Taking too long? Close loading screen.

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

ย ย ย 3.5 Minute Read

Ana Sofรญa 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 โ€œthe next-best-unique thingโ€. 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 โ€œhigh-commercialโ€. 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 โ€œtop-notch-coffeesโ€, while anything below that is considered โ€œnot-good-enoughโ€. However, many want 86+ point coffees for 83-point prices, especially when the โ€˜C-marketโ€™ 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 producersโ€™ 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:

  • Securing sales for an entire harvest output is hard for a producer. Consider buying other quality tiers alongside micro-lots. For this, colectivos come in handy as they offer a range of opportunities in terms of cup profile, quality, quantity, and price.
  • Commitment can take you a long way. Consider forward contracting which will secure quality, quantity, and help lay the groundwork for long-standing relationships.
  • Get to know your producer partners. Ask for more information about the producers who supply your coffee; learn their struggles and why they only provided a minimum amount of any 86+ coffee. And once you know them and have established a solid relationship, you can consider the possibility of taking the next step and evaluate if a fixed-price, long-term contract is the best option to continue strengthening the relationship.
  • 2 Comments
    1. Wells Trenfield

      I want to comment on your timely and articulate message to the Industry. In 30 years of roasting, I have been conscious of this gap as described. My relationships with the producers I work with ensure that I support the farmer through thick and thin as I buy from them over 9-20years. It is important for the farmer to have consistent projected secure sales of most of the coffee produced. The high score micro lots are just icing on the economically sustainable cake. As experienced in a Latin American Coop a few years ago, the farmers did not want to engage us with tasting their coffees for fear of yet another waste of their time if only 6 bags of their highest scored beans were to be bought. What they needed was the bulk of their (excellent quality) beans sold for the effort they put in. As they made clear, they just cannot live on the few lots of high score beans.
      Roasters are an important cog in the education of consumers, whereby, if a high score micro lot is not priced high enough in the consumer market, after all the extra work done by the farmer, then the consumer expects more for less, but is not to know about the gap.
      I sell some coffee at $260kg (AUS), which sounds outrageous, but when broken down per cup, it is outrageously cheap at approx $2.60 per cup of brewed coffee at home. Thatโ€™s far cheaper than a regular beer!
      Only when great coffees are priced through the chain with respect to the sustainable value through the entire chain, will farmers gain the sustainable pricing they need to invest in better coffees as their standard.

      Reply
    2. Maximo Odรณn Blandรณn

      Excellent points, I think that farmers understand better the dynamics of the market and the roles of the different links in the coffee chain, however we keep fighting to “break” the traditional business models where a few win, I am part of the third generation of coffee producers, and until a few years ago we started to establish direct relationships with roasters, the few lots that we have sold directly have had a positive impact on our economy, but we only sell 30% of our production directly, the rest of the coffee is sold through a cooperative that has never shown us the contracts they sign, we still live with these situations.
      Greetings from Nicaragua

      Reply

    Submit a Comment

    Your email address will not be published. Required fields are marked *

    Was this interesting? Grab a coffee and pick another from the articles below
    Agroforestry For the Planet: The Impact of Shade-Grown Coffee

    Agroforestry For the Planet: The Impact of Shade-Grown Coffee

    What Makes a B Corp a Different Kind of Business?

    What Makes a B Corp a Different Kind of Business?

    Sustainability: The Sextant of Our Navigation

    Sustainability: The Sextant of Our Navigation

    Taking Coffee Education Program to the Next Level

    Taking Coffee Education Program to the Next Level

    Learning from 2021 and Reflecting on the Future of Coffee

    Learning from 2021 and Reflecting on the Future of Coffee

    Cost Of Production Spotlight: Price Spikes โ‰  Higher Incomes

    Cost Of Production Spotlight: Price Spikes โ‰  Higher Incomes

    Receiving Coffee, Delivering Resilience

    Receiving Coffee, Delivering Resilience

    Recognizing Producers’ Commitment to Excellence in El Salvador

    Recognizing Producers’ Commitment to Excellence in El Salvador

    The Sum of Small Actions: PECA contributes to the reduction of GHGโ€™s

    The Sum of Small Actions: PECA contributes to the reduction of GHGโ€™s

    A Pivotal Moment for Specialty Coffee

    A Pivotal Moment for Specialty Coffee

    Long Distances, Long Histories: Getting Close to Coffee in Oaxaca

    Long Distances, Long Histories: Getting Close to Coffee in Oaxaca

    We are Best for the World 2021!

