I’ve always gone along with the idea that the C price in coffee is nothing to do with me. But I’ve started to change that opinion of late

So what is the C price ? The C price is the price paid for traded commodity coffees at the New York financial exchange. This is a two-fold market of current prices and also a futures market for purchase of contracts for coffee for a later date.

The prices are dictated by a few things, but in a stable market these main things are weather conditions at origin which will have an effect on yield for that year. There is a saying if Brazil sneezes the rest of the world catches a cold, and this stems from this kind of thing. Markets are heavily influenced by statements from coffee-producing countries’ organisations, regarding dropping yields or a lack of supply of coffee in the market. Like anything supply and demand are very important factors.

Coffee that we buy have no resemblance to this price and I’ve worked hard over the years to make producers ignore the “c” and focus on things like cost of production and then the rewards they deserve for the coffee. Cost of production can vary from varietal to varietal and reward can fluctuate depending on rarity and demand.

Its been a clean easy mechanism to work out what price we should pay for a coffee, well so I thought.

So why the change of heart and the focus on watching the “c” price? Every farm that produces specialty coffee will have some commodity coffee, the stuff that doesn’t taste so good, the smaller beans, and broken / black beans. These beans have to find a home, and its often on the commodity market that they are sold.

I’m not even going to touch differentials if you want to learn about them go here http://www.hasblog.co.uk/coffee-prices-differentials-and-premium-quality-coffee-relationships. But for now lets keep the numbers simple

The fluctuation in the market means that the profits of a farm can fluctuate with them. These numbers are very complicated unless your talking about a real farm, and I’ve yet to have this conversation. So I’m going to use some very basic numbers to prove the point.

So say a farm that produces 450 bags. 60% of the coffee sells at $4.50 a lb FOB to the speciality market. The remaining 40% is subject to the commodity prices at the time. The fixed income is the relatively good at $184824.59 for the 270 bags of specialty. But what does the market do to the other prices

Well lets look at some dates in April. If the commodity coffee was sold on the 1st of April 2011 then the producer would have received $82,144.26 for their 180 commodity bags, giving them a total turnover of $266,968.85. Fast forward to the 1st of April 2014 and that same commodity coffee would have sold for $55,584.28 giving them a total of $240408.87 a drop of $26,559.98. Fast forward further to the 1st of April 2017 and that same coffee would have sold for $37997.20 a total of £222821.79 a drop from 2011 of $44,147.06.

Now say this imaginary farm has outgoing costs including a wage for the producer of $240,000.00 In 2011 they made an amazing profit of $26,968.85, winner winner chicken dinner. But in 2014 that profit would be $408.87. 2017 was even worse where they made an imaginary loss of $17178.21 nearly wiping out all the profit of 2011 (not to mention costs will have all gone up by then).

Now these figures are probably way off, but they do demonstrate how much effect a swing in the New York ‘c’ can have on the life of a producer in an imaginary world.

 

Potential Solutions

The ‘c’ in 2011 was a freak occurrence that doesn’t happen very often. Stock markets were down, currencies unstable and commodities were really targeted by the rich as a place to put their money. The market was being manipulated by very wealthy banks and hedge funds to keep making money in the tough times. Prices at the moment are low, and in many cases lower than production (this is where differentials come in places like Kenya compared to say Brazil have very different harvesting costs).

So lets set a mid price of $1.60 for the C to be a healthy market. This would mean that a good profit for the imaginary farm being set at $228634.86. My proposal would be to set a sliding scale of payment on that $4.50 a lb coffee and when the market rises, that price would drop to the producer and when it drop the “specialty” coffee rise. For instance the coffee on the 1st of April 2017 would be $37997.20. So if you set the price at $4.64 in stead of the static $4.50 you cover the loses of the producer in the specialty price.

But if April 2011 ever happened again then then that “speciality” price would drop for instance $3.57 meaning the producer still got the $228634.86 which involves profit and wages but the roaster is protected against what would be a rising market. You see when the market rises and spot purchases from importers and negotiations with new suppliers are always much higher than when the market is down even if we pretend to ignore it. I kind of see it as hedging the market both ways for producer and roaster.

