2019 Transparency Report
Our annual Transparency report for 2019 is as always way over due. 2020 has been a strange year and we have had to focus a lot on maintaining our business and also adapt to the pandemic situation that we are currently in. As a green coffee buyer it has been a very different year as I have not been able to travel to visit and follow up on the producers we buy coffee from. Thankfully we have very good relations with them, especially in Central- and South-America. Therefore it was quite easy for us to get samples and buy the qualities that we know our followers expect from us. Sadly we lost one of our dear friends, the renowned coffee producer Gilberto Baraona who passed away this summer. I am greatful that I was able to see him in February, right before society started to shut down. It is good to know that his legacy and farm Los Pirineos will be well taken care of by his daughter and son and we will of course continue to support them and buy their excellent coffees in the coming years.
Last year we signed The Pledge which is a joint project made to establish a common code for transparency reporting in the coffee industry. I believe this initiative is extremely important as I still experience a lot of resistance from roasters, both small and big, against being transparent. It seems that everyone likes the idea of transparency, yet there are still just a handful of roasters in the world that are willing to actually show what they are paying for their green coffee. Phrases like “we pay more for quality” or “we support the farmers” become meaningless if you are not able to back it up with real facts and numbers. If you are actually paying more and supporting farmers, then there should be nothing to hide in my opinion.
But how much is more and how much is enough?
Roasters have often referred to the C-market price when they talk about the market price for coffee. But it doesn’t mean that if you pay more than the c-market price then you are automatically supporting the farmers or paying a fair price for your coffee.
First of all the c-market price is the market price for «commodity coffee», the coffees you’ll typically find in super markets, and not high quality coffee or what people refer to as “specialty coffe”. The C-market price, as I am writing this today, is around USD 1,07 per lb which for example is about 30 -50 cents lower than the cost of production for a pound of green coffee in countries like Colombia. Quality focused «specialty roasters» should therefore not use this price as a benchmark for what they are paying for coffee as it is not the correct market price for quality coffee.
Fortunately we now have a new benchmark for what the market price for high quality coffee is. The Specialty Coffee Transaction Guide has been developed by some brilliant people at Emori university. Based on data from over 70 data donors, among them roasters, importers, exporters and farmers, they have been able to create a guide showing what the real market price for high quality coffee is. Of course they take in to account that different volumes, qualities and origins will have variation in prices. This is is all described in detail in the guide. I find this to be extremely important as now both farmers, exporters, importers, roasters and the public will have a better understanding of what the actual market price for quality coffee is. It means that when a roaster like us claim to be paying a fair price for the coffee, you finally have valid standard to compare the prices against and that average price is somewhere between 1.91 to 3.63 USD per lb F.O.B. depending on quality, quantity and origin.
The need for transparency in the coffee world is becoming more and more important to me as a person and also our company. To understand what a sustainable price is we need openness and transparency around the econiomics of coffee. In the last years the coffee c-market price has been below production cost of coffee which is obviously not sustainable for most coffee producers. We use a lot of energy throughout the year showing our followers what it actually takes to grow and produce high quality coffee and therefore I also think it is important to show you what we actually pay for it. After spending over 2 months at Finca Tamana every year since 2015 I have also gotten a better insight to how a farmer thinks and what is important to them. Therefore posting what we pay for our green coffee is not only a tradition for our company but we do it because we want to inspire other coffee companies and show them that it is possible to build a profitable business and still pay a fair price for coffee. We also do it so that farmers who are selling quality coffee and might not be aware of what other roasters are paying for similar coffees in the market, can use it as a tool or a reference when they negotiate prices. Making sure that the coffee producers are paid a sustainable price is key to keeping our industry alive and secure our future supplies of quality coffee. If you love coffee and want to continue drinking it, then it is the only way we can move forward.
Below I will try to explain a bit more in depht the information in our transparency report and also explain a little bit how we work in the different origins we buy from.
What does F.O.B. price mean?
