In the past 23-years of coffee harvests, this is the first time in memory, for our friend and Owner of Finca El Molino, Jose Antonio Salaverrria, that three key factors in coffee farming aligned in the favor of the coffee producer.
You see, each year coffee farmers around the world face tremendous challenges in order to make a profit from the farms that have, often times, been in their families for generations. Being from Kansas, that story is all too familiar to me, and a story that often times doesn’t end well for the farmer. This year will certainly be a different story for coffee farmers around the globe.
THREE KEY’S IN EL SALVADOR:
Quantity: the bourbon coffee trees and the weather aligned to produce a bountiful crop for most of the country. The region of Chaletenango in El Salvador had unusual weather that limited the production for Finca Los Planes.
Quality: the Bourbon and Pacamara variety coffee crop produced this year is exceptional in flavor profile.
And last but certainly not least…
Price: I.C.E. or what is more commonly known as the “NY C-Market” – the commodities market that sets the standard price for coffee trading – is at a 13-yr high and appears to be headed higher. Possibly breaking all time records for price.
The three factors have aligned this year to make what could be a favorable harvest for farmers. It also could be the beginning of another high – low cycle for farmers that will eventually end in the farmer making pennies for his harvest. Historically, high prices in the C-Market, lead to low prices on the other end of the cycle. Can PT’s Direct Trade, relationship coffee and fixed contracts make a difference?
Some conversations I’ve had at origin have left me believing that with Direct Trade Relationships it is possible to ignore the C-Market (for some exceptional coffees) and set a Fixed Price that is beneficial to both parties, as long as both producer and roaster are looking long term (3-5 years) and disregard the vulnerability of the C-Market on an annual basis. We’ve been doing this with our Direct Trade Partners for nearly 5 years now. But the previous 4 years, the C Market was so low our Fixed Price was never challenged. This year C-Prices rival those of fixed contracts. The quality of our relationships will be tested for sure. Will our producing partners want raises equal to the increase of the C-Market? Or will they understand the stability of the fixed contract concept over the long haul?
The answer could go either way, and probably will, depending on the farms and relationships previously established.
Roasters, consumers and producers, want a system to be beneficial to all involved and are most times willing to work together to achieve the common goal.
The high price that the C-Market is requiring this year is near what we at PT’s have been paying our Direct Trade Parnters for years, even when the market did not demand it over the past 5-years. We honestly believe that the farmer who produces outstanding coffee, deserves an outstanding wage. It’s a model that we, along with others in the industry, have called “Direct Trade.” We pay a great wage for a great coffee. It meant we had to be disciplined to buy only outstanding coffees, be fair to the community and farm employees, treat the earth with respect for sustainability and at the same time, make sure we could sell a great coffee at a higher price than some of our competitors, in order to achieve the return needed to grow our company and show room for profitability for all involved. If we sell it for a higher price than some, it has to be better than most.
This year will test most Direct Trade partnerships in the coffee industry.
I am in El Salvador right now having real, open and honest conversations with our partners. I’ve outlined the costs of coffee from farm gate to cup so that they can see we are not making the lion’s share of the profits, but rather sharing with them in those profits. Reminding them that we voluntarily paid a high price for their coffee during a time the market didn’t ask, nor demand it, so that they could be rewarded appropriately for having an outstanding coffee according to it’s cost of production.
The question I’ve been asking is this:
Are our origin partners now willing to stay the course and accept very fair, fixed pricing for 2,3 or 5 year contracts that benefits roaster, producer and consumer? Or, will we follow the market and inevitably ride the roller coaster of pricing back down when the market returns to lows in just a few short years?
In my next few blog posts, I’ll talk about the farms I visited in El Salvador and the conversations I’ve had with the producers. We’ll talk about the coffee that will be coming later in the spring or early summer and the plans we have for years to come. El Salvador produces some of the best coffee in Central America and we are proud to work with some of the best producers and buy some of the best coffees from El Salvador.