Like last year we want to push the coffee industry to be more transparent and therefore let you know what kind of prices we payed for coffee during 2011. Most of you know that the coffee prices has been rising for the last two years, and as we speak the commodity prices for coffee is about USD 2,20 per lb. (450g) of green coffee. Although we are buying coffees that are valued a lot higher than the commodity coffees and where the value is based more on quality rather than supply & demand, the quality coffee prices are for sure affected by the commodity market as well.

Unlike in 2010 where we did buy a lot of expensive Cup of Excellence coffee and some other auction coffees that lifted the average price a lot,  in 2011 we only sourced coffees direct from the farmers. The reason for this is to be able to buy fresher coffees and we also had better opportunity to do so as we have developed good relations to the producers we buy from. Instead of buying from many countries, we decided to focus on a few ones and rather get better coffees from these origins. We believe this has given us better value for our money. The average price for our coffees F.O.B (Free on board) in 2010 was USD 5,06 per lb. In 2011 the average price we payed per lb was 5,45, ranging from USD 4 to USD 7,55.

In 2012 we aim to get even better quality from the same producers as well as we will get to know some new origins that we have started working with through our sister company Nordic Approach. Ethiopia is one of the origins we will be getting coffees from this year and that is very exciting for all of us.

Before we list the prices we payed for coffee in 2011 please take a note that these are prices FOB, which means for unroasted coffee delivered to the boat that ships it to Norway. We still need to cover shipping cost that varies from where it is shipped from, storage, handling, roasting, packing, labour, rent, gas, electricity, etc, etc. I did a blog post  last year that explains why quality coffee costs more and if you are interested I recommend reading it to get a better understanding of how these mechanisms work.

So, for those who are curious here are the prices we payed for coffee last year:

TW coffee prices payed in 2011

Tim and I have already spent 6 days in Kenya together with our dear friend and customer Anders Valde (the first World Aeropress Champion) and our good friend and coffee colleague from Solberg & Hansen, Alexander Scheen Jensen.

Our trip started on Monday where we spent the day at Dorman’s cupping lab, tasting the freshly harvested coffee from the fly crop in Kenya, followed by a tour at their green coffee mill and roasting factory in Nairobi. Although one of the coffees had already been sold for over USD 7 per lb. None of the coffees were spectacular.

On Tuesday we visited CMS (Coffee Management Servives) in Ruiru. CMS is both a marketing agent and a technical and agriculture resource for the cooperatives we buy from . The manager of CMS, Mr. Kamau Kuria has personally been in charge of making sure the money we donated through our drying table project was spent in the best possible way. We were lucky to have a one hour meeting with the ever busy Mr. Kamau, and  he gave us vital info about the current harvest and the prognosis of next years coffee production in Kenya.
To sum up what he said; the severe rains during the flowering period has lead to less flowering making yields about 40% less than last years crop, which was also very low. The current prognosis of total production in the main harvest this year is only at 34.000 metric tons.  However, the amount of AA and elephant beans is much higher due to a lot of rain during the expansion phase of the coffee cherries. This means there will be a lot of good quality coffee coming out of Kenya, but the yields are unfortunately very low, so there will be a lot of fighting and high prices to expect for the best lots.

In the afternoon we headed for Nyeri which was our main destination for this trip.

Wednesday morning we got a brief tour of the Central Kenya Coffee Mill where all our coffees are being dry milled before export.

After the tour we went to visit the Tekangu Cooperative Society and to finally do the official hand over of the drying tables we have funded through our drying table project on our 3 year anniversary. The board of directors greeted us with coffee and sweet potato complimented with good conversation. As this was my 3rd time visiting it was great to listen to the improvements done and future plans they had made to develop the coffee quality and infrastructure on their factories. The coffee we bought from Tekangu this year came from the Karogoto factory, so we had decided to place the new drying tables there.

As we went up to see the new tables, i was stunned and a bit shocked when the tables revealed themselves behind a row of trees protecting the Karogoto factory. Not only had CMS (Coffee Management Services) managed to build 8 new tables for the money we donated, but the tables were huge and the quality was extremely good.

