Paying for Coffee: Inzá

In our previous series, Paying for Coffee: It’s Complicated, we talked about the various factors that underpin how we as a coffee sourcing company buy coffee, as well as how to discuss it. While that series looked at the larger picture and laid crucial groundwork for the discussion, this is something we feel we—and the industry at large—need to go deeper on. This series will take a closer look at the details that underpin how we buy coffee in our major supply chains, each of which is unique. 

 

Inzá, Our Oldest Relationship

In this piece, we take a deep look at Inzá, our longest-standing relationship at 13 years. In Inzá, we’ve seen other buyers come and go, dealt with hyper-competition, and experienced both success and failure; through it all, we’ve remained just as invested in the hardworking and honest members and leaders at producer association Asorcafe and the exceptional quality and consistency they produce. This is a group we’re completely committed to, and here, we dive into what that commitment looks like, talking about not just what we pay for coffee, but how we buy it.

What We Pay

First, the simplest part of the equation: what we pay. We visit our trade partners in Inzá each May to establish pricing for the following 12 months of harvest. Our motivation is not just to make coffee production worthwhile in Inzá, but to make sure that the extra effort it takes to produce the above-and-beyond quality we look for here drives the incentives producers receive. Asorcafe sells their specialty coffee production to us exclusively, so we also need to ensure that our pricing is superior to what they could get elsewhere in order to maintain our exclusive access to their specialty weight.

Farmgate Pricing

As part of this strategy, we set our base prices high and we don’t tie them to the C market in any way. First, as a comparative baseline, the local price offered by the Colombian Coffee Growers Federation (FNC) on our most recent visit was 837,000 pesos per carga (the standard price/volume measurement in Colombia—around 125 kg parchment) with no pricing incentive for better quality—a price that goes up and down with the C market. In Inzá, Nespresso is a huge commodity buyer, offering prices slightly higher than the Federation: at the same time the FNC was offering 837,000 pesos per carga, the Nespresso price was 850,000, also tied to the C market.

Looking at our prices, we pay a baseline rate for coffees scoring 84-85 of 1,150,000 Colombian pesos per carga, equivalent to 2.47 FOB (or free on board, the price of the coffee at export). For coffees that score an 86, we pay 1,250,000 pesos per carga, equalling 2.64 FOB. For coffees at an 87, we pay 1,400,000 pesos per carga, or 2.90 FOB, and for 88-89 point coffees, we pay 1,500,000 pesos per carga, or 3.07. For coffees at or above a 90, we pay 1,700,000 pesos per carga, or 3.42 FOB. Once again, our prices don’t fluctuate based on the C market.

Price Comparison:Farmgate (pesos per carga)FOB (USD)
FNC837,000<2.00
Nespresso850,000<2.00
Red Fox 84-851,150,0002.47
Red Fox 861,250,0002.64
Red Fox 871,400,0002.9
Red Fox 88-891,500,0003.07
Red Fox 90+1,700,0003.42

FOB Pricing

As we’ll go further into below when talking about how we buy, costs that take the coffee from farmgate to FOB include transportation from the interior to the mill (which Red Fox pays for directly), meticulous preparation for export, GrainPro for protection through transport and storage, transport to port, and loading onto the cargo ship. We expect a process and prep that’s close to perfect and we pay well for it.

As we explored in Paying for Coffee: It’s Complicated, just as exporting coffee adds costs over and above the amount the producer got paid, the importing and warehousing process also adds costs of its own. Once we factor in the cost of bringing coffee into port, getting it into a warehouse, holding it in the warehouse until it’s sold, and covering the additional operating costs of our business, we get to our ex-warehouse prices, the point at which roasters purchase our coffees.

Managing Risk

Another factor we have to account for in our ex-warehouse pricing is the risk we take when carrying a large spot position from these producer groups. Where many other importers and sourcing companies only buy what they can sell in advance, reducing their warehousing costs, we commit to the quality volume Asorcafe produces, selling it over a longer period of time.

What this often means is that we’re managing some amount of inventory in the warehouse for a longer period in order to do this—a cost we have to account for. We’re also accountable for any quality risks involved in this process, paying what we’ve committed to paying even if the coffee doesn’t arrive at the contracted quality level.

Just like the price roasters charge per retail pound is higher than the green price per pound of the same coffee, our ex-warehouse prices are necessarily higher than our FOB costs. Just like the costs roasters face in taking coffee from a green to a roasted product, we face costs during the sourcing, exporting, importing, warehousing, and selling process that take the coffee from its FOB to ex-warehouse prices, while carrying the quality risks incurred at all these stages.