F.O.B means «Free on Board» which means the price for the coffee packed and stacked in a container delivered to the ship. The price is stated as the price per pound (lb) which is equal to 453 grams of green coffee. The reason why we use this price and for example not the «Farm Gate» price (price paid to farmer) is because this is the most common way of communicating price and is the decided way of communicating prices in The Pledge.
So, when we state the F.O.B. price it means that for example when we pay USD 5,- per lb F.O.B. for coffee from Elias and his farm Finca Tamana in Colombia, he only get’s USD 4,- per lb. Why? Because the coffee needs to be transported to the mill, milled, packed and again transported to port. Samples also needs to be sent to Norway for approval and local coffee taxes needs to be paid. This work is managed by an exporter, in this case our friend Alejandro Renjifo and his company Fairfield Trading. Alejandro also has personnel cost and rent to cover and also executes quality control in the milling and delivery process. In some cases the farmer is his own exporter and miller and in other cases where we are buying through a cooperative structure the cooperative also need to get a cut for administration costs, wet milling, pre-financing of farm inputs or school fees, etc.
The F.O.B price is not a perfect indicator of what the farmer was paid, but when you have a transparent value chain and also as few “middle men” as possible it means the farmers will still get the majority of the F.O.B Price. Having said that, if the F.O.B. price is very low, the farmers pay check most certainly was lower, so at least the F.O.B price will give a good indication wether the buyer paid a fair price for the coffee or not. The coffee community are still debating wether the F.O.B. price is the correct one to report or if it should be the farm gate price (price paid to farmer). I believe if the value chain is transparent and the producer gets a fair cut of the price and also a sustainable price for his / her coffee it can be reported in any way you want. But we need a standard. Having a common benchmark is a good thing and now we finally have one that is relevant to our part of the coffee industry. I often find that the biggest critiques of F.O.B. price reporting are those who are still not so keen on being transparent. So let us rather spend our energy on encouraging more people to make their business transparent and pay sustainable prices to the coffee producers, rather than wasting it on technicalities of our reporting.
Country, Farm / Cooperative, Purchase history and who we buy from.
In 2018 we mainly bought our coffees directly from farms and cooperatives but every country and farmer have a different supply chain. I will try to explain them briefly here so that you can understand a bit more how we buy our coffees.
Finca Tamana – We buy coffee directly from Elias Roa, the farmer. Fairfield Trading, the exporter, provides milling and logistical service and the coffee is imported by ourselves directly to Norway. We have been buying coffee from Elias every year since 2012 and we will continue to do so in future years.
Caballero – We buy coffee directly from Marysabel Caballero and Moises Herrera, the farmers. They mill and pack their own coffee. Boncafe, the exporter, provides logistical service and the coffee is imported by ourselves directly to Norway. We have been buying coffee from the Caballeros every year since 2009 and we will continue to do so in future years.
Nacimiento – We buy coffee directly from Jobneel Caceres Dios, the farmer. San Vicente, the exporter, provides milling and logistical service and the coffee is imported by ourselves directly to Norway. We have been buying coffee from Jobneel every year since 2008 and we will continue to do so in future years.
Los Pirineos – We buy coffee directly from Gilberto Baraona R.I.P. the farmer. He mills and packs his own coffee. He is also the exporter. The coffee is imported by ourselves directly to Norway. We have been buying coffee from Gilberto every year since 2010 and will continue to work with his children in the future years.
Kenyan coffees – So far we have mainly been buying through what is called «direct sales» in Kenya. We try to buy from the same wet mills (organised under a cooperative society) every year but have also been shopping around based on availability and quality and in some years political situations have made buying challenging. This means that some wet mills we have bought from for many years (yet some years we have not been able to), and others we might have bought from once before. Every year we cup through «direct sale offers» from C.Dorman and also in 2019 from Sasini who are exporters. Once the selection is made we offer a price based on USD per 50kg bag of green coffee that is negotiated with the cooperatives. This price is what is paid for the coffee to the cooperative and is negotiated with the help of a marketing agent that the different wet-mills / factories have selected to use. Once the price is agreed upon, the marketing agent adds their fee, the exporter adds their milling, finance and logistical cost to the price which becomes the F.O.B. price.