Here are the most important features of the new tables:

• Galvanized steel net to prevent rust hence a longer lasting drying surface.
• Ergonomic height of the table to make it easier for workers as they don’t need to bend over to work on the drying coffee.
• Extra steel wire for better support of the drying surface to prevent the net from sagging.
• Concrete fundaments to prevent the tables to sink into the ground.
• Angled edges at the end of the table to prevent workers from sitting on them as then they will more easily get ruined.
• Each table can dry 20 bags which is 1 metric ton of coffee. They can dry 8 tons at the same time with the 8 tables.

Normally the Tekangu cooperative would spend 10 to 12 years to build 8 new steel drying tables, so the board members of Tekangu and especially the production manager of the Karogoto factory were very happy for the donation of the new tables.

The vice chairman of Tekangu made me promise to thank all our customers in Norway and C. Dorman in Kenya who supported the project and made it possible to build these drying tables. I am also extremely happy to see that the project went so well, so a big thank you to all who supported it.

The best part of the whole project is that the factory manager at Karogoto promised us he will separate the coffee that gets dried on the new tables so that we will be able to taste the difference between the coffee dried on the new vs old tables. I can’t wait to taste the difference when I go back to Kenya in February and hopefully we will be able to buy the coffee if the quality is as expected.

Of course our trip did not end there. We have also done a lot of other great stuff down here in Kenya, but I will write about that in part 2 of this post next week. (some key topics for the next post: new varietal (Batian) released in Kenya, pictures of enormous Liberica and Excelsa coffee trees, cupping of different grades in Kenya, etc)

Yesterday I got a link sent to me by a good friend and coffee enthusiast in San Francisco. The link is to an Internet forum called Home Barista that is basically a discussion forum for coffee enthusiasts from around the world. I was a bit surprised to read this post on a forum created by and for coffee lovers, so I felt I had to reply in order to educate our customers and also to try to explain that not all coffee companies are the same.

Transparency

A lot of high quality driven roasters, including ourselves, preach that transparency is the most important part of our trade, but rarely do we actually get to see the numbers in the coffee industry. Sustainable Harvest is one of the few companies that are trying to do something about this through their Relationship Information Tracking System.

Cup of Excellence is also a great example of where consumers can get full traceability of the coffee trade.

I have been trying to establish a traceability system of our own and also to develop a contract that shows what the farmer gets when we pay USD 3 pr. lb (453g) FOB for coffee. We do have the contracts in Kenya as this is cooperative coffees created by hundreds of farmers. For all the other coffees we have bought this year we feel we don’t need it as we are communicating directly with the farmers anyway. We are still far away from being 100% transparent but hopefully in the future we will be able to get a system for it that enables our customers to get all the info they need.

As a temporary solution I have started to systemize all the information about our coffee purchases from the end of last year, and to my surprise we are actually paying a higher average price for our coffee than I thought we were.

Coffee prices

For the past months we have read that the C market price for coffee is at it’s highest in over 10 years at about USD 1,6 pr. lb. (453 g) of green coffee.

Although this is not a very high price for coffee it is still very positive that it is going up, as the price has been way too low for the last 10 years, forcing a lot of producers to start growing other cash crops in order to survive.

As you all probably know, we do not trade coffee based on the C market price and we do not sign future contracts based upon today’s prices like most of the bigger roasteries do. We buy the coffee direct from exporters or farmers and negotiate the price based on taste and quality. We negotiate with the farmer and the exporter. Not with a broker. We also have gentlemen’s agreements with farmers that if they continue their work with quality, we will be there to support them by buying their coffees.

As promised, I will try to do an effort for transparency, so here are the prices in USD pr. lb that we have payed for our coffees FOB  (free on board) in 2010:

Panama, Hacienda la Esmeralda:______ 26,50 $ + packing

Honduras, Cielito Lindo 2010 COE:_____  8,10 + packing

El Salvador, Las Palmas 2010 COE:_____ 5,31 + packing

Honduras, Naciemento:______________  3,50

Honduras, Finca El Pantanal:___________3,00

Guatemala, Santa Ana:_______________ 3,50

Kenya, Mugaga:_____________________ 4,77

Kenya, Tekangu:____________________  5,23

Of course these lots are not the same size. The Esmeralda was only about 120kg for instance. So the average price per lb. so far this year is actually USD 5,06.