 

DATE C PRICE

1/4/2011 299.38 $82144.26 for 27381.42 lb

1/4/2014 203.05 $55584.28 for 27381.42 lb

1/4/2017 138.77 $37997.20 for 27381.42 lb

450.00 184824.59 for 41072.13 lb

Now these sums are very basic, and I’d love to sit down with a coffee producer and give them some real meaning but there has to be some milage in this idea, so a farmer can plan for the year knowing exactly what they will bring in, and roasters can plan and not be adversely hurt by a changing market. Its also easier to put raises in costs of production again, sitting down year on year and working out the best price to pay depending on the market.

 

Potential Problems

How do you continue to motivate the farmer to produce quality. I don’t think this model would fit every producer and very country (and I don’t know if it would even work. But I think the majority of producers we work with are not motivated by money, but by producing great coffee and having some stability in pricing. I’ve had some of our farmers approached by other roasters wanting the coffee and offering more money, but our team tend to know that I’ll be back every year, and thats a motivator in itself.

But I think some guidelines like

– we’ll buy XX lbs of coffee of coffee next year provided they are available and cup at 85+
– We will guarantee a premium on this quantity of coffee,
– we will raise/lower this premium to factor any financial impact incurred by changes in the C-market on any coffee produced that cups below 85 to ensure stable profits
– we will invest x% of profit from this years coffee into future innovation on your farm

These are just muses, and stuff I’ve been thinking about, but I will approach someone and get the real figures and see if we can do something on one farm see if its even possible and if it is just to trial this out. I’m sure theres another blog post in the future about this too.

You think i forgot about this right !! Well wrong, that just proves you don’t follow my instagram account where last weeks flashback was a picture. This week we look at an article I wrote back in 2008, and I am as proud of it today as I was back then. Its an insight to who I am and how has bean started, its been a fun journey, and one I must update soon. Maybe sharing it here will motivate me to do so.

Sit back and enjoy

 

 

I have always enjoyed coffee, and always been a little weird with it too. Not in a bad way, more in terms of quality and choice. I remember asking, as a seven or eight year old, for a filter machine for Christmas, and drinking filter coffee when no o­ne else in the house did. I recall enquiring if my mom would allow me to choose the coffee myself, then spending a long time carefully making a selection. I really don’t know where this desire came from, or why I liked coffee so much.

There was a shop in Wolverhampton called Snapes that I liked to visit when I got a little older. Despite it being the 1980s, the shop remained a very olde worlde looking place with oak panels o­n the walls. o­n these hung big (and I mean big) hoppers full of what I now know to be stale coffee beans, which when purchased were wrapped meticulously in 1940s style brown paper.

Snapes was a reasonable distance from my home and going there was a big thing to me. As quite an independent young person, I used to look forward to it and make my own way there. This was at a time when it was safe enough for relative youngsters to travel ten or fifteen miles alone o­n a bus. I can’t imagine in today’s world letting my son do that, which is a shame because back then, for me, it was a life forming experience.

The thing I loved most about Snapes was the aroma. I can still smell it now in my nostrils, the pungent combination of fragrances; coffee and the roast itself mixed with brown paper and the old wooden wall panels. It’s a very clear and strong memory. To this day, I still love the aroma of coffee more than anything else, it’s such an emotive smell and so distinct.

The love of coffee carried o­n into my adult life, but back in the early days, the coffee I drank was nowhere near the quality that I have become used to and expect today. Just as with many coffee consumers, it was in part about the caffeine ‘hit’, though that was not all for me, there was more. I would go for the best quality that was available to me, which at the time was mostly from supermarkets, because I also wanted flavour, just as I had years before when trekking all the way to Snapes. Throughout my life, I have always loved to experience and challenge myself with taste and the perception of flavours.

When I left school, I worked in the mental health sector for seven years. As anyone who has been in nursing knows, the salary is not very good. I was also living with my now wife Sarah, and had a mortgage at eighteen, which made money even tighter. So, to supplement my main income, I used to work three or sometimes four jobs at a time in order to afford the mortgage payments, put food o­n our table, and buy those nice things with which I loved to challenge my sense of taste. This meant working nights or very long hours.

