The Path to Prosperity
Last year, coffee prices remained quite high throughout the industry. The price paid for commodity coffee, also known as the C-price, reached a high of $2.58/lb - which is the highest it’s been in over a decade. At Calendar, we proudly paid 22% more for our coffees compared to 2021. However, it’s important to note that these higher prices don’t necessarily equate to greater prosperity for producers. While we’re able to show that we paid higher prices for our coffees last year, the question still remains “is this enough?”
COST OF PRODUCTION
Coffee farms are businesses just like any other, which means they require a profit to remain viable. Yet the production costs at farm level are rarely taken into consideration when a coffee is sold. Recently, coffee producers around the world have seen a dramatic rise in their costs of production. Struggling with inflation and faced with increasing prices of fertiliser, transportation and labour, many farms are now operating at a loss. This type of situation puts producers under constant pressure to cut costs - often at the expense of the environment or the workers on the farm.
To address this issue, our importer Caravela, has created a figure called the Minimum Prosperity Price. This figure calculates the minimum farm-gate price for each country they work in, that will allow the average farmer to meet their costs of production, make a living wage, and obtain a profit margin of at least 20%. This is exciting because for the first time we will be able to buy our coffee based on a farmers cost of production and ensure they earn a profit, instead of paying premiums on a low and unpredictable market rate. Moving forward, we will be using this indicator as the foundation for all future contracts of our Teamwork Espresso.
Last year, we sourced our Teamwork Espresso from 6 communities with a total of 52 producers across 4 Latin American countries.
Since quality coffee is often grown in remote, high altitude places, hand picked by farmers with less than five hectares of land, it can be harder to source larger volume lots from a single farm. Our Teamwork Espresso is a blend of coffees from these growing communities – combining similar quality lots at origin. This concept of having multiple producers contributing to each lot is also what gave our house espresso its name.
MINIMUM PROSPERITY PRICE
With the help of Caravela, we’ve compared their Minimum Prosperity Price data to what we paid for our Teamwork Espresso in 2022 in the graph below.
It is encouraging that we paid 8% more than the Minimum Prosperity Price in Colombia, 25% more in Guatemala and over 50% higher in Nicaragua, ensuring that producers in these countries are making a profitable income. It’s likely these figures would be less impressive if the C-price at the time of contracting these coffees had not been so high. Compared to this time last year, the commodity price for coffee has fallen from $2.17/lb to $1.48/lb today, which also affects the prices paid in the speciality market. Despite high prices last year, we did not reach the Minimum Prosperity Price in Peru. As you can see, the Minimum Prosperity Price in Peru is significantly higher than the other three countries, and this is due to three major factors.
Of the four countries we purchased from, Peru has the smallest average farm size, the lowest productivity and the second highest cost of production. Together, these three factors contribute to a very high Minimum Prosperity Price. As the data suggests, we are not paying enough for our coffee in Peru. We are currently reviewing all of our future contracts in order to improve on this next year, with the goal of guaranteeing prosperous prices to every community we buy our Teamwork Espresso from by 2025.
Earlier this year we embarked on our first origin trip to Colombia. The purpose of this trip was to meet some of the producers we have been buying from, and gain a better understanding for how our Teamwork lots are created. Working closely with Caravela’s team in Gigante has also allowed us to create our own fixed priced contracts. These are based on the average production costs from the farms we buy from, and moving forward they will guarantee the minimum prosperity price for the producers that contribute to our Teamwork Espresso in Colombia.
We are very proud of what we have achieved in Colombia so far, and our plan is to replicate the work we have done here in the other origins we buy our Teamwork Espresso from over the next two years.
Photo credit: Calendar Coffee
Alcedes Avendaño at his farm Buena Vista, Gigante, Colombia