Coffee is grown only in the tropics but is consumed in every corner of the world. It is traded globally; in fact it was one of the first commodities traded worldwide as early as the beginning of the 18th century.
Today, approximately 170 million bags are produced annually. These coffees come from a wide variety of coffee plantations, in the plains or in the mountains, in the shade or in full sun, and are grown in countries with very different annual GDPs, such as Panama or Burundi.
Every café is a world of its own
The variety in the denominations of origin results in very different coffees. Each producer’s reality is different, from the size of the plot (from large estates to micro-plots), to the cultivation at different altitudes of Arabica varieties, the harvesting season, as well as the agro-ecological conditions, the knowledge and/or motivation for quality, the ease or otherwise of finding pickers at harvest time, or the labour laws of each country. In addition, it is important to consider whether there is one or two harvesting seasons, processing, fermenting, threshing, nomenclature, etc.
Coffee price variability
The price of coffee varies enormously; apart from quality, quantity also plays a role, the purchase made by a multinational is not the same as that of a small roaster who buys a sack of coffee a month. The destination of this origin-grown coffee reaches consumers of all purchasing power ranges and different taste cultures. Moreover, even in the same country, such as France, the price of an espresso varies enormously if you order it in the centre of a big city or in a small town in the same country.
Stock market swings also affect fine coffees
In short, the green coffee market is old, mature, very diverse, complex and in continuous evolution. Moreover, it has its rules, codes, currencies, contracts, relationships. It is basically a commodity market that also has a small segment of speciality coffees or, as I prefer to call them, fine coffees. Let’s face it, as much as we want fine coffees to be governed by a cost/benefit model and their price to be independent of the influence of the New York Stock Exchange, changes in the value of currencies, shortages or oversupply in the market, etc., the harsh reality is that all these variables equally affect the price of the best quality coffees. It is an illusion to think that the New York Stock Exchange rises affecting exclusively commercial coffees and that the price of speciality coffees remains static, to the extent that the gap narrows.
Fine or high quality coffee
Let’s leave commercial coffee to one side, the vast majority, and focus on the fine coffee trade. Since the Cup of Excellence was born, it has been established and refined and the coffee world has adhered to a way of scoring coffees through a cupping sheet with terminology that allows professionals a universal conversation about the quality of a given coffee; it is, let’s put it this way, the Esperanto of coffee.
Yet it is very optimistic to talk about taste as if it were universally uniform and very naïve to believe that all tasters are calibrated to each other or that they have no commercial interest in scoring a given lot or that all Q Graders have the same cupping skills.
Determining coffee quality
To give us a more concrete idea, these are the values in which coffee moves:
- Cup of Excellence. Top lots 90+
- Microlots 86-89
- Good and high comercial 80-85
- Commercial – 80
* 80 is not the 8 they gave you at school, it’s a 5, a close pass.
These speciality coffees (86+) are grown in privileged locations by expert and passionate coffee growers, although nature sometimes works against the quality and quantity they strive for.
As mentioned above, coffee growers cultivate their coffee in very different countries, with radically different GDPs and extensions (such as Panama and Ethiopia, Brazil and Kenya or Colombia and Yemen, to give a few examples), with different governments, with different laws that regulate the country and in which agriculture has significant differences, whether economic, cultural or agro-ecological.
It is also marketed and exported with the idiosyncrasy and customs of the place. Some have their own nomenclature to differentiate qualities or heights, their own measures of weight and currency; some focus on cooperativism (Peru) and others on productivity (Brazil). We can take into account other difficulties such as: the lack of access to the sea (Ethiopia, Rwanda), so you have to go through a third country to export; infrastructure problems; logistical difficulties (Costa Rica has two oceans to ship its coffees, whereas in Peru it can take two days by truck to get sacks of coffee to the port); high inflation; fluctuating currency exchange rates; war; theft; delinquency; and so on and so forth.
