We often get asked by roasters to quantify this impact with another question…<\/p>\n
\u201cWhat was the Farmgate or FOB price?\u201d<\/strong><\/p>\n While this information can be a piece of the puzzle when evaluating equity, there are some important considerations to take into account when asking this question. Consent, cultural context, accessibility of information, and economic factors at the time of purchase to name a few.\u2028\u2028We\u2019re going to delve into some of the aspects of transparency, who is involved when, impacts of making information transparent, and some factors to consider in those decisions by looking at an example coffee value chain and how prices are calculated. We\u2019ll look at how we approach these decisions and since they often include people that are historically disadvantaged and distanced from the end use of their information, from the beginning we need to ask ourselves some tough questions. Is everyone in the value chain in a position to say \u201cno\u201d to the sharing of information if they don\u2019t want to or it endangers them (particularly important for location and financial data)? Does everyone agree ahead of time how the information will be used and by who? And most importantly, has everyone from seed to cup consented to the sharing of their information in the ways previously agreed upon? And finally, is the information I am presenting to end consumers helping to demonstrate the intended impact or further complicating the understanding with a broad scope of numbers without context?<\/p>\n Note: all numbers here are hypothetical and for sake of discussion unless noted otherwise. If you would like to be a part of our research and transparency efforts, drop us an email below!<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.25.0″ _module_preset=”default” background_color=”#eedccc” custom_padding=”|24px||24px|false|false” global_colors_info=”{}”][et_pb_row _builder_version=”4.25.0″ _module_preset=”default” width=”100%” width_last_edited=”off|desktop” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_heading title=”What is transparency?” admin_label=”What is transparency? Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h2″ title_font=”Raleway|500|||||||” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Transparency generally refers to the gathering, sharing, and disclosure of information about a supply chain to better understand the social and environmental impacts, and how value is distributed amongst the many hands it takes to get from point A to point B. In the coffee industry the conversation tends to focus on the financial transactions but can also include information about the origin of the coffee, the conditions under which it was grown, ethical, political, and social considerations such as labor or anti-corruption practices, and environmental concerns. Let\u2019s remember that transparency directly overlaps with the three pillars of sustainability, they can apply to every actor in the supply chain and can be considered at any point in a coffee’s journey from seedling to customer.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”1_3,1_3,1_3″ _builder_version=”4.25.0″ _module_preset=”default” width=”100%” custom_margin=”||||false|false” custom_padding=”||||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_image src=”https:\/\/dev-cdn.cafeimports.com\/images\/Tansparency_Icon_Financial.png” title_text=”Tansparency_Icon_Financial” align=”center” admin_label=”Icon” _builder_version=”4.25.0″ _module_preset=”default” width=”70%” max_width=”200px” global_colors_info=”{}”][\/et_pb_image][et_pb_heading title=”Financial” admin_label=”Financial Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h3″ title_font=”Raleway|500|||||||” title_text_align=”center” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n The transactions that took place to grow, process, export, import, roast, and finally sell the coffee to the consumer. This is any financial data that contributed to the overall value lost or derived by each actor. Some examples include the exchange rate, cost of labor or farm inputs, quality premiums, cooperative fees, or certification differentials. To make financial data transparency, accurate and open recording of this data is required by everyone each time coffee exchanges hands.<\/p>\n [\/et_pb_text][\/et_pb_column][et_pb_column type=”1_3″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_image src=”https:\/\/dev-cdn.cafeimports.com\/images\/Tansparency_Icon_Social.png” title_text=”Tansparency_Icon_Social” align=”center” admin_label=”Icon” _builder_version=”4.25.0″ _module_preset=”default” width=”70%” max_width=”200px” global_colors_info=”{}”][\/et_pb_image][et_pb_heading title=”Social” admin_label=”Social Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h3″ title_font=”Raleway|500|||||||” title_text_align=”center” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n The practices of each actor regarding human rights, fair labor practices, health, safety, and education. Both an ethical and legal consideration, we view responsible social practices as key to building open and trustworthy relationships. These practices look very different depending on which step in the value-chain we are speaking about and local laws and standards. \u00a0<\/p>\n [\/et_pb_text][\/et_pb_column][et_pb_column type=”1_3″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_image src=”https:\/\/dev-cdn.cafeimports.com\/images\/Tansparency_Icon_Environment.png” title_text=”Tansparency_Icon_Environment” align=”center” admin_label=”Icon” _builder_version=”4.25.0″ _module_preset=”default” width=”70%” max_width=”200px” global_colors_info=”{}”][\/et_pb_image][et_pb_heading title=”Environmental” admin_label=”Environmental Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h3″ title_font=”Raleway|500|||||||” title_text_align=”center” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n The management practices of an operations positive and negative impacts on the environment. As part of an industry that relies fully upon healthy ecosystems, it is critical that we monitor these impacts, working together to reduce our environmental footprint. For farmers and producers this might look like protecting native forests, eliminating the use of chemicals and ensuring water is cleaned after use in milling. On the consumption end of the supply chain the first thing to focus on is usually reducing or eliminating waste, especially plastics from packaging, shifting to renewable energy sources, and minimizing emissions from transportation.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n To understand how these three pillars contribute to the overall picture, we\u2019re going to need to know some basics about a typical supply-chain and some terminology. If you\u2019re a seasoned coffee pro, you can skip this section and head down the section Quantifying Our Efforts for more about our price premium model.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ admin_label=”Section” _builder_version=”4.25.0″ _module_preset=”default” custom_padding=”|24px||24px|false|false” global_colors_info=”{}”][et_pb_row admin_label=”Row” _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_heading title=”A basic supply chain and common terms.” admin_label=”A basic supply chain and common terms heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h2″ title_font=”Raleway|500|||||||” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n We need a rough understanding of a basic coffee supply chain to talk about how it is bought, sold, and ultimately factors that influence transparency. Here\u2019s a very quick refresher to get us started. Remember that there\u2019s a lot of different people and business models to perform these services, so sometimes it will be a farmer doing all their own dry\/wet milling and exporting, or it could be an exporter that outsources the milling, or perhaps it\u2019s a farmer owned cooperative that does the processing for a fee, the methods are as unique and diverse as coffee itself.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”2_5,3_5″ use_custom_gutter=”on” gutter_width=”2″ make_equal=”on” admin_label=”Row – Desktop” _builder_version=”4.25.0″ _module_preset=”default” width=”100%” module_alignment=”center” collapsed=”on” global_colors_info=”{}”][et_pb_column type=”2_5″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_image src=”https:\/\/dev-cdn.cafeimports.com\/images\/Supply_Chain_Illustration_800px-scaled.jpg” title_text=”Supply_Chain_Illustration_800px” disabled_on=”on|off|off” admin_label=”Illustration” _builder_version=”4.25.0″ _module_preset=”default” width=”90%” max_width=”800px” border_radii=”on|8px|8px|8px|8px” global_colors_info=”{}”][\/et_pb_image][\/et_pb_column][et_pb_column type=”3_5″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_heading title=”Planting\/Cultivation\/Harvesting” admin_label=”Planting\/Cultivation\/Harvesting Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”||0px||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Planting coffee isn\u2019t quite as simple as sticking the seed in the ground and waiting. Usually, coffee trees start life in a protected greenhouse as they sprout and are moved into the field once they are strong enough. Most species take 3-4 years to mature and begin producing fruit. This fruit, what we commonly call a coffee \u201ccherry\u201d, can be handpicked if focusing on quality, or machine harvested for larger production. This can happen once a year in most coffee-growing regions, but in countries that lie along the equator or in warmer climates, there may be two harvests annually. If the farmer sells the coffee in cherry at this point or continues to process themselves before sale, that price is called the \u201cFarmgate<\/strong>\u201d price and should cover the cost of production, be sufficient to cover personal expenses, and include a profit margin.<\/p>\n Farmgate price often is a raw price for unprocessed and unmilled cherry or parchment, so this price is relevant in the context of where it was sold and how it was processed, but tough to compare country to country. For example, payment in Pesos (Avg 4,323.28COP to $1.00 or \u20ac0.92 in 2023) per carga (125kg) in Colombia as a farmgate price is not directly comparable to Costa Rican Colones (Avg 544CRC to $1.00 or \u20ac0.97 in 2023 per quintale (46kg or 101lbs) of cherry in Costa Rica. Those prices look very different depending on if the coffee as delivered in cherry or in parchment, the Green Been Equivalent or yield factor for that farm, and exchange rate at time of sale which means that they don\u2019t demonstrate equity to an end consumer without additional context.<\/p>\n [\/et_pb_text][et_pb_heading title=”Processing\/Milling” admin_label=”Processing\/Milling Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n After harvesting, the cherries are processed, usually with one of two broad methods and there are new variations and experimental methods being introduced all the time: the dry method, where cherries are spread out in the sun to dry before the skin and mucilage are removed, and the wet method, which involves removing the pulp immediate, fermenting, and then drying the bean with only the parchment skin on. For either method, once the beans are dry, they are hulled or \u201cdry-milled\u201d, where the outer layers of the dried cherry and\/or parchment are removed. This step also often includes polishing to remove any remaining dried skin, grading and sorting the beans based on size and weight. Often, this is the first time the coffee will be tasted and the quality and attributes will be noted. It\u2019s common for samples to be sent at this point to exporters, imports, or potential customers for further assessment, we call these Pre-Shipment Samples<\/strong> (PSS).<\/p>\n Note that there are two points here where the coffee is losing weight. Once when the seed is removed from the fruit, cleaned, and dried. Then again when they are graded. This means that to end up with say 1kg of coffee ready to export, we need more cherries by weight to start with. This is often calculated by something called a \u201cGreen Been Equivalent<\/strong>\u201d (GBE). A simple ratio to calculate how much weight in cherry it takes to have an output of a specific weight of finished coffee. GBE can be different depending the on the processing standards , allowed screensize, even ripeness of the fruit when harvested. which again varies greatly by origin or from farm to farm. In Brazil, you may allow down to 15 screen size which would mean this % would be higher, but in Kenya for AA, this may be lower. This adds a wrinkle into the relevancy of Farmgate price without a strong geographic understanding of coffee agronomy in the country being discussed.<\/p>\n [\/et_pb_text][et_pb_heading title=”Exporting” admin_label=”Exporting Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n The processed and milled beans, now referred to as green coffee, are packed in sacks and moved to the port of departure and ultimately to the country of consumption. Importers usually work with Exporters to make this journey happen. The price paid by the Importer when the coffee arrives at port is called the \u201cFree On Board<\/strong>\u201d\u00a0(FOB) and (if the exporter is a sustainable business) covers the costs of Farmgate\/Processing\/Milling\/Domestic Transport and anything else arising from getting the coffee from farm to port and on the boat. In landlocked countries that need to export by truck or plane to the nearest port, it\u2019s common to see prices reported as \u201cFree on Truck<\/strong>\u201d (FOT) or “Free Carrier<\/strong>” (FCA), which is the price when the coffee is loaded onto the truck in the case of FOT, or any vehicle in the case of FCA, to make the journey to port. Both of these prices include the exporter\u2019s margin, which can vary dramatically depending on the business model of the exporter. [\/et_pb_text][et_pb_heading title=”Importing” admin_label=”Importing Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Once the \u201cFree On Board<\/strong>\u201d\u00a0(FOB), \u201cFree on Truck<\/strong>\u201d (FOT), or \u201cFree Carrier<\/strong>\u201d (FCA) price has been paid and all the stacks of paperwork have been signed, the coffee is physically moved onto the ship, truck, or other transportation method (sometime plane or train) for shipping to the point of import. While every effort is made to minimize the time this takes, moving the coffee can take anywhere from a few days to months depending on the shipping method, route the coffee must take, and the perils encountered along the way.<\/p>\n [\/et_pb_text][et_pb_heading title=”Sensory Analysis\/Warehousing\/Final Shipping” admin_label=”Sensory Analysis\/Warehousing\/Final Shipping Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Upon arrival at its destination, green coffee samples are roasted, tasted, and graded by sensory scientists to assess that their quality and flavor profile are consistent with the pre-ship sample. The green coffee is stored in a climate-controlled environment until it is sold and shipped to the Roaster. These handling and warehousing costs are often called \u201cEx-Works<\/strong>\u201d or \u201cEx-Warehouse<\/strong>\u201d and cover the cost of doing business by the Importer.<\/p>\n [\/et_pb_text][et_pb_heading title=”Roasting\/Packaging\/Retailing” admin_label=”Roasting\/Packaging\/Retailing Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Roasters purchase the green coffee and prep it for serving or distribution to their customers. Roasting, packaging, distribution, and retailing are the final stop in the coffees journey to becoming a final product ready for consumption<\/p>\n [\/et_pb_text][et_pb_heading title=”Consumption” admin_label=”Consumption Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Customers enjoy the results! The \u201cRetail Price\u201d of the final cup or bag covers the remaining costs incurred and profit by the Roaster.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row use_custom_gutter=”on” gutter_width=”2″ make_equal=”on” disabled_on=”off|on|on” admin_label=”Row – Mobile” _builder_version=”4.25.0″ _module_preset=”default” width=”100%” module_alignment=”center” custom_css_main_element=”img {|| padding: 8px;||}” collapsed=”off” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_heading title=”Planting\/Cultivation\/Harvesting” admin_label=”Planting\/Cultivation\/Harvesting Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”||0px||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Farmgate price often is a raw price for unprocessed and unmilled cherry or parchment, so this price is relevant in the context of where it was sold and how it was processed, but tough to compare country to country. For example, payment in Pesos (Avg 4,323.28COP to $1.00 or \u20ac0.92 in 2023) per carga (125kg) in Colombia as a farmgate price is not directly comparable to Costa Rican Colones (Avg 544CRC to $1.00 or \u20ac0.97 in 2023 per quintale (46kg or 101lbs) of cherry in Costa Rica. Those prices look very different depending on if the coffee as delivered in cherry or in parchment, the Green Been Equivalent or yield factor for that farm, and exchange rate at time of sale which means that they don\u2019t demonstrate equity to an end consumer without additional context.<\/p>\n [\/et_pb_text][et_pb_heading title=”Processing\/Milling” admin_label=”Processing\/Milling Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Note that there are two points here where the coffee is losing weight. Once when the seed is removed from the fruit, cleaned, and dried. Then again when they are graded. This means that to end up with say 1kg of coffee ready to export, we need more cherries by weight to start with. This is often calculated by something called a Green Been Equivalent<\/strong>\u00a0(GBE). A simple ratio to calculate how much weight in cherry it takes to have an output of a specific weight of finished coffee. GBE can be different depending the on the processing standards , allowed screensize, even ripeness of the fruit when harvested. which again varies greatly by origin or from farm to farm. In Brazil, you may allow down to 15 screen size which would mean this % would be higher, but in Kenya for AA, this may be lower. This adds a wrinkle into the relevancy of Farmgate price without a strong geographic understanding of coffee agronomy in the country being discussed.<\/p>\n [\/et_pb_text][et_pb_heading title=”Exporting” admin_label=”Exporting Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n [\/et_pb_text][et_pb_heading title=”Importing” admin_label=”Importing Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n [\/et_pb_text][et_pb_heading title=”Sensory Analysis\/Warehousing\/Final Shipping” admin_label=”Sensory Analysis\/Warehousing\/Final Shipping Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Upon arrival at its destination, green coffee samples are roasted, tasted, and graded by sensory scientists to assess that their quality and flavor profile are consistent with the pre-ship sample. The green coffee is stored in a climate-controlled environment until it is sold and shipped to the Roaster. These handling and warehousing costs are often called \u201cEx-Works<\/strong>\u201d or \u201cEx-Warehouse<\/strong>\u201d and cover the cost of doing business by the Importer.<\/p>\n [\/et_pb_text][et_pb_heading title=”Roasting\/Packaging\/Retailing” admin_label=”Roasting\/Packaging\/Retailing Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n [\/et_pb_text][et_pb_heading title=”Consumption” admin_label=”Consumption Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h4″ title_font=”Raleway|500|||||||” custom_padding=”32px||||false|false” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Customers enjoy the results! The Retail Price<\/strong>\u00a0of the final cup or bag covers the remaining costs incurred and profit by the Roaster.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.25.0″ _module_preset=”default” custom_padding=”|24px||24px|false|false” global_colors_info=”{}”][et_pb_row _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_heading title=”So what are Farmgate and FOB\/FOT\/FCA prices?” admin_label=”So what are Farmgate and FOB\/FOT\/FCA prices? Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h2″ title_font=”Raleway|500|||||||” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Farmgate is a catch all term for the price paid directly to the farmer or producer for the coffee, while FOB\/FOT\/FCA is the price paid by the importer to the exporter at the point the coffee is loaded onto the ship (FOB\/FCA), truck (FOT\/FCA) or plane (FCA). <\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.25.0″ _module_preset=”default” custom_margin=”0px||0px||false|false” custom_padding=”0px|8px|0px|8px|false|false” global_colors_info=”{}”][et_pb_row column_structure=”1_4,1_4,1_4,1_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”1_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_image src=”https:\/\/dev-cdn.cafeimports.com\/images\/Farmgate_Graph.png” title_text=”Farmgate_Graph” show_in_lightbox=”on” _builder_version=”4.25.0″ _module_preset=”default” width=”100%” max_width=”400px” global_colors_info=”{}”][\/et_pb_image][\/et_pb_column][et_pb_column type=”1_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text admin_label=”Farmgate” _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Farmgate<\/strong> [\/et_pb_text][\/et_pb_column][et_pb_column type=”1_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_image src=”https:\/\/dev-cdn.cafeimports.com\/images\/FOB_Graph.png” title_text=”FOB_Graph” show_in_lightbox=”on” _builder_version=”4.25.0″ _module_preset=”default” width=”100%” max_width=”400px” global_colors_info=”{}”][\/et_pb_image][\/et_pb_column][et_pb_column type=”1_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text admin_label=”Free On Board\/Truck\/Carrier (FOB\/FOT\/FCA)” _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Free On Board\/Truck\/Carrier (FOB\/FOT\/FCA)<\/strong> [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.25.0″ _module_preset=”default” custom_padding=”|24px||24px|false|false” global_colors_info=”{}”][et_pb_row _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_heading title=”What are these prices based on?” admin_label=”What are these prices based on? Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h2″ title_font=”Raleway|500|||||||” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n The price of specialty coffee is largely benchmarked against the Commodity Market<\/strong> (C-Market) which serves as a constantly fluctuating guide and price floor for Arabica coffee. Specialty coffee (commonly referred to as differentiated coffee) will then be purchased for a premium above the current C-Market price. This premium can be tied to a number of other factors including certifications, quality, social impact, unique characteristics, or sometimes just a great story that we connect with! Whether the price is pre-agreed upon, known as Static<\/strong> pricing, or is an amount above C-Market and continues to move with it until a specific time, known as Dynamic<\/strong>\u00a0pricing, both sellers and buyers use the C-Market as a reference point.<\/p>\n [\/et_pb_text][et_pb_image src=”https:\/\/dev-cdn.cafeimports.com\/images\/Pricing_Types.png” title_text=”Pricing_Types” show_in_lightbox=”on” _builder_version=”4.25.0″ _module_preset=”default” width=”100%” global_colors_info=”{}”][\/et_pb_image][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”1_3,1_3,1_3″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”1_3″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_heading title=”Commodity or C-Market” admin_label=”Commodity or C-Market Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h3″ title_font=”Raleway|500|||||||” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n The C-Market, or the “C” price, is a global benchmark for the trading of Arabica coffee. It operates similarly to a stock exchange for commodities, where green Arabica coffee is traded in the form of futures contracts on the Intercontinental Exchange (ICE) in New York City. These futures contracts are agreements to buy or sell a commodity (in this case Coffee) at a predetermined price at a specified future date.<\/p>\n The price of coffee on the C-Market fluctuates based on supply and demand, as well as on speculation about future supply and demand. This means the price per pound of coffee can change significantly from one day to the next. For instance, the C price can vary dramatically, which can impact everyone from producers to roasters to consumers. Factors such as weather conditions, disease outbreaks affecting harvests, and global economic factors can all influence these price changes.<\/p>\n [\/et_pb_text][\/et_pb_column][et_pb_column type=”1_3″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_heading title=”Dynamic” admin_label=”Dynamic Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h3″ title_font=”Raleway|500|||||||” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Dynamically priced coffees respond to market fluctuations. This method of setting the price of coffee accounts for various factors, such as quality, origin, market conditions, and futures market prices. This means that the price for a coffee can fluctuate from day to day, even during the middle of the harvest season. Dynamic pricing allows for flexibility to react to market conditions, ensuring that both buyers and sellers can reach a fair agreement that reflects the current value of the coffee being traded. This of course comes with risks in instances of an overall C-Market downturn.<\/p>\n [\/et_pb_text][\/et_pb_column][et_pb_column type=”1_3″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_heading title=”Static” admin_label=”Static Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h3″ title_font=”Raleway|500|||||||” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Static pricing is simple, you agree on a set price that does not change in response to market forces and that is what is paid. This type of pricing can be an advantage for buyers or sellers who wish to lock in costs and revenues without the risk of price volatility affecting their margins or profitability. Static pricing is often used in direct trade agreements or specialty coffee trading where the quality, relationship, or specific attributes of the coffee are valued beyond the commodity market price.<\/p>\n This price is agreed upon within the context of the C-Market at the time directly or indirectly. If a fair price is established collaboratively then the C-Market increases, that fair price may not seem so fair any more given the alternative of a higher C-Market.<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.25.0″ _module_preset=”default” custom_margin=”0px||0px||false|false” custom_padding=”16px|24px||24px|false|false” global_colors_info=”{}”][et_pb_row _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_heading title=”Don\u2019t forget geographic and economic context.” admin_label=”Don\u2019t forget geographic and economic context Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h2″ title_font=”Raleway|500|||||||” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]<\/p>\n Most consumers in non-coffee producing countries, encounter the price of coffee either in drink form or roasted bag form, far removed from the farm and the pricing of the raw material meticulously chosen by the roaster. So does Farmgate or FOB\/FOT alone tell the whole story of value distribution? Let\u2019s look at three very simplified scenarios.<\/p>\n [\/et_pb_text][et_pb_slider arrows_custom_color=”#000000″ dot_nav_custom_color=”#000000″ admin_label=”Scenario Slider” module_id=”scenario_slider” _builder_version=”4.25.0″ _module_preset=”default” header_font=”Raleway|500|||||||” header_text_color=”#000000″ header_font_size=”18px” body_font=”||||||||” body_text_color=”#000000″ background_color=”#ffffff” width=”100%” max_width=”1080%” custom_margin=”0px|0px|0px|0px|false|false” custom_padding=”0px|0px|12px|0px|false|false” custom_css_free_form=”selector .et-pb-slider-arrows a.et-pb-arrow-prev,||selector .et-pb-slider-arrows a.et-pb-arrow-next {||\topacity: 1;||}||selector .et-pb-slider-arrows a.et-pb-arrow-prev {||\tleft: 22px;||}||||selector .et-pb-slider-arrows a.et-pb-arrow-next {||\tright: 22px;||}” custom_css_slide_description=”text-align: left;||text-shadow:none;” custom_css_slide_title=”text-align:center;||text-shadow:none;” global_colors_info=”{}”][et_pb_slide heading=”Scenario one: Colombia” _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}” sticky_transition=”on”]<\/p>\n In this simplified scenario, producers are paid a fixed premium differential (let\u2019s round it to 20%) above the C market which is published on a whiteboard outside of receiving stations, as they contribute their harvest to a community lot. If a producer delivers the majority of their coffee when the C-Market is at $1.45 (low of 2023) and paid in Pesos per Carga, her or his \u201cfarmgate price\u201d may be much lower than if the next producer delivers at the end of the harvest if the C-Market has risen to $1.95 (high 2023) and now covers the cost of production and living (we\u2019ll talk abut certifications with price floors in a later blog post). We also need to consider the currency exchange rate at the time of delivery to the exporter (the example below assumes 3600COP\/1USD). How does that translate back to your reporting currency? To add further context, often these lots can have premiums paid and are then blended into a regional or community lot of producers.<\/p>\n <\/p>\n <\/p>\n [\/et_pb_slide][et_pb_slide heading=”Scenario two: Guatemala” _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}” sticky_transition=”on”]<\/p>\n Both farmers in this example are members of local cooperatives and deliver their coffee in cherry to the mill for processing. To keep it simple in this example, let\u2019s say the coffees are blended in to a community lot, cup similarly, and are purchased in the same lot size resulting in the same FOB price paid by the importer. The first farmer delivers their coffee to the cooperative where it\u2019s processed, cupped, offered for sale, and the price received is distributed amongst the members of the cooperative based on weight delivered throughout the harvest (very typical of member owned cooperatives in Guatemala). The cooperative is about 300km from the nearest port. The second farmer does the same However the cooperative is only about 100km from port, resulting in a lower transportation cost for the exporter. If they aren\u2019t a trusted partner, that\u2019s a savings that may or may not be passed onto the price negotiated with the cooperative and ultimately impact farmer profit.<\/p>\n <\/p>\n [\/et_pb_slide][et_pb_slide heading=”Scenario three: Rwanda and Kenya” _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}” sticky_transition=”on”]<\/p>\n Farmers in Rwanda and Kenya have been growing coffee since the early 1900s but their approach to selling and exporting coffee are completely different.<\/p>\n In Kenya, coffee is brought to auction via the Nairobi Coffee Exchange by \u201cMarketing Agents\u201d who act on behalf of the farmers who grew the coffee and\/or the Factories (equivalent to a Coffee Washing Station or Mill) that aggregated and processed it. It\u2019s not uncommon for the farmers to be completely detached from the sale, with the process and paperwork being handled exclusively by the Marketing Agent and the profits being paid out to the farmers less the marketing fee. The FOB price in this context captures the costs of production, processing, marketing agent commission, and the export fees along with a trip to port with the exporter.<\/p>\n Contrast this to Rwanda which has focused on developing an extensive network of Coffee Washing Stations (CWS) which are often owned by farmer collectives. It\u2019s common for these CWSs to be strongly tied to the communities they serve, providing both social programs like access to transportation, education, and health care, as well as technical farm support through composting, seedling distribution, discounted bulk fertilizer and farm implement purchases. This system supports good farming practices, raising quality and often price which in the case of trusted farmer owned CWS is passed on to members. Often the CWS act as the exporter and works with buyers arranging the paper work and transportation. These shared support programs can significantly reduce the individual farmers cost of production.<\/p>\n The FOT\/FOB\/FCA price is this case covers the costs of the farm, the operating costs of the CWS and it\u2019s development programs, as well as export costs and domestic transport (if purchased as FOB).<\/p>\n <\/p>\n [\/et_pb_slide][\/et_pb_slider][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.25.0″ _module_preset=”default” custom_margin=”0px||0px||false|false” custom_padding=”16px|24px|16px|24px|false|false” global_colors_info=”{}”][et_pb_row _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_heading title=”Bringing it all together: An example from Honduras.” admin_label=”Bringing it all together: An example from Honduras Heading” _builder_version=”4.25.0″ _module_preset=”default” title_level=”h2″ title_font=”Raleway|500|||||||” global_colors_info=”{}”][\/et_pb_heading][et_pb_text _builder_version=”4.25.0″ _module_preset=”default” custom_padding=”||24px||false|false” global_colors_info=”{}”]<\/p>\n Since each actor can be involved in any or all aspects of transparency, let\u2019s use an example built on our list of financial transparency items from above to get familiar with the terms and some ways they can be applied. There is no way to embody the complexity and uniqueness of every coffee relationship so to keep it simple, we\u2019ll set the scene.<\/p>\n We\u2019re going to say that we\u2019re talking about the journey of a microlot specialty coffee grown by a smallholder in Honduras, which was wet milled by the farmer, dry milled and graded by a cooperative near the farm, exported, imported, then roasted and consumed in the central United States by a roaster with both a wholesale and retail operation. Finally, we\u2019re also going to use the 2023 average commodity market (C-market) of $1.72, and say that this coffee was purchased and sold for a fixed price across the entire supply chain.<\/p>\n The numbers below are for demonstration, they can vary drastically for a given coffee. Some examples of these variations would be the market factors above, cost of farm inputs, cost of labor, lot size, shipping method and routes, location of the roastery in relation to the point of import or storage, and whether or not the final sale is via wholesale or traditional retail. Middle column is shown as percentage of final retail price per pound.<\/p>\n [\/et_pb_text][et_pb_code _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”]
FOB is the most common request we get for financial transparency, but as you can see, this number may not always indicate the impact on the farmer without a strong understanding of the full geographic and economic picture of the purchase. Simply one exporter having a higher margin than another can make this number slightly misleading when trying to determine how much was paid to the farmer or producer.<\/p>\n![\"\"](\"https:\/\/dev-cdn.cafeimports.com\/images\/Havest-240x300.jpg\")
Planting coffee isn\u2019t quite as simple as sticking the seed in the ground and waiting. Usually, coffee trees start life in a protected greenhouse as they sprout and are moved into the field once they are strong enough. Most species take 3-4 years to mature and begin producing fruit. This fruit, what we commonly call a coffee \u201ccherry\u201d, can be handpicked if focusing on quality, or machine harvested for larger production. This can happen once a year in most coffee-growing regions, but in countries that lie along the equator or in warmer climates, there may be two harvests annually. If the farmer sells the coffee in cherry at this point or continues to process themselves before sale, that price is called the Farmgate<\/strong>\u00a0price and should cover the cost of production, be sufficient to cover personal expenses, and include a profit margin.<\/p>\n![\"\"](\"https:\/\/dev-cdn.cafeimports.com\/images\/Processing-240x300.jpg\")
After harvesting, the cherries are processed, usually with one of two broad methods and there are new variations and experimental methods being introduced all the time: the dry method, where cherries are spread out in the sun to dry before the skin and mucilage are removed, and the wet method, which involves removing the pulp immediate, fermenting, and then drying the bean with only the parchment skin on. For either method, once the beans are dry, they are hulled or \u201cdry-milled\u201d, where the outer layers of the dried cherry and\/or parchment are removed. This step also often includes polishing to remove any remaining dried skin, grading and sorting the beans based on size and weight. Often, this is the first time the coffee will be tasted and the quality and attributes will be noted. It\u2019s common for samples to be sent at this point to exporters, imports, or potential customers for further assessment, we call these Pre-Shipment Samples<\/strong> (PSS).<\/p>\n![\"\"](\"https:\/\/dev-cdn.cafeimports.com\/images\/Exporting-240x300.jpg\")
The processed and milled beans, now referred to as green coffee, are packed in sacks and moved to the port of departure and ultimately to the country of consumption. Importers usually work with Exporters to make this journey happen. The price paid by the Importer when the coffee arrives at port is called the Free On Board<\/strong> (FOB) and (if the exporter is a sustainable business) covers the costs of Farmgate\/Processing\/Milling\/Domestic Transport and anything else arising from getting the coffee from farm to port and on the boat. In landlocked countries that need to export by truck or plane to the nearest port, it\u2019s common to see prices reported as Free on Truck<\/strong> (FOT) or Free Carrier<\/strong>\u00a0(FCA), which is the price when the coffee is loaded onto the truck in the case of FOT, or any vehicle in the case of FCA, to make the journey to port. Both of these prices include the exporter\u2019s margin, which can vary dramatically depending on the business model of the exporter.
FOB is the most common request we get for financial transparency, but as you can see, this number may not always indicate the impact on the farmer without a strong understanding of the full geographic and economic picture of the purchase. Simply one exporter having a higher margin than another can make this number slightly misleading when trying to determine how much was paid to the farmer or producer.<\/p>\n![\"\"](\"https:\/\/dev-cdn.cafeimports.com\/images\/Importing-240x300.jpg\")
Once the Free On Board<\/strong> (FOB), Free on Truck <\/strong>(FOT), or Free Carrier<\/strong>\u00a0(FCA) price has been paid and all the stacks of paperwork have been signed, the coffee is physically moved onto the ship, truck, or other transportation method (sometime plane or train) for shipping to the point of import. While every effort is made to minimize the time this takes, moving the coffee can take anywhere from a few days to months depending on the shipping method, route the coffee must take, and the perils encountered along the way.<\/p>\n![\"\"](\"https:\/\/dev-cdn.cafeimports.com\/images\/Consuming-240x300.jpg\")
Roasters purchase the green coffee and prep it for serving or distribution to their customers. Roasting, packaging, distribution, and retailing are the final stop in the coffees journey to becoming a final product ready for consumption<\/p>\n
The price paid to the producer, usually near the farm, often for unprocessed or partially process coffee either in Cherry or Parchment, but at times exportable green when they process the coffee themselves. This price can fluctuate throughout the harvest due to changes in quality, movement of the C-Market, or increases and decreases in supply and demand for similar coffees. For a farm to be sustainable, this needs to cover the cost of living, cost of production, and include profits.<\/p>\n
The price paid by the Importer to the Exporter\u00a0 is called the Free On Board (FOB), Free on Truck (FOT), or Free Carrier (FCA) and if the exporter is a sustainable business covers the costs of Farmgate\/Processing\/Milling\/Domestic Transport and anything else arising from getting the coffee from farm to port and on board the ship or truck.<\/p>\n![\"\"](\"https:\/\/dev-cdn.cafeimports.com\/images\/Scenario_One_Colombia-1024x457.png\")
<\/p>\n![\"\"](\"https:\/\/dev-cdn.cafeimports.com\/images\/Scenario_Two_Guatemala_Combined-1024x866.png\")
<\/p>\n![\"\"](\"https:\/\/dev-cdn.cafeimports.com\/images\/Scenario_Three_RwandaKenya_Combined-1024x615.png\")
<\/p>\n