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Price Transparency
PRICE TRANSPARENCY
The first step towards financial stability for coffee producers.
ONE OF THE BIGGEST PROBLEMS FOR COFFEE SUSTAINABILITY IS THE LOW INCOMES EARNED BY COFFEE PRODUCERS.
The C-market is the market price for commodity coffee. In May 2019, this price was down to $0.867 per pound, the lowest since 2004. This price is less than the production cost of coffee, which is not sustainable for coffee producers, especially the smaller ones.
Historical coffee C-market price (via macrotrends.net). Click to expand.
THE C-MARKET IS THE MARKET PRICE FOR COMMODITY COFFEE, BUT ALSO SETS THE BENCHMARK FOR SPECIALTY COFFEE, WHICH IS FLAWED.
While specialty coffee (i.e. high quality coffee like ours) prices are higher than commodity, they still indirectly use commodity prices as the benchmark since there isn't any other benchmark.
This is flawed, since commodity prices are too low, too volatile, and not linked to quality.
WE NEED A NEW BENCHMARK FOR SPECIALTY COFFEE
This is why price transparency matters.
Driftaway, along with several other specialty coffee companies, is making a commitment to be completely transparent in our coffee sourcing. This is the Transparency Pledge.
THE TRANSPARENCY PLEDGE
The Transparency Pledge is a joint project made to establish a common code for transparency reporting in the coffee industry. We are committed to making the following available:
- We will create transparency data that is publicly available and easily accessible.
- State the producer/producer organization the coffee was purchased from
- State the Free On Board (FOB) price paid for the coffee
- Indicate the quality of the coffee, for instance by using the SCA score in order to indicate cup quality
- State the lot size (volume) of the coffee purchased
- State the length of the relationship between producer/producer organization and buyer
- State the percentage of transparent coffees in relation to the total volume of coffee (in lbs/tonnes) sold in the stated year.
FROM SEPTEMBER 2019, EVERY DRIFTAWAY COFFEE WILL SHOW THE PRICE WE PAID FOR IT.
In addition, it will also show the C-market price at that time of buying, and the Fair Trade price at the time of buying. While the C-market price isn't the right benchmark, in the absence of a new benchmark, we are displaying it to provide a reference.
DRIFTAWAY HISTORICAL PRICE TRANSPARENCY
FAQ
What is the C-market? Why does it exist?
The C-Market, also known as the coffee commodity market, is where the global price of coffee is determined by traders at the New York Stock Exchange. The price of coffee on the C-Market shifts based on supply and demand, but also based on trader predictions about future supply and demand.
A lot of the activity on the C-Market revolves around futures contracts and these futures contracts are based on macro trends like Brazilian or Vietnamese outlook for coffee for the following year. It is not based on cost of production for an individual farmer, so in many ways, it is disconnected from the real cost of producing coffee, especially for a small farmer.
Is this truly a crisis or market fluctuation based on supply and demand?
The reason it is considered a crisis and not just market fluctuation based on supply and demand is because the real cost of production is documented to be well above the C-market.
This means that farmers are not able to sustain their lives on coffee as a crop. Other social, economic and environmental issues arise -
- Less access to credit and higher interest rates for farmers borrowing money
- Local economies shrink as less cash is injected by coffee
- Small farmers abandon coffee leading to farm consolidation with richer, larger farmers
- Quality of coffee drops since investment into better crops is not possible
- Migration increases
Does Fair Trade address this issue?
Unfortunately, it does not. Fair Trade price is indexed to the C-Market price. It adds a premium on the C-Market price (40 cents per pound for washed Arabica coffee).
Price set by Fair Trade International - page 8, row 10 - https://files.fairtrade.net/standards/2019-08-21_Fairtrade_Minimum_Price_and_Premium_Table_EN_PUBLIC.pdf