Our Approach to Green Coffee Pricing Fairness

Prices we pay for coffee in relation to the global coffee exchange and fair trade

Here at Sweet Maria’s and CoffeeShrub, our buying has changed in the last 20 years, from initially buying off the lists of importers to buying our coffee in the producing countries. But our idea, that the path to good quality coffee is to build long-term buying relationships with farmers, coops, coffee projects and exporters, has remained unchanged.

Many years ago we started our direct purchase model, where we verify the pricing to the producer, which we called Farm Gate. Recently, there’s been a uptick in focus on the fairness of coffee pricing, especially in the portion that makes it back to the farmer. We’re happy this focus has re-emerged: Trust and transparency is important to us, but we also know that is coffee, as in much else, often complicated. Green coffee pricing and fairness aren’t easy to resolve, but it certainly is our goal to try to in our own sphere of influence.

We support FT and offer FT coffees but our direct purchasing model is more oriented towards cup quality, and uses our direct relationships to assure fairness to the farmer.  We do still buy coffees from importers and brokers if they are good quality.  But in the origins where we are particularly strong, our longstanding relationships with coffee producers, developed through our Farm Gate program, ensures the best and most consistent quality coffee, and a fair and stable price paid for that quality. We avoid the Co-ops that do not share premium prices with their farmer members. Any coffee bought off an importer list does not qualify for Farm Gate unless we independently find pricing to the farm. Further, lots from origins where hundreds of tiny farms contribute to even the smallest importable lots, such as in Sumatra or Yemen, can’t qualify for Farm Gate in some cases, nor can Auction Lot Kenyas even though we pay extremely high prices for them and know from direct observation that a premium reaches the farmer. So it’s not like things not tagged as Farm Gate aren’t bought at high prices or that fair share doesn’t reach the farm. We just can’t verify that. And to be clear, verification does not mean we send someone there to certify it, because as a small company that is impossible, and that is (supposedly) what fair trade is good at doing. For us it means a level of trust in our supply chain and partners to be transparent with the information. We have to rely on others, and we have to find trusting relationships for our coffee sourcing.

Raking natural coffee at the Guji Highland processing facility in Shakiso
Raking natural coffee at the Guji Highland processing facility in Shakiso

The global coffee market has been through booms and busts since we started out in 1997. Generally it has low impact on us.* Our pricing is set directly with farmers and exporters so it isn’t much impacted by the global coffee exchange price when it is down, as it has been for some time. For example, our prices in key origins like Guatemala, Colombia, Ethiopia, Kenya, Sumatra, Rwanda and Burundi have not dipped with the global market. We pay a stable price that is considerably higher, in the very general range of + 2.00 USD or more over the current 1.00 USD market.

We pay a premium for quality coffee that isn’t impacted by the issues that change the global exchange rate, like what the Indexed Funds are doing. It’s concerned with longer term supplier/farmer relationships that result in us getting the quality of coffee we have built our reputation on. **

Sorting freshly fermented coffee parchment in the shade, Sidama
Sorting freshly fermented coffee parchment in the shade, Sidama

One impact, though, of recent discussions in the internet “coffee-sphere” about transparency on coffee pricing, and particularly efforts to assure that farmers are being paid above their cost of production, has been a huge sense of stress – at least for me! This stress comes from recognizing the incredible amount of work it would take us to research each coffee we source, the local cost of production for hundreds of locales, local cost of living, the breakdown of our Farm Gate payment to owners and laborers … the work is overwhelming. So we have had many discussions about what would be “do-able” for our us and our limited resources, and what would be meaningful to our customers.

We decided to choose some of our most important coffee-sourcing origins, representing over 30% of our annual purchases, and compare our prices over the long-term with the New York C Index, the global arabica price for the same period. This does not provide full detail, but it does give a longer term overview of the level and consistency of our coffee-sourcing.***

2016 C market high $1.55 per poundGuatemala average            $ 3.6914 per pound
total weight 113,344.00
Colombia average                  $ 3.1983 per pound
total weight 65,912.00
2017  C market high $1.31 per poundGuatemala average            $ 3.8885 per pound

total weight 205,840.80

Colombia average                  $ 3.4885  per pound

 total weight 59,290.00

2018  C market high $1.22 per poundGuatemala average            $ 3.6453 per pound,

total pounds 231,697.40

Colombia average                  $ 3.2071 per pound

 total weight 116,754.00

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*We have a separate, detailed article concerning this. While the global market has a low impact on us, it does effect pricing across the board and has a huge impact on farmers’ incomes generally. We are not big buyers in the wider scheme of things, or even in the so-called “specialty market.” Even taken as a whole, buyers of our ilk do not amount to much of the total specialty coffee purchased. Many farmers are however, impacted by global prices with financial instruments (i.e. crop loans, futures contracts, etc) that are tied to the market and this concerns us a lot!

