When C-market prices are historically low — as they had been throughout much of 2018, 2019 and 2020 — they can be expected to move back upward. Yet such volatility tends to cause actors throughout the supply chain — including roasters, importers, exporters, and producers — to counter with drastic measures, exacerbating price volatility.
What are some of the consequences of the most recent rise in the NY C-market price, and how might this impact producers in places like Peru, Brazil, Indonesia, Burundi or Rwanda, where peak harvesting season is approaching?
Deforestation can increase. Producers may become incentivized by higher prices to expand production into primary forested areas with the hope of increasing yields as soon as possible. Yet within the time it takes for a forest to re-grow, prices will ebb and flow many times over.
Coffee quality can suffer. When the market goes up, farmers are more likely to pick their crops and deliver cherry to mills as quickly as possible to take advantage of higher prices. Fast delivery can hamper quality due to lack of selective harvesting practices and meticulous post-harvest practices.
The rising C-market price may encourage strip-picking, meaning the amount of quality coffees available in later months can be diminished. The price differential between red, ripe selective harvests and mixed underripe selections is often not enough to justify selective harvesting when prices are presently high.
Private collectors become competitive. Cooperatives often struggle to afford coffee parchment from their members because they must compete with heavily financed, privately owned buyers who are able to pay higher prices without delay. This can strain cooperative structures and membership benefits.
Ed Canty, the general manager of the United States-based trading cooperative Cooperative Coffees, addressed this issue in a story on price risk management (PRM) tools way back in 2015.
“Independent smallholder organizations always need to pay producers a local expression of the current commodity price to collect coffee. If they do not, producers will sell to someone else,” Canty stated at the time. “Estates pay workers a rate that is not immediately tied to the commodity price of coffee. So their risk of not being able to collect coffee in a rising coffee market is greatly reduced. This allows many Estates to sign fixed price contracts without protecting against the risk of a rising market.”
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