    We are Best for the World 2021!

    Transparent Teamwork with Local Cooperatives

    Transparent Teamwork with Local Cooperatives

    Planning Ahead: As bad as it sounds?

    Planning Ahead: As bad as it sounds?

    Growing and Thriving with Guatemalan Farmers

    Growing and Thriving with Guatemalan Farmers

    An Update on Colombiaโ€™s Ongoing Crisis

    An Update on Colombiaโ€™s Ongoing Crisis

    Mastering the Learning Loop in Peru

    Mastering the Learning Loop in Peru

    Supply Chain Hurricane: Weathering a perfect logistical storm in 2021

    Supply Chain Hurricane: Weathering a perfect logistical storm in 2021

    Making the Coffee World More Sustainable

    Making the Coffee World More Sustainable

    A Familiar Face Returns: William Ortiz at the helm of Colombia/Ecuador

    A Familiar Face Returns: William Ortiz at the helm of Colombia/Ecuador

    Cause and Effectiveness: Increasing Impact with the Sustainable Development Initiative

    Cause and Effectiveness: Increasing Impact with the Sustainable Development Initiative

    Shifting Calendars, Shifting Harvests

    Shifting Calendars, Shifting Harvests

    Third-Party Verification that Leads to Action

    Third-Party Verification that Leads to Action

    ‘Milds’ Intrigue: The Price Quandry Facing Farmers

    ‘Milds’ Intrigue: The Price Quandry Facing Farmers

    Guiding Farms in the Right Direction

    Guiding Farms in the Right Direction

    Our Best Coffee is Our People

    Our Best Coffee is Our People

    What’s Brewingย in the Coffeeย Industry: Lessons Learnedย and What to Look Forward in 2021

    What’s Brewingย in the Coffeeย Industry: Lessons Learnedย and What to Look Forward in 2021

    Why Add Yeast ?

    Why Add Yeast ?

    Polar Promise in Las Palmas: A Case Study of North Star’s El Salvador Origin Project

    Polar Promise in Las Palmas: A Case Study of North Star’s El Salvador Origin Project

    Peru 2020: Rising Up From Lockdown

    Peru 2020: Rising Up From Lockdown

    Traditional Varieties in Latin America

    Traditional Varieties in Latin America

    Ecuador 2020: Making Our Way in the Middle

    Ecuador 2020: Making Our Way in the Middle

    Climate Neutral Caravela 2025: Steady Steps Towards a More Sustainable Future

    Climate Neutral Caravela 2025: Steady Steps Towards a More Sustainable Future

    A Primer on Transparency + Traceability Part II

    A Primer on Transparency + Traceability Part II

    A Primer on Transparency + Traceability Part I

    A Primer on Transparency + Traceability Part I

    How to Create a Specialty Coffee Line to Attract Commercial Coffee Drinkers Into The Specialty Coffee World? Part II

    How to Create a Specialty Coffee Line to Attract Commercial Coffee Drinkers Into The Specialty Coffee World? Part II

    How to Create a Specialty Coffee Line to Attract Commercial Coffee Drinkers Into The Specialty Coffee World?

    How to Create a Specialty Coffee Line to Attract Commercial Coffee Drinkers Into The Specialty Coffee World?

