Brexit hangover

Price, nobody likes it when prices go up (apart from the person who benefits), but what if no one is benefiting?

Normally there’s a winner somewhere, coffee producers raising the money they charge, roasters wanting to make more money, costs rising so some other sector is getting more money (packaging, shipping, fertilisers etc). But this time, it’s the result of a vote 4 months ago that we’re now having to react to.

After the crazy party of a referendum we all woke up with a bit of a political hangover and to a new world, I think something that was missed is the new face of consumerism. On Friday, June 24th we saw what the markets thought of our decision, the stock markets and the currency markets both plummeted. The stock markets quickly recovered and we’re seeing record highs in the FTSE 100 and other measurements, but currency remains at record lows. When I first started to understand buying coffee in dollars I remember the £ being worth around $2 as my mental marker. Easy conversion times. Even before Brexit we had seen big changes in this, and previous visits to $1.35 to £1.00 were scary and horrible. Today the mid-price for the $-£ sits at 1.2276 (the new most opened app on my phone is XE) and record lows are reported every day, and just when you think it’s bottomed out ($1.29 was my guess) you see more and more drops.

What does this mean? Well, all our coffee is bought in USD/$. Part of my job as a green buyer is also to hedge against the dollar (this means buying dollars when I think the price is good or to protect from huge market swings). Before Brexit, I spent a couple of days reading about what the outcomes might be from different votes (yes my life is this interesting) and worked out some scenarios. I think it’s fair to say that no one really knew what might happen, as there is no precedent for such a huge vote, but you can take a stab in the dark. If we take ourselves back to Wednesday, June 22nd the day before the vote, all things pointed to a remain vote being most likely. The forecasted reaction to this would be a small jump up to $1.50 to £-ish and some stability back in the UK markets. The case for leave meant some uncertainty and a drop, but a drop some people had at $1.10 – $1.20 others more $1.30 – $ 1.40. I had to make a decision that day to buy some $ and think we might leave and protect myself from this change, or ride it out expect a remain vote and see a chance to sell some dollars at a slightly higher price.

My decision was to do nothing, sit tight, didn’t have anything arriving for the next 4-6 weeks and see what happened. Well, what happened was well documented (I think we will all know where we were when we heard the result), and was the biggest loss on currency and some of the lowest exchange rates on record. What also has happened is that I’ve become a currency junkie, constantly checking for small changes in the $-£.

On that morning some importers who had already bought coffee raised their prices because of the swing, I even heard of some roasters doing the same. To me, this seems crazy for coffee that’s in store and had already been paid for at the older (much juicier) exchange rate, and also a little opportunistic. We didn’t, we sat and we waited and we watched, and that’s been the last 4 months, waiting and watching.

In that four months we had to buy some dollars, some big purchases, some smaller hedging ones to try and buy when I thought the market was good, and selling when I could see an upward swing. But since Brexit I’ve bought around $400,000.00 of currency to buy coffee. $400,000.00 today will cost you around £325,865.58 but back on June 22nd that same $400,000.00 would have cost £268,456.38, a difference of £57,409.20.

Let me take a moment to say that figure again, £57,409.20. That’s £57,409.20 that didn’t go to the farmer, £57,409.20 that didn’t go into my pocket, it just disappeared in currency exchange. It’s sad, really really sad.

What does this mean for Has Bean? Well, it means that our prices are going to have to go up. Not right now, but on new coffees as they come in, you will see some of our prices rising, and as we start to use these coffees in blends, their prices will rise too. This will also have a knock-on effect on subscriptions too, it’s something we’re going to have to address, but we’re riding it for as long as we can, waiting for the market to settle, and seeing what we can do to offset it as much as possible.

Don’t think coffee is the only thing that’s going to get more expensive. Many things are bought in dollars, oil typically bought in $ will increases at the pump, a low barrel price is keeping this under control for now, but pre-Brexit this would have been much cheaper at the pump and prices we’re seeing now are 15-20% higher than we would have expected at previous currency rates. Currency effects so much of what we consume, the scary one on the news this morning was wine from Australia.

So, what’s the future? Well, I wish I knew. Good trading results and unexpected news post-Brexit are making the pound actually better than it could have been. The UK economy has not taken the dive that many predicted so maybe we should be happy at $1.22.

But the market remains volatile. Something as simple as a speech can have an effect on market confidence. In the recent conservative conference every time our prime minister spoke, the £ plunged with talk of hard Brexit and dates of March being set for invoking article 50 to leave the European Union. This isn’t a political statement by me, more a sign of the fragility of the market and the confidence it has in a post-EU world, and something we will have to prepare for.

I wanted to warn you about what was coming, and let you know that this is not a roaster getting greedy, or a farmer making deserved coin, but we will be looking at our pricing as we go, and keeping it under constant review. We won’t be the only ones doing this so expect coffee to get more expensive, but sadly not for the right reasons. We live in uncertain times, but one thing remains, life is too short for bad coffee.

A Bolivia monologue 

A few weeks back I was lucky enough to spend some time in Bolivia. Bolivia has become one of my favourite country’s in the world to visit, and in fact was my 10th time in ten years.

No where in the world is like Bolivia, the landscape, the people and the unique issues surrounding coffee production and export.

Whilst there I recorded a little piece on it for Tamper Tantrum (a podcast between myself, Colin Harmon and Jenn Ruglow aimed at the coffee industry) which was a monologue on the trip and the future of Bolivian coffee. Its been a few weeks since I recorded and released it, but remembered this week I forgot to really talk about it here, so I thought I’d embed it below I hope you enjoy it.