How We Buy

One thing we’ve seen over time—in every region we source, but especially Colombia—is buyers who attempt to pick off those they perceive as the “best” producers rather than working with producing groups like Asorcafe who provide resources, structure, and community investment. Critical to our success in Inzá over time is our investment in the community structures that support producers, rather than just an interest in skimming the highest-scoring lots and producers off the top.

The essence of what we do in Inzá is similar to everywhere else: we try to incentivize quality. We do this with the prices we pay, discussed above, but those aren’t the only incentives for producers to grow great coffee. Asorcafe works with an agronomist to help with nutrition, shade coverage, and pruning, as well as fermentation times and processing details. We pay 50% of the agronomist’s fees, making it easier for Asorcafe to afford the quality improvements that come along with better plant health and processing.

We also pay for transportation of the coffee to the dry mill, which is a significant cost, and one that producers usually have to cover themselves. From there, we buy the coffee in parchment. We take on the cost of removing the parchment and sorting via gravity tables or machines—the latter which not only has a process cost but also removes a minimum of 20% of the coffee’s weight but results in a significantly better cup.

We then pay for the coffee to get packed in GrainPro bags to preserve the careful work that went into processing and drying. We transport the coffee to the port and get it onto the ship that will bring it to its destination, selecting the fastest shipping option—which often is not the cheapest—in order to minimize the impact the shipping process can have on quality.

Cupping and Communication

As we talked about in Scaling Quality: Signal Detection Cupping, farmers in Inzá average just 1 exportable bag of coffee a year, but even though it takes a lot of time and energy, we feel it’s well worth it to taste what each farmer has to offer individually and blend in ways that truly represent their work. We apply the signal detection process to all offer samples, making sure we’re cupping samples anonymously to remove bias and quantifying our results in a way that’s easy to communicate back to Asorcafe.

Once we have our scores, we compose lots at various tiers custom-made from specific producers and communities to best showcase their work. We then send the results to Asorcafe leader Geovanny Liscano, who communicates them to Asorcafe’s membership.

Coffees that score below our threshold are typically sold by producers to Nespresso, which is why we work hard to both incentivize and assist quality production. For us to buy coffee at lower quality tiers at high-quality prices, we would need customers to both embrace and commit to that.

Paying for Coffee in Inzá

Inzá is a perfect example of how we buy coffee. As our oldest relationship, it’s an ideal vantage point to examine not just at what we pay for individual lots, but the other types of support and incentives we offer, as well as the specific logistics that move coffee from point A to point B in this unique supply chain. As we move through the year, we’ll continue to shine a light on our individual supply chains, going deeper in order to show what our sourcing really looks like, from the ground up. It’s critical to the future of coffee that we as an industry have conversations like this: conversations where we discuss not just what we as companies pay for coffee, but how we buy it.

Scaling Quality: Signal Detection Cupping

At Red Fox, our very small team cups a veritable ton of coffee. Whereas another importer might cup a single representative sample to purchase multiple containers from a coop, we often cup as many as 250 samples to build just one. This is a lot of work, so why do we do it? The answer is that we feel that each producer, no matter how small their operation, deserves to have their coffee tasted by our team and assessed independently. We also feel that every producer deserves specific feedback on their coffees and the ability to make additional quality premiums when their coffees exceed our already-high expectations.

Even more than the why, this piece is focused on the how: in order to cup the amount of samples we do with the tiny team we are, we use a carefully dialed system called signal detection cupping. First introduced to us by roasting and sensory expert Paul Songer and honed to our needs over time by resident expert and Director of Quality Joel Edwards, signal detection lets us cup a ton of coffee both efficiently and objectively, allowing us to not only make the right purchasing decisions but also share concise, focused, and quantified feedback with the producers we partner with.

More than just helping us cup more accurately, efficiently, and consistently, signal detection is also a linchpin in how we allocate coffees and construct lots. Where many others take a single sample from a cooperative as the de facto blend for a particular region—which, in general, is also considered de facto inferior to the single producers of that same region—we build them by hand, taking the extra time to craft lots that are a perfect representation of a particular community, family, or microregion. Without signal detection, this process would be a lot more time-consuming.

How Signal Detection Cupping Works

First, some context: we only use signal detection to cup coffees for purchase. We have a completely different procedure we use to assess preship samples and arrival samples, as well as to track quality over time. The signal detection process is specifically calibrated to help us cup offer samples from producers both efficiently and effectively and make the least biased, most informed purchasing decisions possible.