    A Take on Long-standing Relationships: Hasbean and Pedro Claros

    A Take on Long-standing Relationships: Hasbean and Pedro Claros

    Futures Contracts: What, Why, How  Part Three: Futures 103 How Hedging Works

    Futures Contracts: What, Why, How Part Three: Futures 103 How Hedging Works

    Futures Contracts: What, Why, How Part Two: Futures 102

    Futures Contracts: What, Why, How Part Two: Futures 102

    Futures Contracts: What, Why, How Part One: Futures 101

    Futures Contracts: What, Why, How Part One: Futures 101

    Grade Expectations: Finding Versatility and Value in A and AA Coffees

    Grade Expectations: Finding Versatility and Value in A and AA Coffees

    A Presentation on Cost of Production In Latin America

    A Presentation on Cost of Production In Latin America

    Meso-American Producer Survey: The Pandemic Will Leave Long-Lasting Scars

    Meso-American Producer Survey: The Pandemic Will Leave Long-Lasting Scars

    Invisible Barriers for Moving Coffee

    Invisible Barriers for Moving Coffee

    Caravela at 20: The Journey is Only Getting Started

    Caravela at 20: The Journey is Only Getting Started

    Certifiably Awesome: Passion and Persistence Turn Promise into Parchment in Mexico

    Certifiably Awesome: Passion and Persistence Turn Promise into Parchment in Mexico

    Harvest Arrives, Along with a Pandemic

    Harvest Arrives, Along with a Pandemic

    Minga From Field To Filter: Coffee Reacts and Adapts to the Covid Era

    Minga From Field To Filter: Coffee Reacts and Adapts to the Covid Era

    Mother Nature Turns The Volume Down in Nicaragua

    Mother Nature Turns The Volume Down in Nicaragua

    LOTSA Potential: The Long-Term Supply Agreement as a Tool for Financial Stability and Building Relationships

    LOTSA Potential: The Long-Term Supply Agreement as a Tool for Financial Stability and Building Relationships

    Progress in a Picture-Perfect Coffee Setting

    Progress in a Picture-Perfect Coffee Setting

    The Price and Value of Consistency

    The Price and Value of Consistency

    Looking Back and Leaping Forward

    Looking Back and Leaping Forward

    Womxn-Powered Coffee: Why It Matters

    Womxn-Powered Coffee: Why It Matters

    Behind the Scenes in Peruvian Coffee

    Behind the Scenes in Peruvian Coffee

    Unpoppable Opportunities for the Future

    Unpoppable Opportunities for the Future

    Equipping the Equipo: Playing to win in Guatemala and El Salvador

    Equipping the Equipo: Playing to win in Guatemala and El Salvador

    Agronomy to Keep the Microlots Coming

    Agronomy to Keep the Microlots Coming

    Evolution in a Land of Revolution

    Evolution in a Land of Revolution

    Cupping as Meditation

    Cupping as Meditation

    Origin Revelations

    Origin Revelations

    Avoiding the Poverty Trap: Choosing Stories Instead of Emotional Marketing

    Avoiding the Poverty Trap: Choosing Stories Instead of Emotional Marketing

    Iโ€™ve Bean Everywhere, Man

    Iโ€™ve Bean Everywhere, Man

    Have Yourself a Mara Little Christmas

    Have Yourself a Mara Little Christmas

    All Roads Lead to Coffee

    All Roads Lead to Coffee

    How Coffee can Complement Food

    How Coffee can Complement Food

    Building Projects at Origin

    Building Projects at Origin

    Coffee: Culture or Business?

    Coffee: Culture or Business?

    Cafรฉ: ยฟCultura o Negocio?

    Cafรฉ: ยฟCultura o Negocio?

    A Study on Costs of Production in Latin America

    A Study on Costs of Production in Latin America

    Fermentation Experiments in Nicaragua โ€“ How We Managed to Go from RTB to AAA

    Fermentation Experiments in Nicaragua โ€“ How We Managed to Go from RTB to AAA

    Constantly Adapting to Change

    Constantly Adapting to Change

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

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

    Embracing Technology to Create New Pathways in Coffee

    Embracing Technology to Create New Pathways in Coffee

    Forward Contracting to Secure Quality, Quantity and Relationships

    Forward Contracting to Secure Quality, Quantity and Relationships

    Caravela Sponsors Seven Small-holder Coffee Producers to attend the Producer and Roaster Forum in Guatemala

    Caravela Sponsors Seven Small-holder Coffee Producers to attend the Producer and Roaster Forum in Guatemala