In short, coffee growers face a myriad of problems that as a roaster, on the other side of the world, you can’t even imagine.
Who grows coffee?
- Small producers. They do not have enough coffee trees or facilities to process their coffee. They sell their coffee in cherry. They are associated with cooperatives or sell it to coffee collectors.
- Medium producers. They harvest and process the coffee to its parchment state. They may or may not have enough to constitute a significant lot to be able to sell it under their farm name. They must take the parchment coffee to a threshing machine to complete the process and have the machine prepare it for sale and export. They sell their coffee in cherry. They are associated to cooperatives or they sell it to coffee collectors.
- Cooperative. Associations of small and perhaps medium-sized producers to export their coffee. It is sold under the name of the cooperative. In some cases, special lots are separated to preserve traceability. They may help to pre-finance coffee growers before harvest if they lack liquidity.
- Big producers. They can do the whole process (milling, threshing and export documents) up to the shipment and sell directly to roasters or importers. They have the necessary capacity to be able to sell with Direct Trade since they can take care of all the logistics to reach the final client, even having an agent in the consuming country of destination that manages the import and generates the invoice of the coffee for the roaster already as European merchandise (i.e., it is not Direct Trade).
- Thresher/Exporter/Importer. They deal with regional coffees, purchased through contacts in the field, which they combine to sell as regional coffees (or as their own brand). They also select lots of specialty coffees. In addition, they receive coffee from small or medium sized producers that are unable to complete the final process of the bean, the oreado, that is, the selection by density, color and size. On occasions a final selection by hand is necessary, as well as bagging, which requires a large investment in machinery and labor. The Thresher is also in charge of the paperwork for export, the logistics up to the shipment at the port, giving an FOB price (FOB price is the value of the merchandise at the port of shipment including the cost of packaging, labeling, customs expenses, etc.), the collection of payment from the buyers and above all, the payment to the coffee growers. They can also help to finance coffee farmers before harvest if they need a cash advance.
The limitations of the fine coffee producer
Thus, on countless occasions and as a general rule, the specialty coffee producer is too small. He/she needs the threshing machine/exporter to prepare his/her coffee. He/she is also too far from the port and has little or no knowledge of the rules of international trade to sell the beans already prepared and bagged, especially to export them, as well as to take care of all the logistics, the export paperwork and also to allow him/herself the luxury of being paid long after the harvest is finished. All this is a complex, long and costly process.
The producer, most of the time, does not know what the export conditions are (FOB, exworks, CIF, etc.), and prefers to be paid when the coffee leaves his farm (farm gate) and wants it in his local currency and unit of weight (for example in colones per quintal, peso per arroba or birrs per feresulla) since he has been cultivating for a whole year without obtaining any income.
In short, FOB prices say little about the money finally received by the producer, and there is no international organization that controls and/or regulates them. This logistic value is the sum of the price of coffee at the farm gate plus:
- Transportation costs to the threshing machine
- Threshing and storage costs until the purchase order is placed
- The tariff, taxes and documents for the export and transportation of the bags to the port of shipment.
The key intermediary: the importer of green coffee
Once shipped is when the buyer (importer or roaster) takes control of the coffee. It is assumed that if the buyer has made a direct deal, that is, has eliminated intermediaries and has paid the coffee grower directly, he has taken charge of all the steps until shipment, paying for each one of them and taking responsibility for freight, insurance, customs, phytosanitary controls and other export expenses until arrival at the port of destination.
While this is already a Herculean task for a small roasting company, the risk of coffee being delayed, spoiled, lost or having lost quality over the months that the whole process takes is too serious a financial and stock mismatch risk to be overlooked. It is worth remembering that a small 21-foot container holds about 250 bags of 69 kgs and that the freight is paid per full container; if you load fewer bags the price per kg is higher; if you do it in groupage (i.e. you share it with other goods) the freight per kg is even higher and you also run the risk of your coffee being contaminated by a foreign odor.