Adding to the cost

As you may know, this is just for the green coffee. We also need to  pay for the shipping and handling of the coffee before it gets to our roastery. Shipping cost can vary greatly depending on the origin of the coffee. The price of the coffee gets about 25 to 30 % higher for the coffee when we include these costs. On average this means the price for the coffee when it has arrived to Norway is about USD 6,58 pr.lb.

We also need to cover our travel expenses that we spend when we travel around the world to find these coffees and visit the producers.

So far this year I have been to Kenya and Honduras, and I am going to Brazil next week, to Colombia in October and visiting Kenya again in November. That adds up to 60 days of traveling and a cost around NOK 120.000,- or about USD 20.200,- only for 2010.

My accountant may think I am crazy spending so much on traveling, but I think it is totally necessary and a good investment for the future. We are building relationships with serious farmers and we are trying to secure a good supply of great coffees in the future. We want to develop long term relationships with the farmers, not have one night stands with them.

After the coffee has arrived to Norway we still need to roast it, so you have to add the  cost of production, rent needs to be payed as well as salaries, delivery truck, electricity, maintenance, etc, etc. Of course the cost of living is higher in Norway than in Colombia and therefore we need to add a bigger margin to the coffee than a farmer in a producing country needs in order to make a living. For example, a beer in Colombia is about 1 USD. In Norway a beer in a bar is about 10 USD.

Is coffee expensive?

Some people think our coffees are expensive, and I understand that they believe so, especially if they compare us to a coffee sold in a supermarket. But if you taste the difference and understand how much work and effort is behind these coffees, I still believe that our coffees are cheap. It all boils down to about NOK 5,- or about USD 0,9 pr. cup. Compare that to what you pay for a bottle of water here in Norway (USD 5) where we have plenty of super clean water free from the tap, I think there is no need to discuss whether coffee is expensive or not.

Why is some coffees worth more than others?

Because quality of the coffee varies. Not only from farm to farm but within the same farm we can sometimes find a huge range of different qualities and varietals.

Take Cielito Lindo and Naciemento for instance. These 2 farms are neighbouring farms run by father and son. They grow coffee from 1500 to 1800 masl. in 2 very different types of soil. They grow 5 different Arabica varietals (Pacas, Catuai, Catimor, Geisha and Bourbon) These trees produce (like all other fruit trees) both very mature coffee cherries and also unripe and cherries that fall to the ground and get mouldy and rotten. Of course this will produce coffee of different quality.

Next year we will be there during their harvest in order to help them separate the different varietals. We are going to taste the coffees blind and  score them according to the COE cupping form. We will pay more for the better tasting lots and less for the lots that get lower scores. Would we do this if there wasn’t a difference? I think not. So, why do we do this? Because we want to encourage the farmers (above: Jobneel and Extreberto) to grow more of the qualities we like so that we can get more of this coffee in future years.

Simple and easy.

Why pay more for coffee?

Well, I see it as an investment. The farmers are able to invest in necessary equipment in order to raise the quality and they are able to save a little money and make a decent living. If we treat them well today, they will treat us well tomorrow.

I  believe that we cannot continue to exploit the coffee producers. Sooner or later they will stop producing coffee and that is a scenario I would not like to see. So, if you love coffee and would like to continue to be able to appreciate its wonderful flavours and diversity, then choose quality coffee before cheap quantity coffee.

I also think all roasters need to practice transparency in a greater way. It is time we practice what we preach so that more people understand what we are all about.

Hopefully this post was of some help to clarify what we are doing and trying to do in the coffee world. I could go on and on writing about this, but instead I encourage you to leave comments in our comments section and I will make sure I reply as soon as I can.

The total amount of money we managed to raise for the Tekangu drying table project is USD 4600,-

Hopefully this will be enough to build 5 tables.

Tim Varney and I will be going to Kenya in November to oversee the harvest and also to document the benefits of using these new drying tables.

A huge thank you to all our customers who contributed. It is much appreciated.