We have also bought coffees from the exporter C.Dorman. In these cases, C.Dorman bought coffees at the Kenyan coffee auction with the intent of selling the coffees to their clients afterwards. The prices paid on the auction is still transparent but farmers and cooperatives prefer to sell “direct” so that they do not have to pay the auction fees and they tend to fetch higher prices too through direct sales.
The farmers sell coffee cherries to the wet mills and deliver cherries several times during a harvest. The farmers are paid a price based on all the coffees they sold to the cooperative that year. (not just the one we bought) The wet mill will process and dry the coffees before they get sent to the local mill for storage. Therefore the cooperative by law charges no more than 20% of the selling price of the coffee. Most of the wet mills we buy from publish the prices they are paid for their coffees on their notice boards for the farmers to see and everything is recorded in their accounting. However I still know that we can get better at providing transparency in Kenya and I really hope to step up our buying protocols and find more long term partners in Kenya in the years to come. All coffees are imported directly to Norway by ourselves.
Ethiopian coffees – In 2019 we changed the way we buy coffees in Ethiopia due to a change of legislation in Ethiopia, making it easier for roasters to buy directly from small to medium sized farms in Ethiopia. The goal is to buy directly from farms also in Ethiopia and to be able to provide full transparency like we do in Central- and South America. In 2019 all of our Ethiopian coffees were bought with the help of importers. We negotiated price directly with the farmers and in addition paid the importers for logistical service such as sending samples, moving the coffees inside of Ethiopia, pre-financing the coffees, exporting the coffee to Europe and moving it from warehouses in Europe to Norway.
Echemo is a small farm owned by Khalid Shifa who is also an exporter of coffee. We met Khalid through the French import company named Belco and visited his farm in December 2018 and 2019. We agreed on buying a small volume of coffee from Khalid. Since he had already negotiated prices with Belco we decided to pay a premium on top of that price if the quality was good upon arrival which we ended up doing. The F.O.B. Price of USD 4 per lb was paid to Khalid, but milling and transportation inside Ethiopia was paid by him. Belco added their margin to cover their expenses for helping us move the coffees and communicating and organising logistics with Khalid. They also charged for transport costs to Europe and within Europe. Belco is also providing valuable support to farmers like Khalid in terms of training in agronomy and processing techniques and they help market and sell the coffee to roasters. The final price we paid ended up being 5,15 USD per lb for the coffee.
Tatmara Coffee Plantation
Tatmara is a small to medium sized farm farm owned by Negussie Tadesse who is also an exporter of coffee. We met Negussie also through the French import company named Belco and visited his farm in December 2018 and 2019. We agreed on buying 80 bags of coffee from Negussie. The F.O.B. Price of USD 4 per lb was paid to Negussie, but milling and transportation inside Ethiopia was paid by him. Belco added their margin to cover their expenses for helping us move the coffees and communicating and organising logistics with Negussie. They also charged for transport costs to Europe and within Europe. Belco is also providing valuable support to farmers like Negussie in terms of training in agronomy and processing techniques and they help market and sell the coffee to roasters. The final price we paid ended up being 5,15 USD per lb for the coffee.
Fahem is a medium to large coffee plantation owned by Mohammed Lalo. We got in touch with his team lead by Hayatudin Jemal through the importer Nordic Approach and visited the farm both in 2018 and 2019. We agreed on buying 50 bags of coffee from Fahem. We originally offered to pay a price of USD 4,50 per lb if the quality delivered was according to a protocol we had agreed upon. Unfortunately when we received the coffee in Norway 20 bags out of the 50 were not up to the standard we had agreed upon, landing with an excessive moisture content and degraded quality. Fortunately the remaining 30 bags were tasting very good. Hayatudin and his team offered us to pay a lower price on all the coffees to compensate for the 20 bags that were tasting woody. We ended up selling the 20 bags of woody coffee, unroasted and with a loss, but it was a calculated risk we took in order to get the coffees shipped to Norway. The F.O.B. Price of USD 3 per lb was paid to Mohammed Lalo, but milling and transportation inside Ethiopia was paid by him. Nordic Approach added their margin to cover their expenses for helping us move the coffees and communicating and organising logistics with Mohammed’s team. They also charged for transport costs to Europe and within Europe. The final price we paid ended up being 5,91 USD per lb for the coffee.
