For most coffee lovers, the price they're willing to pay for a good cup of coffee takes into account competitors' prices, how well the coffee has been roasted (to showcase its natural flavours), how expensive (alternative) milk is and how good the customer service was.
What’s not necessarily taken into account is the increased price in shipping containers, container shortages, global warming, disease, contracted coffees and the pandemic, just to name a few.
Many coffee consumers are unaware of how (arabica) coffee is traded and what variables influence the price that a) the farmer receives for their coffee and b) at which price roasters and traders buy coffee.
Arabica coffee is a commodity, and like other commodities such as wheat, cotton and oil, they are traded on the futures exchange which determines their overall buying price.
Arabica coffee is traded on the C Market, which is a global index that determines the price of all green arabica coffee. The C Market does not differentiate between the quality of coffees. Its role is to standardise trade between all un-roasted arabica coffee that has met a certain level of quality.
Within the C Market, arabica coffee is traded in the futures exchange. This exchange acts as the middle man between the buyer and the seller. The seller sells to the exchange and the buyer buys from the exchange. In this exchange, buyers or traders enter into futures contracts and agree on the terms for an exchange that would occur at a later date (or in the future). Investors also interact in this market with no intention of buying coffee. Rather they treat the future contracts as they would stocks, buying and selling to make money. Once the coffee futures contract has expired, whoever is holding the contract at the time of expiration is the owner.
An important thing to note is that the C Market doesn’t necessarily determine what the farmer gets paid for their coffee, rather it acts as a benchmark to determine the minimum price of coffee on a global scale. Depending on the quality of the coffee roasters are buying, its price can either have a negative or positive price differential compared to the C Market price.
For some roasteries like us, who are dealing with specialty coffee, when it's possible, we always choose to buy direct from the farmer. This means that the C Market has an effect on the minimum price a farmer can sell their harvest but farmers also take into account their cost of production, the size of their harvest, wages and bills, currency exchange, the quality of the un-roasted beans, the processing method and much more.
For example 19grams has been working with Hacienda Sonora in Costa Rica for over 15 years. As a roastery within the specialty coffee industry, we see a huge importance in paying the farmer for their efforts in growing and harvesting the highest quality green coffee. Enabling the farmer to not just cover the costs of wages, bills production etc but to also re-invest into their farm and to improve their farming techniques and thus cup quality year on year.
Today, the C Market price for coffee is 2.28 USD per ounce. That’s €2.08 per 454 grams OR €4.16 per kilo FOB (Free of Board). FOB takes into account all the costs up until the green coffee arrives at the boat for shipment leaving the export country or country of origin. Because we choose to pay the farmers based on their quality and skill, the average price we pay for green coffee is €10 per kilo (Landed in the roastery).
On top of that, roasteries like us have to then pay transport fees, packaging, wages and salaries for both the roaster and barista, cost or rent for the roasting and café space, cost or rent for the roaster, coffee tax (which is €2.19 per kilo in Germany) and the list goes on.