The price of your cup of coffee is set to rise
With high coffee prices now hitting mainstream news feeds I thought some light on the darker side of coffee purchasing by multinationals, large high street stores and commercial importers would make an interesting article.
The nature of buying coffee is never an easy subject and in my experience buying quality will overall be best for all, from farmer to consumer. Here, Leon from Freeman Trading chats a little about the hardships facing some farmers despite the record-breaking prices.
Ultimately, the jump in pricing and pressures on global shipping/warehousing and staffing for all levels involved may see prices rise 10-15 per cent on your cup of joe.
COFFEE PRICES AT A FOUR YEAR HIGH!
You may be wondering what relevance this has to the coffee you drink. Firstly, let’s shine some light on the situation.
With (annual) rumours of bad weather in Brazil, the largest producer of Arabica coffee, we start to see pressure on the global coffee C price (price of which coffee is trading on the stock markets for commercial purposes).
Now bear in mind that many co-ops and organisations sold their crops beforehand, usually in the month of February some as far as two to three years in advance. They sign sales contracts without much choice as they need the liquidity to fulfil cash purchases direct from farmers and continue to offer support to their producers. This pre-finance comes from lenders at rates up to 20 per cent (I’m guessing they are still wearing face masks). This finance is only approved upon proof that this coffee has been sold!
With speculation running rife, conglomerates that trade in the UK often via their ‘speciality branches’, yet these often have ‘sister’ companies/positions on the ground who begin to buy up any unsold coffee coming down from the hills. Paying in cash on the ground causes a frenzy as the domestic market blows up, this too puts further pressure on the C price.
So having secured the crop, and any remaining coffee, these very same corporations now hold all the cards and as we see prices climb even higher, we see farmers literally break down in tears knowing the crop they sold in February is now being traded at more than double the price they sold for.
By purchasing Fair Trade Organic and/or from roasters with ethical buying policies, you can be satisfied knowing that should the market hit 1:90c l/b (minimum purchase price for Organic/FairTrade, 26/07 price is $2.03/lb) then the offer price now has to move with the market, some big players have their own protocol, but the right thing to do is re-negotiate in accordance to the C price + FTO combined premium of $0.50/lb so that’s a total of $2.53/lb.
A lot of roasters complain about Fair Trade, even snub it as it does not reflect quality, but it was not created to reflect quality, it exists to protect vulnerable producers from the scenario we see unfolding right now.
Rob owns Butterworth & Son coffee roasters and tea smiths, based on Moreton Hall, Bury St Edmunds
His job takes him around the world visiting coffee farms to source great coffees.