One of the many jobs I had was at an all night petrol station. It was o­n a very busy road about ten miles from Birmingham – and not in the nicest part of town. There, I was locked in from seven at night until seven in the morning all o­n my own, finishing just in time to get to go to my main job. The nights were long, lonely and very hard work. Staying alert and awake was important, but making friends with the local police was crucial. I quickly found out that night workers enjoy coffee, and if you give night workers nice coffee, they like you a lot!

Thanks to the coffee, I would have two or three police cars parked outside my petrol station for hours upon end. The presence of the police is o­ne of the best crime prevention methods around and I highly recommend it. o­n o­ne occasion when I didn’t have a coffee party going o­n and there was some trouble, I pressed my panic alarm that alerted the police of a problem and my coffee buddies we soon there, providing a very speedy response.

I then got a job that paid more money than nursing but was no where near as much fun. o­nce again, I ended up doing night duty and, just as before, coffee eventually came to my rescue, but this time in a very different way. I didn’t enjoy the job that I was doing and spent many a night thinking about what I would do differently to change it all and make improvements. I was clearly unhappy and perhaps a little disillusioned. Around this time my son had started school and my wife was thinking of new things that she might like to try for herself. That seemed like a good idea to me, so I too began to consider what I would really like to do. I loved football but was never good enough for the school team, so making a living from it was out of the question. I loved wine, but my liver would never have held up in the long term. Then it came to me. I loved coffee! At the time, I had progressed from the supermarket’s finest offerings to buying green coffee directly from Sweet Maria’s in the US (thanks Tom) because it simply wasn’t possible to get what I wanted here in the UK.

It was 1999 and the internet was still fairly much in its infancy, especially where commerce was concerned. After some investigation, I found a great roaster based in the UK, and made the decision to buy roasted coffee from him to resell three days a week o­n a market stall in Stafford. Both Sarah and I kept our day jobs throughout the market stall period. I was able to be there due to a combination of leave, nights and early shifts at work, often taking over from Sarah for the afternoon. It was so tough, and they were crazy, crazy times.

I remember carefully selecting the coffees, buying some great jars to present them in, getting the bags ready and having lots of signs printed. We opened up expectantly o­n the first day and sold just three 250g bags. It was a complete failure, costing us £30 to stand there for the day whilst we took just £7. The second day was even worse. A lovely old lady came across to the stall and asked what we were selling. I explained my prepared and well rehearsed story about this fine specialty coffee that been sourced from all corners of the world. She was impressed, and said “I’d like to take a bag please”. It was our first sale of the day. I ground the coffee for her o­n our lovely grinder, sealed the bag carefully and thanked her very much. So pleased was I to have introduced this lovely lady to good coffee, it didn’t matter to me that everyone else was walking past and no-one was buying. Indeed when the end of the day arrived there were no other sales, yet I was still pleased. o­ne person converted to the good stuff was a start. After all, from acorns mighty oaks spring.

Whilst packing away the stall and loading up my trolley, I noticed the old lady coming back into the market. No matter how great a job I may have done in introducing her to good coffee, she surely could not have finished the bag already. She returned to the stall and explained that she was pleased I was still there as something was wrong with the coffee. I was truly gutted. What o­n earth could it be? We were so careful and particular when choosing what to sell. Was it over roasted, tainted, the wrong grind? Yes, that must be it. I knew it. In my mind it was the wrong grind. I enquired further, “I’m so sorry, what was wrong?” The lady replied, “Well I put it in the cup, stirred and it wouldn’t dissolve! I stirred and stirred, but it stayed all powdery”. Rather stunned and a little surprised, I apologised and returned her money. It was just not worth trying to explain. Deep down, I knew this did not bode well. The poor sales went o­n for three weeks. The best day was the first day when we sold three 250g bags, the worst week amounted to a solitary sale of o­ne 250g bag. Something clearly had to give.

I decided that if Stafford wasn’t quite ready to buy coffee beans from a specialist retailer, we would have to showcase our product more successfully. Recalling the massive impact that the coffee aroma in Snapes used to have o­n me, I decided that we would continue to sell beans but needed to offer cups of coffee too. That way, people would drink and be converted to great coffee, then we could sell them some beans to take home. “I’ll show them”, I thought. It’s just a matter of education and being exposed to quality coffee. So we found a shop in Stafford town centre. It was VERY small, and in an awful location, but cheap and affordable.