El Salvador and the “Quality Coffee Event 2016”

I know many readers here will have seen my blog post, about the disappointment of the Alliance for coffee excellence cancelling a number of next years program in Africa and Central America.

One of the ones that disturbed me the most was the El Salvador program, which is one thats been super close to my heart. This was the the first cup of excellence program that I was able to buy the number one coffee (2007) and purchase that I followed through with a long term relationship (and many since). This has also be a a country that has been hit hard by the leaf rust epidemic thats swept through some of my favourite growing areas, and effected many of my friends who we buy coffee from.

It was also the place that I had emails reaching out to me, from producers (read as three separate people) who read my blog post and were compelled to contact me, expressing how upset they were that the program wouldn’t be coming and how some of them had been working on special lots to enter the competition, and their work was to be wasted.

So instead of a negative blog post about how bad this is, it’s lovely to report that the Consejo who are the supporting body for the Salvadorian coffee community have written to me and said that they plan to hold a national project to carry on the local specialty discovery program in house, and carry on the hard work done over many years of COE programs. Sure the protocols will be different I am sure, and some of the way its implemented will be different, but I am sure with a good group of people searching through samples for quality and using protocols and procedures, there will still be a very good opportunity to find true quality coffee and help producers find quality buyers.

I’m also really excited that the Consejo have asked me to be one of the judges for this program this year, and I am more than happy to offer my help and support to make sure something happens.

Dates are yet to be confirmed and I ma sure there are many hurdles to overcome, but I am excited to be involved, and I’ll be offering as much support as I possibly can, and very excited to be asked to be involved.

Watch this space!!!!

Cup of Excellence announcment

Another huge shock that a non profit US lead organisation makes terrible communication announcement and fails to involve its membership in the decision making process. Following on from the SCAA announcing cutting its regional barista competitions.

It’s no shock to me that the cup of excellence arrogantly sent out an email last night saying without blinking they will be stopping for one year the competitions in El Salvador, (one of my personal favourites), Nicaragua and Mexico along with all the african programs of Burundi and Rwanda. No consultation with the membership (not that I expect it I only hear from them at renewal time when they want my benefactor membership fees that I’ve paid since 2005) to slash the program in half.

Its a program that I love, without it I wouldn’t have half the relationships we have for buying great coffee, I owe it so much. I also wouldn’t have met some of the greats of the coffee industry on jury’s and be able to call them friends, I learned so much in those jury days.

I loved it so much I was on the board of directors for a couple of years (much to the annoyance of the board and officers of the organisation). You see they like to build the board, and when I asked to be part of it I was told to go away and thank you for your interest, but the “nominations committee” had decided who they would have instead of the membership. So I raised 20 names and forced a ballot for what I believe was the first time, and got voted on. This gift meant I had a horrible two years flying to silly parts of the world (art my own cost) to sit on board meetings where you were powerless to do anything, and decisions were made else where behind closed doors, and in private meetings.

But this is a distraction, the news that came through last night was typically delivered without a concern or consultation for the membership, or thoughts of how this might effect some of the hardest hit coffee producers in the world.

The announcement states that the 2016 program will only include Brazil(BSCA),Colombia(FNC),Costa Rica(SCACR), Guatemala(Anacafe) and Honduras (SCAH)) while they fine tune the program.

Why are these remaining and the others being cut? Well its funny all the remaining competitions have coffee organisations in country with some money to pay for the program and are the very easy wins. This means bye bye to Nicaragua (who has had trouble funding the competition for a few years), El Salvador (the Consejo has been in disarray for a while and leaf rust has decimated the Salvadorian coffee industry), Mexico (thats a young program and only been in place a few years with varied success) and the African programs in Rwanda and Burundi (typically hard to run when your based in North America previously Montana and now Seattle are renowned for being a long way from Africa).

Why are these countries that need all the help being cut ? whats the rational to take away the tool the people need the most?

To take time out to fine tune.

A new auction platform.

I’ve had this priced up as I was trying to help a producer who ACE didn’t want to help. Around $15,000 and a month development time. Maybe I can put the organisation in touch with my dev team.

Update exciting competition standards

I’ve been told for years they are always in development and evolving and we have the best standards in the world for coffee competitions. But if this needs looking at, set up a working group, let them worry about that.

Creating and implementing and electronic cupping form.

I can help with this, I have a customer who is doing this for the has bean app. But if your not happy with that theres catador thats a wonderful app, I am sure if you talked to them they will help out

Improving post auction logistical issues with respect to purchased lots and deliveries

Really ? We live in a world of importers that do this all the time and have expertise. Were closing down half the program because of this?

You need to kill half the program for some of the most needy countries to do this ? It’s a joke, if there are reasons I’m willing to listen and hear them, but these are excuses and cop outs.

I’ve fell out of love with the organisation for a long time, and this is the nail in the coffin. I’ve spent around $15,000 – $20,000 on membership over the last 10 years with samples and alike. Spent many more thousands on flights for jury’s, and many more on flights when I was on the board, not to count the many thousands on lots over 10 years. But thats me done, I’m out I’m off to support an organisation that supports its producers and members.


2016 COE Schedule Announcement

Ask Stevee pt 2

So in my quest to answer your questions I’ve done another audio podcast to answer all the things about coffee you were to afraid to ask

there will be more of these so keep the questions coming