We’ll get into the details, but first, some general principles:

  • Signal detection is double-blind, so no one tasting coffee has any idea which coffees they are tasting beyond which cooperative or producer group they came from.
  • We place three cups of each coffee at random points in the table based on numeric assignments from our signal detection spreadsheet instead placing cups together and judging them as sets.
  • Each panel participant cups the table a single time at their desired temperature and we come back to the table to taste & discuss coffees in question after the data is entered into the system and analyzed.
  • We rely on the group’s aggregated scores and calibration to generate accurate and comprehensive results rather than on individual opinions.

While signal detection might not be the right cupping procedure for every roaster, it utilizes principles that underpin any solid cupping protocol: ensuring consistency, eliminating bias, and relying on group calibration more than individual opinions.

The Details

Specifically, the signal detection scoresheet works via a scale of 1-6, which takes on the following values:

1: Defective

2: Not Red Fox quality

3: Probably not Red Fox quality

4: Probably yes Red Fox quality

5: Yes Red Fox quality

6: Definitely Red Fox quality

Prior to setting up the cupping, we enter all of the sample roasts we are cupping into our signal detection spreadsheet, which assigns them random numbers, then scramble them, so that we can set up the cupping with no knowledge of which coffees we are tasting.

We brew the coffees without assessing fragrance or aroma, then move through the table quickly once the coffees are completely cool, taking one or two tastes of each and assigning them a score on this scale. While this process would be glib if used by a solo cupper, it works perfectly with a team, ensuring that all cuppers taste all coffees in a uniform and brisk fashion and don’t second-guess their first instincts.

We then enter our anonymous individual scores into our spreadsheet, which calculates our aggregated scores, giving us a group average, a cup-to-cup spread, and a confidence rating. At this point, we unscramble the coffees so we can see the random cups as sets and assess their quality and consistency.

Allocating Coffees and Lot Construction

This is where we start the process of building lots. Looking at our group average, our cup-to-cup variance, and our confidence rating, we’ll be able to see at first glance that some coffees were clearly exceptional and that some did not quite meet our quality standards. For those coffees scoring either solidly in between or all over the place, we go back and taste them as a group, then come to a decision.

In our core regions where we work primarily with smallholders—Colombia, Peru, and Mexico—we build our menu at a few different tiers: regional lots, community or family lots, and producer ID lots. Where a coffee gets slotted depends on its quantity as much as its quality.

Typically, offers will need to average around 4 to be contracted, and those lots will be bulked into community or regional lots. Offers that score closer to 5 will be marked for separation, qualify for a higher price tier, and will be marketed by name when possible as producer ID lots. Offers that score closer to 6 will receive an additional premium. Each tiny lot that goes into both our community and regional lots is vetted with the same rigour; each producer gets the same level of feedback from us. Even though cupping each producer’s lots separately isn’t the easiest way to buy coffee, we feel it’s more than worth it to build lots that represent each producer’s work at its finest, especially because we often find that these hand-built lots can present even more dynamism than the best producer ID lots.

For example, take Inzá, Colombia, where lot sizes average around just a single exportable bag. Cupping these tiny lots takes a lot of effort on our end, but not nearly as much as it takes to produce them. We aim to be as intentional as possible with how we bulk these lots and present them to the marketplace. For instance, no matter how exceptional their quality—and it is exceptional—a slew of one-bag producer lots is neither feasible to market on our end nor feasible for our clients to market and sell to their clients.

So, we take the next step to make sure these tiny lots can find real market representation in a way that makes the most logistical sense for all involved: crafting bespoke lots at the community, family, microregional, and regional levels that most accurately represent each producer’s unique cut. For example, Eibar Rojas, neighbor to the Oidor family in San Rafael, produces tremendous quality—just not always a lot of it. His farm is on the same southern-facing slopes as his neighbors and grows almost entirely Caturra, same as his neighbors. His farm is at 1800 masl in its lowest point, the Oidors at 1750 masl. Both peak out just above 1900 masl. When carefully blended together, these coffees showcase exactly the quality and unique character that its individual producers are bringing to the table. Their lots are often too small to find market representation when separated, but together, they showcase their quality perfectly and fit perfectly into the supply chain as well.

Or, look at brothers James, Hernan, and Jose Casso. They have four hectares between themselves and their father Miguel—not so much if separated individually, considering they produce coffee from June through February, but collectively enough to produce over 50 exportable bags annually. With that volume between them, they’ve got teamwork down to a science and work with us to bring their coffee to market in the most representative way possible: as familia lots that are as labor-intensive to construct and every bit as special as any single producer lot we bring in.

