PRICE TRANSPARENCY

As an industry, we’re always claiming to be paying better prices for our coffee, but what are these ‘better prices’? When we started Calendar, we were congratulating ourselves on the premiums we were paying for our coffees, but once we started looking into it, we began to question if these prices were actually enough. The truth is, specialty coffee requires a lot more time, care and labour to produce - it’s often risky and expensive business! While we may be paying ‘better prices’ for the coffee we buy, it doesn’t necessarily mean we’re paying enough for the farmers to make a profit.

In order to ensure producers are earning a prosperous living, we need to be aware of how prices are distributed along the supply chain. To help shine a light on the prices paid along the way, we’ve compiled this report showing each of the coffees we purchased in 2023. Similar to the previous two years, this report focuses on our buying history with each producer, the volumes we purchased, and the prices that were paid throughout the supply chain.

WHY TRANSPARENCY?

We believe greater transparency around coffee prices can benefit the entire industry. Producers will have a better understanding of what their coffees are worth, green coffee buyers can see what others are paying for similar lots, and consumers will know how much makes it back to the farmer. Publishing our coffee prices does not guarantee the producer was paid a fair price, but we do believe transparency around this information is crucial to building a more equitable future for our industry.

GLOSSARY OF TERMS

Farmer refers to someone who grows and sells coffee as whole cherries

DIFFICULTIES OF TRANSPARENCY

We faced a number of challenges while compiling the data for this report. Besides the various weight and currency conversions, coffee is valued differently depending on whether a producer is selling whole coffee cherries, parchment, or fully milled green coffee. Each step in processing and milling adds value to the coffee and is reflected in the price. In our report, you’ll see that farmers in Ethiopia and Rwanda sold whole cherries to their local washing station, which is why the price paid was much lower for these coffees. These complexities make transparency even more difficult, and demonstrate why pricing alone isn’t useful. When analysing these figures, it’s important to take into account the context and anything else that might have influenced the price.

KEY PURCHASING STATS FOR 2023:

• We imported 38,149 kg of green coffee (39% more than 2022)
• We purchased 2,679 kg of certified organic coffee (80% more than 2022)
• We purchased from 26 producers across 6 countries
• We obtained the FOB price for all 34 lots of coffee, achieving FOB price transparency on 100% of our total volume purchased
• We obtained the Farmer/Producer price for 32 out of 34 coffees, and achieved Farmer/Producer price transparency on 98% of our total volume purchased

2023 TRENDS

This year saw a significant drop in coffee prices compared to 2022. The price paid for commodity coffee, also known as the C-price, was well below $2.00 / lb for most of the year, and reached a low of $1.42 / lb. Even though we don’t purchase commodity coffee, this C-price still has a strong influence on specialty prices. As the C-price rises, specialty prices must also increase, otherwise it would reduce the financial incentive for producers to continue the labour intensive process of growing for the specialty market. On the other hand, when the C-price drops, data shows that specialty prices tend to decrease as well, since buyers don’t feel as much pressure to pay higher prices. Below is a comparison of the C-price and the median FOB price in the Specialty Coffee Transaction Guide over the past six years.

The Specialty Coffee Transaction Guide compiles a list of prices paid for coffees graded 80 points or above on a scale of 100 points. This year, they reported an overall median FOB price of $3.40 within the specialty sector - decreasing $0.10 from the previous year. While the median price may have dropped throughout the industry, we’re happy to say that our average weighted FOB price increased to $4.08, rising $0.58 over last year.

The Specialty Coffee Transaction Guide also gives a detailed breakdown of prices paid for coffees based on their cup score, which helps us compare our specific purchases to other similar scoring coffees. The graph below shows that we fell short of the median price for 88+ scoring coffees, yet this only accounts for 4% of the total coffee we purchased in 2023. The other 96% of coffee we purchased was above the median price for their cup scores (85 - 87.9).

While the Specialty Coffee Transaction Guide proves to be a very helpful tool for us in general, we realise that the FOB prices they report tell us very little about how much the farmer or producer received. This is important to note because higher FOB prices don’t necessarily equate to greater prosperity for producers.

The table below shows that over the years, both the FOB and the average price we paid has increased, yet the price paid to the producers actually decreased compared to last year. Even though the Producer Price remained well over the C-price, we still have to question if this price was enough for the producers to meet their cost of production.

PRICES PAID ALONG THE SUPPLY CHAIN

PROSPERITY PRICING

Coffee farms are a business just like any other, which means they require a profit to stay afloat. Yet the cost of production on the farm is rarely taken into consideration when pricing coffee. To address this issue, one of our importers, Caravela, has created a figure called the Minimum Prosperity Price. This figure calculates the minimum farm-gate price needed per pound of coffee in each country, 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%.

The graph below compares these Prosperity Prices with the coffees we purchased through Caravela in 2023. As you can see, we paid well above the C-price in each of the countries, but only managed to meet the Prosperity Price for 1 out of the 3 countries - and barely. In Guatemala, we exceeded the Prosperity Price by 1 cent. In Colombia, we were just under the living income price, and in Peru, the price we paid for a pound of coffee wasn't even enough for a producer to make the legal minimum wage. 

The Prosperity Price in Peru is significantly higher than the other two countries, and this is due to three major factors. Peru has the smallest average farm size, the lowest productivity, and it shares the highest cost of production. Together, these three factors contribute to a very high Prosperity Price. While we're not able to match the Prosperity Price in Peru this year, the contracts we have in place for 2024 will ensure higher farm gate prices. As for the other two countries, we’ve now signed contracts for both Colombia and Guatemala that guarantee the Minimum Prosperity Price for all the producers we buy from. 

The Minimum Prosperity Price has become a very important tool for us when contracting new coffees, because we now have a more reliable benchmark for what we should be paying for our coffees from Central and South America. Unfortunately this information is not yet available for Africa, but we're working with suppliers who are pushing for greater transparency in this continent. Our long term goal is to ensure all producers we buy from are not just covering their costs, but earning a prosperous living.

SPECIALTY COFFEE TRANSACTION GUIDE & THE PLEDGE

When it comes to price transparency,  the Specialty Coffee Transaction Guide and the Pledge are two valuable sources of information. Both exist to increase the prices paid to farmers and provide living incomes in coffee-producing countries. They compile data from producers, exporters, importers and roasters, in order to establish new benchmarks for what we should be paying for quality coffee. By contributing our data to the Specialty Coffee Transaction Guide and signing the Pledge, we’ve joined a growing number of international businesses who are embracing transparency and empowering everyone in the coffee industry to make informed choices. We encourage you to visit both of their websites to find a full list of roasters, importers, and exporters who are also sharing their prices.