The importer takes care of a lot of paperwork:
- Customs fees
- Necessary documents
- Payment of phytosanitary analysis – Certificates of origin
- Shipping instructions – Invoices
- Payments against documents for the purchase of coffee at origin
- Insurance
- Storage
- Sea and land transport
- Storage costs during the administrative paperwork
And a long etc. It also takes care of claims for non-compliance and assumes the risk if the coffee suffers any quality-related damage during transport from origin.
The importer is not a simple intermediary, he is the essential link between two very distant worlds and an ocean of potential problems. Financially and structurally, importing directly from origin is beyond the reach of a company of our size.
Cupping determines which green coffees we buy
Once they arrive at their warehouse on the other side of the world, the importer keeps the bags until the roaster picks them up and pays for them. But so that we can choose before buying, they send us samples for us to taste and evaluate. In El Magnífico we buy some coffees from the same farms or cooperatives on a regular basis for years and others that we have chosen this season because we have found them to be exceptional and we may not buy them again the following year for different reasons: because they are not as good; because the owner has sold the farm or because these coffees have gone to other markets (such as Japan, Korea, USA…) and we cannot find them again. The casuistry is long.
The best coffee from a farm is the sum of all the best lots harvested during the harvest quarter. The fact of visiting a farm in the middle of the harvest and tasting the coffee at that moment can give you an idea but it is not the real final profile of how the coffee will taste after it has been harvested and rested for two fundamental reasons: the taste of the coffee evolves during the 12 weeks that the harvest lasts and therefore if you visit the farm in the third week you have only tasted the coffee of the first three weeks. Secondly, coffee that has just been harvested is too fresh and tastes too vegetal and acidic, needing a few weeks of rest to show its full potential. We prefer to choose from samples of coffees with a defined profile and not speculate.
The roaster’s difficulties with the Direct Deal
What would happen if, for example, we only worked with Direct Trade with a coffee grower and something happened to him or his crop was not good this year. Would we leave him in the lurch by not buying his coffee? Through an importer we can be sure that the coffee will have another possible buyer anywhere in Europe. What would we tell our clients if the coffee is damaged or arrives late or its quality is not as expected? Would our clients assume these problems? Let us not forget that this is a very big financial risk for a container with thousands of kilos of green coffee.
At Cafés El Magnífico we have built a network of mutual trust over the years with importers of proven value and work ethic. In their team in the producing countries they have professionals in the field that allow them to have lasting relationships with the coffee growers or cooperatives they work with or to learn about new initiatives (it is a job of great dedication given that in Brazil alone, for example, there are 400,000 coffee growers).
Importers also collect information and follow up on quality, both at origin and when the coffee arrives at their warehouse. In addition, in many cases, they may be helping the coffee grower by advancing payment before the harvest, something that a roaster is far from being able to even consider.
We continue our commitment to travel to the origin
Since 1991 we have been traveling to countries of origin and we will continue to do so because we are interested in coffee growing and in learning about the reasons behind great coffees and the people who make them possible. And above all, we will travel to participate in competitions, which give a very panoramic vision of the quality of coffee growing in a country. Thanks to this we have met and established relationships of many years with extraordinary people in many parts of the planet. This does not mean that for all of the above reasons we continue to leave the importation of coffees in the hands of those who know: the importers.
We can therefore assure that our importers/suppliers of green coffee are professionals of proven prestige in the market, who send us samples of excellent coffees so that we can choose, always blindly, at the tasting table. Furthermore, there can be samples of the same origin from different importers, which allows the tasters of Cafés El Magnífico to make a more rigorous choice. These are coffees that are already cleared through customs and available in a European port a week at most from our warehouse so that we can roast them with a guarantee of freshness, variety and immediate availability.
In short, our commitment to the coffee grower and our clients goes through the importer, an essential part of the green coffee value chain.
Salvador Sans
Director and owner of Cafés El Magnífico.