The shop needed to be fitted out as a cafe. I begged, borrowed, and after a full shift at my main job, worked hard until three every morning, before going home for a few hours sleep and returning to the early shift at work the next day. This went o­n day after day until it was ready. We painted the main room bright red, and the back became a funky electric blue. It looked different. We decided that Sarah would front the place whilst I continued at my main job and worked with her around my shifts, just as I had at the market stall. We spent as much money o­n tables and chairs at Ikea as my credit card would allow. We o­nly had twenty covers, but in our location, we didn’t really need too many more. We started with what was basically a home set up of a Rancilio Rocky grinder and a Nuevo Simonelli Oscar o­ne group espresso machine. I look back now and cringe, but we worked for six months with that kit until someone felt sorry for us and sold me a three group commercial La Cimbali for £100 that worked like a trojan. We roasted the filter coffee ourselves o­n an Alpenrost home roaster and bought the espresso beans from our roaster friend. We had the coffee shop for three years in total and although it did not bring riches, we didn’t lose anything either. We survived, but it was such very hard work.

While we had the coffee shop, I used to travel 120 miles to pick up the coffee beans from our roaster friend. It was not necessary, but I did it because I loved the roastery so much. The roasting process was what really intrigued me about coffee. I also liked that there were no customers directly in my face, and that roastery customers appeared to be genuinely appreciative of the effort of the person roasting. On one of my trips to the roastery, I spotted a 2kg roasting machine in the corner that was not being using any more. I asked if they had thought about selling it, and they wanted to do so. We settled on a price that was ok for everyone, and came to an agreement that I would not sell roasted coffee online for a number of months.

For me it meant a bank loan. I was all spent out, but it seemed like a dream to have a great roaster that meant I could roast all the coffee for the coffee shop myself. So, our garage was fitted out with electrics, a new ceiling, worktops, floors, and it was plaster boarded by a friend. It had the lot. Once again, I did a lot of the work myself, fitting cupboards, floors and painting. I even installed the chimney – which turned out not to be such a great idea. The first few roasts went well, then, I learned that roasting demands constant attention when I set fire to my flexible hose chimney and had flames coming out the roof! Our neighbours enjoyed this time with me being a seemingly constant source of hilarious entertainment. I remember some of our neighbour’s young children asking why I set fire to my garage every night.

I worked at my main job or in the shop every day, and then at night would be in the garage roasting coffee, which I then mailed the next day during my lunch break at work! As time passed, I found myself spending more and more time roasting. It meant that Sarah was more often than not having to work a seven-day week because I was roasting on what were meant to be her days off. The coffee shop had become something far removed from our original vision. It had evolved into what was almost a sandwich bar that sold coffee beans. We did not intend it to be that and no longer wanted it. Meanwhile, the roasting was quickly becoming something that I very much did want.

We were busy with the roasting but there was not enough of it to concentrate our efforts on that alone. The lease on the shop was coming to an end and I was far from convinced that we should renew and continue with it. The coffee shop was meant to be just a means to an end, a way to introduce people to our roasted coffees. By this time the period for we had agreed not to sell roasted coffee online as part of the deal to purchase the roaster was also coming to an end. The inspiration behind us selling coffee remained Sweet Maria’s in the US. They were the reason for this whole crazy idea, the start of it all. There was still nobody doing it here in the UK in quite the same way as Sweet Maria’s served US coffee lovers and to me that was madness. The people who we were buying from just didn’t seem to be so focused on the smaller customers and I thought we could do that well.

With the coffee shop being so far off the beaten track we had always needed to offer people a reason to walk a little further to us. Price was our thing, and this in turn meant that students were attracted to our premises. We really liked the students; they appreciated the coffee, and they came in regularly. Sitting in the shop one quiet afternoon, I got talking to Pete who was one of the students. He had a real appreciation of the coffee and the effort we put in. We got on really well. I started to tell him about my idea. I wanted to set up a website to sell good coffee but my skills stopped at html, and an online shop needed a little more expertise than I could provide. These were the days before you could easily buy an off the shelf checkout solution for e-commerce from any number of vendors. Pete was studying computers and was a clever guy. He offered to try to build a cart for us. This was from the ground up using pearl and cgi. Our first site worked, but I’m not sure whether I would have been comfortable giving us credit card details.