Extreberto from Cielito Lindo at the Cup of Excellence 2010

We are very pleased and proud to announce the purchase of Cielito Lindo CoE #18 in the Honduras Cup of Excellence for the 3rd year running. The purchase price was $8.10 per pound.

Tim was part of the international jury this year, so had a very close relationship with the top coffees – and especially with the wonderful Cielito Lindo which has become a favourite at Tim Wendelboe between both staff and our customers. It is very exciting to know we will be offering this coffee again soon!

More information on the Cup of Excellence and what it means to us and the farmers can be found here.

More info on Cielito Lindo can be found here.

For those of you who wonder what is going on with fair trade and why we are not selling fair trade coffee, please read this long e-mail from Geoff Watts. Geoff is one of the worlds absolute pioneers when it comes to sourcing and buying green coffee and establishing relationships and direct trade models with the coffee producers he and Intelligentsia (the company he works for) buys their coffee from.

This is by far the best read I have had about Fair trade and Direct trade.

We are proud to announce that we just bought the no. 11 lot at the 2009 Guatemala Cup of Excellence.

The coffee is grown on the farm San Antonio De Esquipulas y Anexos and is a mix of Bourbón, Catuaí and Caturra.

Here is a taste description:

Aroma: Hints of almonds and chocolate.
Acidity: Tropical and stone fruit-like acidity. Lively and refreshing.
Mouthfeel: A clean cup with a fat texture without being heavy. Intense sweetness and a really nice balance.
Flavour: Intense chocolate flavour. Hints of rasberries and peach. Sweet finish.

The coffee was bought for USD 7.45 per lb. (453g) of green unpacked coffee ex. transportation cost. This is about USD 6.19 above fair trade price. The farmer gets 80% of the money, the remaining 20% goes to managing the Cup of Excellence system.

We are proud to announce that we just bought lot no. 5 lot on the 2009 Honduras Cup of Excellence.

This is the same coffee we bought last year from Cielito Lindo both years it has by far been our favourite on the cupping table among the other Honduras Cup of Excellence lots. (we taste the lots blind of course)

This is why we payed the 3rd highest price for this coffee this year at USD 12.05 per pound (453g) of green unpacked and unshipped coffee.

Last year we payed USD 14 per pound, but it does not mean this years coffee is any worse in flavour.

The 2009 lot is a bit lighter than last years coffee, but shows much more complexity and an even cleaner mouthfeel. It looks like Mr. Extreberto has done an even better job this year, hopefully investing in his farm with the money we payed him last year.

Here is a small taste description of the coffee:

Intense citric and berry aromas. Sweet acidity as in stonefruits. Sparkling acidity and a firm sweet aftertaste.

When hot it has a lot of stone fruit aromas as in peach and nectarines. When it cools it developes more rose hip flavours and black currant like flavours.

Hopefully we will get the coffee within 2 months.

We are proud to announce that we just bought the 2009 Costa Rica Cup of Excellence lot #8 for USD 7.10 per pound (453g) of green unpacked and unshipped coffee. (Marketprice is about USD 1.30 per pound.)

The Coffee from the farm San Pedro was one of our favourites among this years auction lots from Costa Rica.

Here is a brief taste description:

A very juicy and sweet coffee with soft mouthfeel and sweet berrylike acidity. Flavours of chocolate, cherries and blackberries. Sweet and juicy finish.

Hopefully we will get the coffee within 2 months.

Although the coffees became expensive, we managed to buy 2 delicious small lots of coffee at the Best of Panama auction today. We are not only proud of getting our hands on such lovely coffee, we are also proud to say that we payed the 3rd and 4th highest prices on the auction. Only beaten by Esmeralda at 1st and a lovely Geisha coffee on 2nd place.

Lot no. 7 had a distinct floral and citrus nose. Lively and crisp acidity. Sweetness like in yellow melons and taste of violets, coffee flowers and bergamoth.

Lot no.14 had a very strawberry- like fruity aroma. Warm and ripe acidity. Soft and berrylike sweetness and a lovely balance.

I have not figured out how to ship the coffees yet, so we will probably get them after summer is over.