Continuing the coffee sourcing theme that we’ve set out in the previous few blog posts, after last week’s overview we wanted to go a little deeper with an example of one of our flagship coffees.
We’re focusing on the Catuai from Farami, a farm in Costa Rica owned by Juan Luis Fallas Mata and his wife Maria Eugenia Ramirez.
We’ve chosen Farami here as the example because it’s a mid-priced coffee for us, and one we have good data on. It is a farm we’ve been enormously proud to buy coffee from. They take great care in their produce and have gone above and beyond in terms of their environmental efforts. Farami was the first farm in Costa Rica to receive the prestigious ecological Blue Flag award. They also process their own coffee on the farm in their micro-mill. Costa Rica itself has a deep history in coffee production, and is currently a stable and well established coffee nation.
When we begin to take the example of Farami then, and look at the value chain from there, the first port of call so to speak is the farm, and the farmgate price. This, as the name suggests, is the price that the coffee changes hands for as it exits the farmers hands and heads for the exporters.
One farmgate price isn’t the same as the next however, and is dependent on many key factors. First stop is the cost of production, to ensure that the farmers costs are met. Secondly, the quantity and quality determine the price of the coffee, as well as the way the cherries leave the farm. With Farami, the cherries leave as a processed raw coffee, but still need to be sorted and bagged at the dry mill. Elsewhere a farmgate price might refer to an unprocessed coffee.
The farmgate price is agreed between our green buyer Steve and Juan and Maria at Farami. The price is set in dollars per pound of unroasted (heavier) coffee, rather than the roasted coffee in euros per kilo that we would work with at this end of the chain.
Next up is the exporter. In Costa Rica, our coffees come through Francisco Mena at Exclusive Coffees. Francisco takes the processed coffee from Farami to be milled, bagged and made ready for export. We pay him a small percentage of the overall value for this service. The accrued price for each step along the chain so far is known as the F.O.B. price, and this is the standard price referenced when talking about coffee prices, such as the Fair Trade floor-price, or the C-market price that we spoke about in the previous two posts. Again, it is based on dollars per pound of unroasted coffee.
There’s another small step in this particular chain, whereby we sometimes use an importer to get the coffee to Europe. They take on the logistical legwork, and also help with financing the coffee so that the farmers and exporters can be paid promptly. This was the case with Farami last year, but not always.
It’s worth mentioning that what differentiates this set-up to more conventional supply chains is that the exporter and importer are there in a supporting role, rather than being in charge of buying and selling the coffee. This means that there’s transparency between Steve the buyer, and Juan and Maria the farmers, and we can be sure that they’re being paid a fair price for their coffee.
The next phase is when it lands with us here in the Dublin roastery. At this point we’ve already agreed to take on all the costs thus far, and we begin getting it ready for the public buyer, and the coffee shops who’ll retail it. We take the pricing information and the criteria that’s important to us, to work out how much we need to sell it to the retailers for.
Finally, the coffee-hungry public get to lay their hands on the Farami coffee, and in making their purchase, they’ve paid for each of these steps along the chain.
As mentioned in a previous blog post, we’ve seen a crisis in terms of the amount of money paid at origin, and who gets the lion's share of that final value across the coffee industry.
We’re happy to say that in the case of Farami, the price paid for the coffee is almost 4 times the current Fair Trade floor price, and that about 95% of the F.O.B. price goes to the farmer.
Whilst price transparency is an important aspect, doing up this one case study has shown that there’s a great deal of complexity when it comes to coffee prices, and the context needed to understand the pricing from farm to farm and country to country is huge. On top of this, to have a true reflection of the value chain, we’d need to analyse the costs to each link in the chain.
Finally, it also puts a lot of the burden on you, the customer, to understand whether the product you’re buying has been fairly traded. We’re looking for easier ways to communicate this, so stay tuned over the year as we do more work on this!
- Aidan Lonergan, Head of Wholesale