As if trying to outdo 2020 for sheer tumultuousness, 2021 has offered up a dizzying array of difficulties here in Colombia. From an almost twofold increase in local market prices since early last year, through the protests and strikes that paralyzed the country in May and June, and now, a critical shortage of containers and vessels to export coffee. Despite these challenges, however, we’ve managed to continue growing, while still delivering to our customers the best Colombian coffees on the market.
Although forced to essentially cease our milling and export operations in May and June as the protests and strikes made it impossible to move coffee from our purchasing stations to our dry mill (and from mill to port), at no point did we stop purchasing coffee from farmers. In May we were only able to export one container, and zero (!) in June; mind-boggling when you consider Colombia’s position as third-largest coffee producer in the world. As of today, we have made up the lost time on shipments and our purchases are up by almost 10% year-to-date, while our exports are 5% higher.
It’s been a true bright spot amidst all the difficulties to witness the continued durability of our model. A direct presence in almost all the municipalities where our over 2,000 partner producers have their farms coupled with the constant interaction of our PECA team allows us to maintain strong ties to growers and their communities, as well as helping us reduce our risk and maintain a diverse portfolio of options to our customers, quality- and profile-wise. This year our purchasing warehouses have not closed a single day, remaining available for coffee growers to deliver their lots, and receive both feedback and payment promptly. The latter is a feature that has become particularly critical this year given the extreme volatility in coffee prices, as growers want to take advantage of sudden spikes to sell their lots at the highest price possible.
Thanks to the recent peak, we are paying coffee growers the highest prices in our twenty-year history – up 33% from last year’s already-record prices. This significant increase in average prices paid is occurring even though the demand for our RTB (Ready-To-Blend) coffee has surged by 20% year-on-year as the increase in market prices has pushed some roasters towards cheaper options. In turn, the percentage of AA-grade coffees shipped has been the lowest in our 20-year history, currently resting below 35%, when historically it was around 50%. And although most farmers tend to forget about quality when prices are high (why bother when I’m already receiving a fortune, even for mediocre coffee, right?), most of our long-term farmer partners have continued to deliver great coffees, thinking long-term, and ensuring that we can all continue to enjoy great tasting coffee.
The rise in prices paid to farmers and the difficult situation roasters are facing due to the pandemic has impacted our gross margins considerably, but we are delighted that growers are increasing their incomes, especially after several grueling years of prices repeatedly gravitating below the dollar mark. We’ve continued paying the highest prices in the market thanks to the long-term commitment of the roasters we work with, who continue to sign forward contracts, as well as our risk management strategies and strong capital position. It is important to continue showing coffee growers that we are there for them, in good and bad times, valuing their trust, their quality, and their consistency over so many years.
But none of this would be possible without the professional and experienced team we have at Caravela. We firmly believe that this makes a difference when it comes to consistently delivering to our customers coffee of the highest quality standards, as timely as supply chain issues allow. I am the newest member of the team, having taken the helm of the operation just 6 months ago after being away for almost 6 years, and I couldn’t be prouder of the team we have in Colombia. Despite the trials and tribulations of the pandemic, our 120 employees here have continued to perform at their best and deliver. Although the year is far from over, with the second harvest about to commence, we are happy in the knowledge it will be a profitable year for the coffee growers that we work with, and we look forward to the challenges that will make us stronger – and coffee better!
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