** The mystification of coffee buying has reached a crescendo, and we hope all our farm info and videos has not contributed to that. We worry it has. We go travel and buy coffee because we sell coffee. It’s not a big deal. A company that buys and sells nuts or beans doesn’t generally elaborate much on “sourcing,” but coffee is somehow different. We believe that there is nothing righteous or heroic about paying a good price to the farmers who can produce the quality of coffee we need. We believe our approach reduces the discomforting (and patronizing) tone that we find underlying the “coffee buyer narratives” one might encounter in the “specialty coffee” trade. For example, we don’t “work with farmers.” And if we say we have a relationship, it’s a seller-buyer relationship. After all, if you buy local-grown tomatoes at a farmers market, would it be fair to say that you “work with the farmer” or you have “a relationship” with them? We think it’s a stretch. On the other hand, it’s semantics and we understand other companies, like ourselves, are proud of what they do.

***Our goal is to start with an overview and add informative data in the future, including a portrait of our sourcing in a particular coffee-producing country comparing our Farm Gate price level to local equivalents. In terms of finding how our pricing translates into local currency, and exactly what farmers who sell to us are being paid, we discuss this in our various travelogues and videos fairly regularly, and those are the best sources for that information since it is specific to the region.

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Some further thoughts on the coffee trade and global commodities…

It’s hard to write about this topic without recognizing the lack of shared language and concepts in the coffee trade. When we are discussing the social mission involved in fair pricing to all in the coffee production cycle, we leave the standard practices of commerce and enter into something that requires a range of knowledge from different disciplines: sociology, cultural anthropology, global trade and the economics of poverty, to name a few.

Let’s take a simple part of the equation: What is a farmer? Even when we try to define how we reimburse farmers for their labor, the questions pile up quickly: What kind of farmer, from where? A farmer from Antigua, Guatemala will likely be quite different from one in Huehuetenango Guatemala, who is generally quite different from one in El Quiche. One might typically be from an older land-entitled family with many hectares, another with a couple hectares and just the family to labor on the trees, and the last with just a few hundred trees, and few resources to improve them. You generally can’t work with a single farmer at that level; they have to be organized into a group, a co-op. There would be hundreds of them contributing to a 20 bag lot, whereas a few farmers in Huehue could produce 20 bags, and most older farms in Antigua can produce multiples of that.

We are just referencing Guatemala in our example, and 3 areas. It’s a completely different story in Panama, or Colombia, let alone Burundi, or Flores Indonesia, or Nyeri Kenya. It’s taken us all of 20 years to fathom the differences, and with a lot of help, to approach each origin in a way that makes sense for a small business like ours. So when someone says “we work with our farmers ….” it’s a statement that, for us, has to be specific, localized, and recognize its own limits. Otherwise, it rings hollow.

That doesn’t mean that COP (cost of production) and COL (Cost of living) cannot be determined, or these difficulties should be a roadblock to action. But we do not have to look so far from home, in our local or national politics, to find how difficult it is to determine these same standards, the amount of field work it takes to determine and update this data, and how a small coffee company (like us) would need to be part of a much bigger collective effort, likely one with support across University networks here and abroad, to provide data.

On the positive side, new methods of reporting from the farm gate, compiled from cell data and in some cases using newer technology (blockchain) shows some hope of crunching huge amount of data into usable numbers to determine what farmers are producing, what they are getting for it, and what their local costs are to live better lives. For me, I (Thompson) can verify our impacts by direct contact with our supplier farmers and groups by actually talking to them face-to-face in my travels.

As we await new ways to verify statistically that our payments meet farmer needs, we offer our pricing versus global and specialty market standards, as well as our Farm Gate model, imperfect for sure, but some effort toward transparency.  – T.O.

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