I try to check out Cafe Imports web site at least once a week for any new coffee or info I can get. Tonight I saw this article by Tim O’brien of Cafe Imports. I am giving him full credit and link back to the original post on Cafe Imports, so I am pretty sure they won’t mind me posting this on OCB’s blog.
This is an AWESOME article about the high prices of the current coffee market.
Here is Tim’s article.
The Coffee Fix:
Depending on where you reside along the coffee trail from farm to cup your perspective of the current “coffee fix” will be very different.
For the average consumer needing their morning or afternoon coffee “fix”, many see rising coffee prices as an assault on their basic human right to have cheap coffee. And if there is noticeable drop in the quality of their preferred cup they will look to blame the roaster or more likely the poor barista behind the counter. The fact that two year old exchange grade coffee now sells for what a high end boutique coffee did just a year ago has no impact on their world, they just want the same quality coffee at the same price. For the consumer, the end of cheap coffee and gas are two realities they are just going to have to get used to as higher prices may be here to stay.
This is putting the roasters and coffee retailers in a “fix” as the rapid rise in the market and its duration has left little room to just absorb the higher green coffee costs and having to raise prices or renegotiate contracts every other month is awkward and risky for business as you do not know which clients might walk away. Stocking up on green coffee just got pricier so operating capital is tighter, all in an economic time when even stable clients may be slower to pay or cutting back orders. Hard decisions between minimum quality level of green coffee and price are being made every day now. There are very few people in specialty coffee now who were even in business back in the late 70’s to have prior experience dealing with green coffee prices this high or have a business model that can accommodate them. Finding the new “pain threshold” or quality/value limit for clients is now a major pre-occupation for roasters.
For the importers and green buyers trying to buy good coffee and “fix” a price with exporters and producers is more complicated than ever. The risk of buying green coffee just multiplied as inventory costs have doubled and banks have made getting extended credit lines harder. Many coffee contracts that were negotiated fixed price before the spike in the market are not being fulfilled or the quality dropped as the many cooperatives or exporters can not buy coffee fruit to sell if they have contracts set way below market value. The price of coffee has soared and producers have been selling large amounts of coffee to market speculators on the street for great prices in cash rather than local mills. Many producers are also not selecting best fruits or processing properly as they are rushing to get beans to market before the high prices go away. This is why with the higher prices the average quality in many coffees areas has actually gone down instead of up. This in turn has also pushed the remaining top coffee prices even higher as there is less on the market.
As we on the consuming side of the coffee trail struggle to adjust to this new coffee reality the one “coffee fix” that is not getting much attention is that the producers are getting prices many have never seen before. Having just returned from 3 origin countries and seeing a very different atmosphere in the coffee regions than I normally would witness, it seemed that at origin these prices are a huge “fix” over the many years of inequitable or even artificially low coffee prices in many coffee regions that allowed many small producers survive, but very little else. These are some good times for producers and, for many, there are now some extra funds to invest in the coffee farm, fix up the house, get new clothes, send kids to school, pay off debts, and fix the work truck. Spending money in the same communities that need it most. Producers seeing a brighter future for the next generation on the family coffee farm is priceless. That is the silver lining on this challenging coffee market for us on the consuming end.
The consumers and roasters are fighting to adjust to higher prices, though we hope the price swings will lessen and stabilize soon, this is actually healthy for our industry in the long term. Coffee prices are now more in line with actual production costs and people who see a decent income from their farms will be more ready to care for them and increase their production and quality. Higher long term supplies of better coffee is in the best interest of the specialty coffee industry as a whole rather than a market that supports overproduction of cheaper coffee. With some patience and understanding, we will make it through this current market shift, and we are confident that the long term outlook for specialty coffee is extremely promising.