What is the work of green coffee buying?
I’ve been thinking about his question and how my work intersects it. I used to think my job was to change minds. I now believe it’s to simply to instigate those in our industry to think deeply about their work and role in the supply circle.
When I think of green coffee at a macro level, I go through seasons of “low-grade” depression boarding despair. But I always return to the fact that, as an industry, we largely want to be fundamentally good actors. I still believe this, and I hope I never lose my ability to return to this belief. Yet, despite our collective best efforts, we still don’t seem to be making the gage of “doing good” flinch in the face of “how it’s always been done.”
Last week, I sat in a lecture by Michael Sheridan of CQI. He spoke on the drivers of impact at origin in tandem with risk management in sourcing green coffee. He shared some helpful data on the relationship between the C-price and it’s effects on the access to quality green coffee, contract defaults, and risk mitigation.
The thesis was this: when the C is down, access to quality green is abundant, contract defaults are few, and roasters have minimal risk to manage. But when the C goes up, the opposite is true. However, this risk can be managed by utilizing two things: a soft hedge (long-term buying relationships) and a hard hedge (options).
During his lecture, the thought occurred to me, “These are not new ideas,” and it made me wonder why we as an industry haven’t adopted these practices as the norm?
I’m not trying to bum anyone out, but since I started in coffee, we’ve been talking about the same challenges with limited progress:
The C-price being below the cost of production.
Producers largely take on outsized risk in relation to reward.
The average age of producers steadily increasing (currently 55-60 years old).
Pricing based on the C-market, even with a differential, isn’t a real solution.
Production decreasing due to climate, pests, and other environmental factors
Have we lost our way?
In 2016, when I started working in coffee, the futures price for green was $1.06. As I’m writing this, it’s $2.60 on the dot. As much as you and I wish this increase was due to something we did, we both know that isn’t true, and it will likely continue to bobble and trend downward.
What do we do?
I believe this moment demands that we collectively become more sophisticated green buyers and rigorously work to understand every single step in our own supply circles. How it works. Why it works. What’s broken and what we are contributing to…the good, the bad, and the unsightly.
If we do this, we will LEARN…
We will learn what to do from those who came before us, as well as what to never do again. We will learn our responsibility and the opportunities for us and our partners. And we can be part of healing what has been broken.
Healing is continuous.
Did you know that healing isn’t a destination, but a continuous restoration? If this is true, then our work here will be ongoing.
One last thing.
Please don’t read any of this as an attack. That’s not what this is. It’s likely that you’re already quite thoughtful about your role in the supply circle. The point is ongoing learning…because healing is ongoing. It’s not a destination.
If you’re in a place where you aren’t sure what any of this means, or you’d just like a thought partner in this, lets talk.