Long-Term Bean Counting: What You Need to Know About Buying Right

By Mike Ferguson

If you work at any point in the coffee supply chain, you know that the last two years have been unusual, to put it mildly. Even the most casual coffee consumers have noticed price increases. Not only did we see historically high prices for green coffee, but perhaps more significantly, historic if not unprecedented and prolonged volatility. In an industry where coffee buyers regularly took days to make a decision, there have been times over the last 18 months when a buyer couldn’t even take the lunch hour to think about it because the market was experiencing substantive fluctuations within the space of not only hours but minutes.

Coffee buyers were suddenly day traders.

While a three-dollar coffee market creates challenges, the consumption side of the supply chain adjusts. Everyone complains about higher prices, whether it’s gas or grapes, but inevitably, one way or another, we find ways to accommodate our costs, as painful as they may be. Witness the general relief (or perhaps “taking a breather” is more accurate) over prices currently bouncing around $2.30, and yet this still represents a 65-percent increase over prices two years ago. To top it all off, as the floor price for commercial-grade coffees broke records, specialty coffee roasters experienced little, if any, retreat within the quality differentials they pay above the floor price. In fact, because the supply/demand pinch is more keenly felt among the very highest quality coffees, quality differentials often increased despite 50–100 percent increases in the floor price. For those buying specialty coffees, the market price became only the first shoe dropping.

Generally speaking, specialty coffee roasters understand higher prices, even at the level of commodity grade quality, to be more aligned with, or at least approaching, the true value of coffee. Higher prices are temporarily inconvenient but ultimately better for a product that has been undervalued relative to its inputs for over 100 years. The last two years has been time to walk the walk.

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