    Colombian Specialty Coffee Scene. A Perspective from Cafรฉ Quindรญo

    Colombian Specialty Coffee Scene. A Perspective from Cafรฉ Quindรญo

    Coffee Sampling  Increases Farmers Profitability Opportunities

    Coffee Sampling Increases Farmers Profitability Opportunities

    Caravela From a Newcomer’s View

    Caravela From a Newcomer’s View

    Water Activity: Predictive insights Changing Processes and Profits

    Water Activity: Predictive insights Changing Processes and Profits

    Blending Experience with Passion in Mesoamerica

    Blending Experience with Passion in Mesoamerica

    Coffee in Galapagos: Evolving To Thrive

    Coffee in Galapagos: Evolving To Thrive

    What Traceability Offers Farmers

    What Traceability Offers Farmers

    The Specialty Coffee Transaction Guide โ€“ Setting the Bar on Prices

    The Specialty Coffee Transaction Guide โ€“ Setting the Bar on Prices

    A Tale of Two Customers: Caravelaย Coffeeย and the Rethinking of the Coffee Import Model

    A Tale of Two Customers: Caravelaย Coffeeย and the Rethinking of the Coffee Import Model

    Arriving at a price

    Arriving at a price

    Rich Farmer, Poor Farmer

    Rich Farmer, Poor Farmer

    Low Prices, Risky Times

    Low Prices, Risky Times

    Making it Work as Well as it Can

    Making it Work as Well as it Can

    Discovering the Source

    Discovering the Source

    A Mutual Evolution: Caravela Nicaraguaโ€™s William Ortiz, on helping people grow coffee, and how coffee helps people grow

    A Mutual Evolution: Caravela Nicaraguaโ€™s William Ortiz, on helping people grow coffee, and how coffee helps people grow

    The High Price of Getting the Best from Ecuador

    The High Price of Getting the Best from Ecuador

    Victims of Exchanging Currencies โ€“ Who Should Take on this Risk?

    Victims of Exchanging Currencies โ€“ Who Should Take on this Risk?

    A Pilgrimage to the Future

    A Pilgrimage to the Future

    Why Weโ€™re Investing in World Coffee Research?

    Why Weโ€™re Investing in World Coffee Research?

    The Making of a Champion

    The Making of a Champion

    Peru, an Unpolished Diamond in Coffee Production

    Peru, an Unpolished Diamond in Coffee Production

    Investing in Education: Investing in People

    Investing in Education: Investing in People

    How Roasters Can Influence the Supply Chain

    How Roasters Can Influence the Supply Chain

    Aromas: More than Just a Coffee Competition

    Aromas: More than Just a Coffee Competition

    FOB vs. EXW – Two Buying/Shipping Methods for Your Green Coffee

    FOB vs. EXW – Two Buying/Shipping Methods for Your Green Coffee

    Sample Roasting vs. Profile Roasting

    Sample Roasting vs. Profile Roasting

    How to Keep Records of your Costs of Production?

    How to Keep Records of your Costs of Production?

    Why and How to Estimate Costs of Production in a Coffee Farm?

    Why and How to Estimate Costs of Production in a Coffee Farm?

    Supply Chain Logistics – The Clockwork of Coffee

    Supply Chain Logistics – The Clockwork of Coffee

    Forecasting Green Coffee Purchasing

    Forecasting Green Coffee Purchasing

    What is specialty Coffee

    What is specialty Coffee

    Drying in Peru: the Final Step in Quality Improvement

    Drying in Peru: the Final Step in Quality Improvement

    FOB vs: EXW – Two Buying/Shipping Methods for Your Green Coffee

    FOB vs: EXW – Two Buying/Shipping Methods for Your Green Coffee

    When is it time to harvest?

    When is it time to harvest?

    Just In Time Inventory

    Just In Time Inventory

    Spectrum Purchasing and How it Impacts Sustainability

    Spectrum Purchasing and How it Impacts Sustainability

    CONNECT WITH US

    ยฉ Caravela Limited, 2020
    SUBSCRIBE TO RECEIVE OUR LATEST NEWS

    • This field is for validation purposes and should be left unchanged.

    Translate ยป

    Pin It on Pinterest

    Share

    Share this content with your coffee community!