Nevertheless, we launched and it was amazing. We sold more in our first day on the site than we did the whole week on the market. Admittedly this was from people who regularly came into the shop supporting us online, but it was still great. It really took off quite quickly from the August when we launched the site.

By October we had decided that the coffee shop was going and we needed some premises to replace the garage in which to roast. We found a small industrial unit, which was only 750sq ft but perfect for us. It had an office, and a great space for the roasters. Preparatory work was once again needed. I had to paint the floor and the cupboards, along with attending to a multitude of the little jobs that always seem to need attention when setting up any new space. It seemed that fitting out was becoming a regular occurrence for me. DIY and I were certainly no strangers.

We purchased a second roaster and spent a happy eighteen months at that place as the business really took off, but it soon became apparent that we were outgrowing the space. It got scarily busy at one stage with space and capacity pushed to the limits. From nowhere our website had just become really popular. At that point, the original site designer, Pete, was back studying at university and unable to do any more work with us. So, thanks to the help of a friend we upgraded the website to something far more professional.

The big catalyst for what was going on in terms of the coffee itself was our involvement in the Cup of Excellence program. With Cup of Excellence, you can’t ask “Can I do that?” or simply join. It’s the kind of thing that you just get asked to do. People in the industry saw what we were doing, and from observing me at cuppings thought that my palate was good enough. It was such a huge honour to be asked to go to Nicaragua in 2005 as a judge. The day that the invitation email arrived, I ran round and round the house at least ten times like an excited little boy. I was unable sleep for days, and luckily for me, Sarah was so supportive of me attending. She knew it was such a dream come true for me.
Being asked to be part of the jury convinced me we were on the right track. If serious people in the speciality coffee industry thought we were doing okay, then that was good enough for me. I’ve always been a little unsure that way throughout my life, worried that we might not be good enough or that we didn’t really belong. Recognition of that magnitude always reassures me, bringing with it a good feeling, and it doesn’t come any bigger than it did that day.

The trip to Nicaragua came at a time when the furthest I had ever been abroad was to Spain way back in 1984, and I hadn’t flown on an aeroplane since. So, there I was, twenty-one years later embarking on a journey to the other side of the world all on my own. I remember it so vividly. At that point, I had not spent more than one or two nights away from my family, and never been as far away from them in distance. The airport has become very familiar to me over the past few years, but back then being alone and in an unfamiliar setting, it filled me with trepidation. I flew from Heathrow, that too was a very new experience for me, having previously only been exposed to smaller regional airports, to Madrid, and then to Miami before continuing to Managua, all on my own. Connections were traumatic, and my arrival at Managua was scary. I arrived at the airport and couldn’t see anyone from the Cup of Excellence or anything about it. I was not sure where we were staying. I did have a cell phone number to call, but got no answer, so I sat on a step and just waited whilst being pestered by people who were speaking a language that I barely understand. The airport was mad with people bustling around everywhere. I must have been offered a taxi forty times in the space of two minutes. It was so very unnerving. Eventually, as someone passed me, I spotted that he had a scrunched up piece of paper with the word “Cup” on it, so I approached him. Fortunately, he too was in town for the Cup of Excellence, and kindly took me to the party arranged for that evening.

The competition was wonderful. I was cupping with coffee gods; people that I had previously only read about. Now, I was there interacting with them. It was such a thrill and a great honour. The coffee producers were so cool as well, and I spent the week just in awe of wonderful people and the fantastic surroundings.

We had always used high quality beans, but being exposed to great Cup of Excellence coffees really inspired us to push to another level. Visiting origin and working with our growing partners was a great experience that really focussed our direction.
Back at the roastery, the space issue was becoming untenable, so we moved to our current premises, a 2500sq ft space, which required another round of building work and floor laying. The extra space enabled us to buy our third and fourth roasters.

We have just, this year, replaced the original 2kg machine and have therefore gone full circle in terms of roasters. The unit next to ours recently became available, so we took on the extra space and now have a total of 5000 sq ft.

It has been a rollercoaster ride from the beginning to where we are now, and we have met lots of very nice people along the way. I hope that the future will bring us lots more ups and not too many downs as our wonderful coffee journey continues. Whatever happens, we love what we do and will always remain committed to providing world class coffees to our customers.