Mexico – We are buying our Mexican coffees though a company called Cafeologo which is working with a small group of farmers in order to help them increase the quality and value of their coffees. Cafeologo was milling and exporting these coffees and we imported it directly to Norway. Cafeologo offers the farmers they buy from a premium for high quality coffees and also provides training and support and pay a fixed minimum price regardless of the market price of the coffee. We have been buying coffees from Cafeologo since 2017 but from different small farms each year due to the small size of the farms and lots.
Lot / Variety and TW SCA cup score
We do buy many different lots every year. Even from the same farm, such as Finca Tamana, we can end up buying 8 lots of the same variety separated by harvest date, screen size or quality. So even though we carry the same coffees year after year, we can go through between 50- 80 different lots of coffee in a year. The price we pay for each lot can vary based on availability, market price and potential selling price. For instance the Catuaí coffee from the Caballeros is a coffee that they produce a lot of and in all fairness it is quite easy to find similar cup profiles from other farms (although not the same quality.) The fact that my personal cupping scores are quite high reflects that in this product category it is a very well processed and sweet coffee with clear flavour attributes. Their Geisha coffee has a very different cup profile and although I only scored it slightly higher it has a lot higher price. This is due to the fact that I score it with a reference to other Geisha coffee and also that the availability of Geisha coffees both from the Caballeros and in general is quite scarce. Geisha lovers are also willing to pay more for this rare coffee and there are many roasters who would like to get their hands on some rare Geisha. For me they are completely different products where I would compare the Catuai to a dark beer, the Geisha is almost like a fragrant white wine, but I love drinking both of them.
The SCA cup score is based on the SCA cupping protocol with a scoring scale from 0-100 where «specialty coffees» range from 80 points and above. Although I haven’t gone through a calibration since I certified as a q-grader some years ago I still feel that I am quite well calibrated with the cuppers I taste with around the world and my score is normally only a point or so off from the local cuppers where I buy the coffees. The scores on the report is either the actual score of the lot we bought if there was only one lot, or in the case of Caballero’s Catuaí or Geisha, the average score I gave to all the lots we bought from them of that particular cultivar.
LB / KG bought and average F.O.B. Price
I have seen some transparency reports where only part of the coffees that a company bought was published in the report so that the numbers looked really good. For me it is important to show the price of all the coffees we buy. We have nothing to hide yet we also haven’t reached our goals of buying everything as direct and transparent as we want to. So the total amount of kilos presented in the report is actually the grand total of all the coffees we bought.
As you can see, the average price we paid per lb of green coffee last year was USD 5,70. You may wonder if this is a high price or a low price? Well, we finally have a benchmark to refer to in The Specialty Coffee Transaction Guide. The average for the higher priced coffees in the guide is at USD 3,63 per lb. This shows that we actually are paying more for our coffees, but what it does not tell you is what the cost of production was and wether the farmers are actually making a healthy profit or not. We know that producing quality coffee cost more and also involves more work at farm level. These costs can be challenging to calculate and to be honest I don’t know exactly what the costs are on each farm. All I can say is that I do see a lot of progress on the farms that we have been working with and buying from in Central-America and Colombia. The coffees we are buying there are for sure increasing in quality year after year. I really hope to be able to have a similar positive impact and find new long term partners in both Kenya and Ethiopia in the years to come.
I would like to finish this post by giving my gratitude to all our guests, customers, subscribers, followers and supporters that every day help us sustain our business so that we can continue pushing for a more sustainable coffee production. I know I have just briefly touched on the economics in this post and I am completely aware that social, ecological and environmental issues also needs to be addressed. However making sure that the farmers are actually able to make money instead of losing money is the first step on the way to make their production more sustainable in all aspects.