct relationship is through programs such as Cup of Excellence, SCAA Guild Origin Competition or any national competition.

v Closely follow the cash flow of the farm to assess the cost of producing one pound of coffee

The coffee future facesOur hope is to assist more farmers receive at least a fair price for their coffee. I know that the price of production varies from one producing country to another but at 1,45 Cents per pound of green bean paid at the farm level would definitely help to sustain their business.

[Joachim Oster]

News I read today ( March 16th. 09) aren't helping in this regard. KRAFT, USA biggest roaster of coffee, announced that they will lower prices for coffees. Don't know which of their many coffee brands are affected ( YUBAN, Starbucks packaged products, Jacobs, e.g.), but it certainly adds to the pressure of what Andres describes. Most of the pressure to lower prices on KRAFT comes from the supermarkets and their own cheaper in-store brands.

One other suggestion to Andres is to start trying to market directly to end customers and home roasters. Even if it is only a fraction of the sales, it builds another leg to stand on. It helps to educate coffee drinkers about the SINGLE ESTATE, SINGLE ORIGIN concept which more and more wine farmers use.

Also team up with other farms who produce e.g. wine, cigars, nuts, crafts in your region. Bundle these products and try to market those nicely packaged for tourists. Approach your country's tourist office to work with your embassies around the world. Plan finca tours with other farms together in your region. Visitors always buy and remember you.