Mind the Gap: A Growing Gray Area Between Market and Production

   3.5 Minute Read

Ana Sofía Narvaez
Relationship Builder

As I continue to immerse myself in my role as a link between farmers and roasters, I have witnessed a steadily growing disconnect between what the market demands and what coffee farmers can realistically produce. Many roasters are interested in unique high-end, coffees, but are also price sensitive. This expectation of quality-at-a-low-price ultimately results in farmers being unable to re-invest and, ironically, prevents them from doing exactly what is being demanded.

Think about this, what specialty coffee means for the coffee industry vs your own perception? There is a great deal of variation in how different buyers see high-end specialty coffee and much of this is based on the need to buy “the next-best-unique thing”. Specialty coffee is broadly defined as a coffee that scores above 80 points. However, coffees that score between 80 and 83 are now considered by many specialty buyers to be “high-commercial”. As the cup profile changes and becomes more complex, we move up the scoring scale, and this progression should theoretically increase prices and sales opportunities for producers. Unfortunately, this is not happening fast enough nor on a large enough scale. There is a popular sentiment in the coffee community that only 86+ lots are considered “top-notch-coffees”, while anything below that is considered “not-good-enough”. However, many want 86+ point coffees for 83-point prices, especially when the ‘C-market’ price is so low.

Is there a single producer that can achieve a full crop of 86+ lots? Will there be a time when all producers can achieve this? What would be the ideal balance for the coffee industry with respects to prices and production?

On the producing side, perfection and quality require labor, time, and money. Not everything produced will be an easy-selling micro-lot, nor is it common that everything produced will be sold at a premium. While producers do benefit from their outstanding, one-of-a-kind lots, these coffees necessitate substantially more work and an accompanying increase in operational costs, which can quickly become burdensome when expected results and prices are not met. Markets can easily nosedive or even skyrocket, BUT supplies, labor, and inputs prices/costs remain constant or even increase due to inflation. Not to mention how exchange rate movements can massively impact the price that farmers will ultimately receive in their local currency. Consequently, the one who absorbs a majority of these macro market shifts is the farmer.

However, there is something often overlooked, and it is the farmer's need to sell their entire specialty coffee production. The fact is, producers need to sell their consistent but less remarkable lots above the market price, as micro-lots nearly always represent a small portion of their total productions. Remaining lots falling in the gray area (between 83.5 and 86), must be sold at a significant price premium to recover investment, or at least to reach a breakeven point. While many 86+ point coffees can easily find a home, this is not the case for the 83-85.5 point coffees.

By embracing the potential of coffees in the 83-85.5 range and being open to buying them, we recognize and value producers’ work. Acknowledging this work also creates an incentive for the producer to continue pushing forward and re-invest in their farms, making it more likely that they will be able to enter the 86+ market.

Alberto Ochoa is an example of how the market should function. He is one of the 4,000+ producers that Caravela works with across Latin America who deliver solid, good tasting coffees with a specific cup profile and good yields, but who currently does not produce micro-lots. He has been working with Caravela for over two years, and he sells 85% of his crop as an A and AA, with the remaining 15% sold to the local market. By purchasing almost all his coffee, we can be part of the development and transition of the producer from good, to excellent, to outstanding. It is a win-win dynamic.

Every coffee needs to find a buyer, every buyer needs a specific quality and volume to offer, and every farmer needs to be sustainable. There is no silver bullet, but there are a few options to consider that can help create a more sustainable coffee industry: