Staying the Course    

Coffee prices globally have gone up, when looking at the global commodity market price data (adjusted for inflation) you can see they are at their highest point since the last spike in 2011. From the start of 2017 until the start of 2021 the C market price has been relatively stable, staying between $0.90 and $1.20 per lb over that time. While we don’t buy commodity coffee, any change to the floor price will of course raise prices across the board. We have always paid higher than market prices to get good quality, because it’s the right thing to do, if our price isn’t a premium any more then we need to raise it. To continue to pay farmers fairly, prices need to go up.

Some more general farming points about what can happen during these unique times are that farmers will try to pick as much coffee as possible to sell before the prices drop. This can mean that quality drops and green buyers have to make quick decisions as there can be a lack of quality lots. We have also heard that farmers who usually sell processed coffee switch to selling cherry. Long term commitment contracts can be broken and basic logistics of moving coffee from farm to port becomes a mad dash. We tend to mainly work with producers who have full control of growing, milling and export which means they are a bit shielded from these factors however when a large percentage of the market is moving quickly the impact is always felt.

That is the situation in a nutshell but we wanted to go through a few of our key producing partners, particularly those who produce the coffees that become our Unit Fourteen and give a little insight and transparency into what we’ve been paying them for their coffee over the years, how much we’ve been buying and also try to highlight some of the challenges they face.

Caballero

Together Marysabel Caballero and her husband Moises Herrera run Caballero, which consists of about 150 hectares of coffee farms and a dry mill called Xinacla. We’ve pretty much always had a coffee from them on our list and about three years ago we started using lots from their farms as one of our key Unit Fourteen coffees.

We began working with Marysabel and Moises in 2017 and our relationship has continued to grow and recently in 2022 we had the pleasure of visiting them where over a few days they outlined some of the major challenges they have faced and overcome during twenty plus years of farming.  This current year has been one most challenging with soaring cost of labour being one of the main factors.  This together with the cost of fuel pretty much doubling means moving their coffees not just around the farm but getting coffee to the port has become a huge challenge.  They also have many worries regarding future harvests as fertiliser costs and even buying fertiliser has become a huge challenge due to the war in Ukraine.  This even as far afield as Honduras has direct impacts. The cost of  shipping containers and logistical challenges also plays into this.  Moises told us that the shipping company said they had a slot to move a container to the USA but the ship would leave in five days.  Simply moving a container from their farms to the port in San Pedro Sula would take 3 days.  This meant they had 2 days to mill the coffee, prepare the documents and go!!! Essentially they worked 24 hour shifts to get it done.  These external factors make planning extremely hard and in turn this creates havoc in what is an utterly seamless business that they have worked so hard to achieve. 

Marysabel, Moises and their son Ezri truly are the best and they take all of this in their stride they also expressed huge concerns for their customers and their customers in this challenging climate.  Even absorbing their margin on their own coffee to ease costs down the chain.  They deeply care about the future for not just their business but everyone in the industry.  Their harvest is amazing this year however it is slightly down on numbers and they continue to invest in new farms to grow and expand for the future.  

Juan Saldarriaga 

Juan owns two farms, a mill and an export company in Bolivar Colombia and we have worked with him since we bought a cold dried natural from La Claudina that we used at the London Coffee Festival back in 2018. Since meeting Juan back in May 2018 we’ve visited his farms 3 times and seen amazing progress on each of trips.  

Juan has faced similar challenges to Marysabel and Moises however Colombia has faced a very different set of problems.   Over the early days of the pandemic we spoke with Juan via instagram, the biggest challenges he faced then was pickers and how restrictions on movement would be the biggest challenge.  Thankfully rural workers were not too affected and the harvest was fantastic.  The internal price for coffee in Colombia post pandemic sky rocketed to levels we have never seen in the past ten years this created total chaos.  Juan has started buying coffee from smaller producers in his region and exporting it.  We have been buying from some of the projects he has been running supporting his community.  Juan’s costs doubled overnight just to buy the same coffees, this in conjunction with the large investment he has had in his mill is crippling. Add on top of this a poor main harvest in November 2021 from his farms La Claudina and El Encanto and by poor we mean 40% down on volume.  Any chance of taking advantage of the high price is gone.  Add on fuel, logistics and labour well I don't need to add more.  Juan had to make the decision to produce naturals and skip the washed coffee for our unit fourteen in 2022 as there simply was not the volume.  

Working long term like we do and directly with these producers in partnership with Nordic Approach our importer means we can overcome challenges and always, always always pay the producer far in excess of what the base market dictates, working through the challenges together is the result and joy.  

Last time we increased prices was April 2018, an increase largely tied to Brexit, increased shipping costs and the weakening of the pound. To be perfectly honest, the set of circumstances surrounding that price increase and the position Round Hill found itself in at that time, as a business that saw itself as European more than British, was quite disheartening. This time our price increase is a matter of staying the course, continuing to pay a premium to exceptional coffee producers so we can continue to receive and roast exceptional green coffee. 

Transparency 

This is very much the first step towards publishing more of our data such as prices paid to producers, volumes bought and price paid to exporter. 

We’ve started with the two producers whom we buy the greatest volume from, largely for Unit Fourteen but also an espresso we reserve for our local clients named La Linda and in both cases several microlots.  We have published the volumes purchased since 2017 this includes both volume lots for espresso and also natural preparations and varietals. 

While we are currently only showing this data from two producers our intention is to build the framework to roll this out for every single purchase going forward.

The graph clearly displays the price paid to the producer.  This is the price paid by our exporter Nordic Approach, not the price we paid to Nordic Approach.  In the future we will be working closely with them to display the F.O.B price (Free on Board) this is the final price paid once the coffee is in a container and heading towards us. 

We have included the closing price for the year see (https://www.macrotrends.net/2535/coffee-prices-historical-chart-data) this is by no means how we wish to continue as it would be far better to display the market C price at the time of purchase.  We have included this to give clarity on what has been happening over the years and to show how we have always paid far in excess of the base level. 

For some coffees the percentage difference is huge, these are the truly high scoring rare varieties we buy, hence when you cross reference with the volumes they are lower this is mainly due production on these coffees being very small and in some cases we bought all that was produced.

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At the end we wanted to outline the costs and profit within our own business.  Graph one is for the financial year ending 21/22 and the second is the projected costs for 22/23 based on the first financial quarter of 22. As you can see on the second graph our projection for profit is -4 percent, which is another strong indication of our pressing need to increase prices. For clarity wages have gone down as a percentage 22/23 as we have one less member of staff.  We have increased existing members of staffs wages.  Cost of coffee will also increase as  we have not yet bought all our stock for the year and our current volumes are down on last year.  We also want to disclose that we are also building a new warehouse and office as part of the expansion of the roastery which is why there are additional costs currently. We are building for the future.