Transparency
Sharing coffee price information
In recent decades, the price of coffee has been based on the market price set via the New York C market. Higher quality coffee, known as specialty coffee, doesn’t use the C market price, but there is a correlation between specialty prices and the C market. Buyers of coffee must compensate growers for the price of coffee plus the additional work needed to produce quality coffee, so the specialty price tends to mirror the market’s up and down swings, while remaining above the market price.
Historically low C market prices have meant that many producers struggle to earn back the cost of producing coffee. In order to help consumers verify that the price paid fairly compensates the producer, coffee companies have made significant efforts to make their prices and supply chains more transparent in recent years. However, transparency data can be difficult to understand. Here are some terms and background info that will help you to understand the transparency data Whiptail shares for each lot of its coffee.
Price
In the US, the price of coffee is typically expressed in US dollars per pound of unroasted coffee. All market transactions in coffee are done in US dollars, though in other countries, roasters might buy from importers using other units and currencies. (For instance, Euros per kilogram.)
FOB
FOB stands for Free on Board. An FOB price reflects the cost of coffee when it is at the port of departure in the country of origin. This means that the coffee at this point reflects the cost of producing the coffee and all transportation within the country of origin; the farmer has been paid, the coffee has been processed, bagged for export, and moved to the shipping port. The FOB cost does not include the cost of freight, marine insurance, customs costs, or warehousing at the destination country. It’s important to understand FOB price in order to understand coffee prices, as many entities share FOB price information as part of their transparency efforts; however, FOB price doesn’t tell the whole story of how well a producer is compensated.
Cherries
Cherries are the fruits of the coffee tree. Fresh harvested cherries are processed and the pulp of the fruit removed in order to leave behind just the seeds, which we call coffee beans.
Parchment
Parchment is a layer within the coffee cherry that protects the small seed within.
Quintal
100 pound weight. (Plural: quintales)
Farmgate price
The price paid to the farmer is called the farmgate price. Farmgate price can be expressed very differently depending on the supply chain and country in question. For example, in Ethiopia many farmers are paid in their local currency, birr, when they deliver harvested cherries to the washing station, based on how many kilograms they deliver. But in some regions of Guatemala, farmers sell parchment coffee based on how many quintales of parchment coffee they deliver and are paid in their local currency, quetzales. Using formulas to estimate coffee yields and currency conversion tools, it is possible to obtain a farmgate price in US dollars per pound, but because of fluctuating currency conversion rates, differing purchasing power parities and living wages, and the different amounts of work farmers do to the product in different places, these conversions can still give an incomplete picture of the economic sustainability of the prices paid to the farmer.
Ex-warehouse price
The coffee at the port of departure can be said to reflect the FOB price, but this coffee still must be shipped to the destination country, moved to a warehouse, and stored until a roaster is ready to move the coffee to a roastery. Ex-warehouse prices reflect the entire cost of the coffee up to the point that it is at a warehouse ready for a roaster to purchase the coffee.
Delivered price
The price of coffee ex-warehouse plus the cost of shipping coffee to the roastery is the final delivered price of a coffee. This is the price we pay to the importer.
Our transparency data, explained.
In order to compare apples to apples, we have found that the best way to compare prices is to compare FOB prices in US dollars per pound, so that’s the data what we share for every coffee that we roast.
This isn’t a perfect comparison, despite our best efforts! Moving coffee through the mountains of Colombia to a seaport involves different costs than moving coffee out of landlocked Ethiopia. But it’s about as close as we can get to understanding what the farmer was paid, the price of processing the coffee, and the price of preparing the coffee to export in different places using standard units that we can collectively understand and, importantly, compare to the C market price.
A high FOB price doesn’t necessarily mean the farmer was paid a high price, but it is a good indication that this is, in fact, the case. Whiptail works with trusted exporter and importer partners with proven track records of striving to pay farmers consistently high prices for their product, in order to ensure that a higher FOB price does in fact mean a better price for farmers in the supply chain.
When we share price data, we share the following information.
The average C market price for commodity coffee, during the months the coffee was harvested and purchased
FOB price paid for the coffee
Ex-warehouse price
Final delivered price of the coffee
This will help you understand what it cost us to buy the coffee, and give you a sense of how much this coffee cost above the C market price, including an indication that the producer was indeed compensated far above and beyond the C price.