Why It Works

Group input and calibration are critical to the consistency of our process because even the most talented and experienced palates can have an off day. As Paul Songer, who introduced us to signal detection, says, 100% calibration where all team members feel exactly the same about each coffee not only doesn’t exist, but wouldn’t benefit a team. Fostering diversity of opinions is crucial in making sure that each producer’s coffee receives fair and balanced feedback, and signal detection allows us to look at group scores and stay within a fairly tight calibration range without having to close off the natural variations in palate and preference.

Removing bias by cupping blind with three randomly placed cups of each coffee also helps us to score coffees fairly and accurately. When we see that a set has very different scores between cups (but not cuppers) we know that one of the cups had a defect—but we got to taste and score the other two cups unbiased by that knowledge. As Joel says, when you taste the first cup in a three-cup set, you’ve usually already decided how you’re going to score the other two. Cupping blind also allows us to remove any political elements that might affect perceived preferences.

An added bonus is that signal detection is very easy to train new partners into, so as we deepen relationships with producing partners and onboard new team members, we can quickly bring them into our system and calibrate.  

Signal detection works well for us, but that doesn’t mean it’s for everyone. It’s a very specific system we know will deliver the results we need, but we do feel that the general principles that underpin the process would benefit any cupping team or buyer: ensuring consistency, removing bias where possible, cupping with a team when possible, and doing your best to appreciate and represent the hard work each producer puts in to get their coffee to your table.

Pluma de Oaxaca: An Origin Reborn

The deeper we get into the world of Mexican coffee, the more excited we get, and those of you who have tasted the coffees or met some of our producing partners know why. Right now, we’re looking at Pluma, a subregion of Oaxaca that brings with it an incredible history along with incredible coffees. Boasting the singular Pluma Hidalgo variety, an offshoot of Typica, at elevations as high as 2200 masl, Pluma coffees bring with them a wide range of flavors: distinct dried fruit notes like raisin and prune, saturated sweetness like brown sugar, richness like drinking chocolate, complex malic acidity like green apples, and even florals like amber honey and peach blossom. Even though many of these coffees are still on the water, they’re going fast—if you’re interested in picking some up, get in touch now.

Over the last few decades, Pluma’s coffee production has evolved dramatically, shifting from the hands of large estates into the hands of local smallholder farmers. Nowadays, Pluma is almost exclusively the province of smallholders with farms averaging just 1-2 hectares, but going back 80 to 100 years, the coffee production landscape looked completely different. Huge, lower-middle elevation coffee plantations ruled the territory, buying the higher-grown smallholder coffees and blending them into their own bulk, undifferentiated despite their superior quality. In the late 80s and early 90s, Pluma gained a widespread reputation for producing quality coffee. However, a combination of factors including low market pricing and coffee leaf rust (known as Roya), saw estate holders abandoning their farms and moving on to more lucrative ventures.

Once the estates were decimated, local smallholder farmers continued farming—mostly out of necessity, though their operations were no more fiscally sound than the estates had been. Pluma’s smallholders struggled to make enough to thrive and reinvest in their farms, and many have lived on the brink of giving up and following in the footsteps of the estate holders before them. Without access to a differentiated market where customers are willing to pay viable prices, there hasn’t always been a real value proposition for Pluma’s producers to keep growing coffee.

Over the last couple years, we’ve seen this start to shift. Being able to introduce these coffees to a group of buyers willing and ready to purchase them at a viable price has started to build trust in this region and reinvigorate local farmers, who are beginning to understand that their coffee is worth more than they’ve always been told. They are ready to be able to dictate their own futures and gain access to new pathways to finance and reinvest in their own success.

We could not be more excited about the future of Pluma. This year, we’ve more than doubled the amount of coffee we’re bringing in from Oaxaca, and still, almost all of it was sold out before it even made it to the States. If you’re interested in putting these coffees on your menu, get in touch now, because they’re going fast.

Paying for Coffee—It’s Complicated: Part 5

Part 5: Asking the Right Questions

Now that we’ve unpacked context on what goes into pricing coffee, from terms and language to production and operating costs to purchasing models and value added, it’s time to talk about how to ask the right questions. As a roaster, it’s important to find out if your coffee purchase represents an investment in a resilient supply chain, so how do you take that conversation deeper than asking about prices?

One good starting point is to ask importers how they go about setting prices for producers, in general and in specific. How do those prices compare to the C market, Fair Trade, and Fair Trade Organic prices? Do they use the C market as a starting point, or decide on baseline rates that are consistent season to season outside the C market? Do baseline prices (prices before producers receive additional quality premiums for exceptional coffees) ever go down from year to year due to the C market, or are they consistent?

Another question to ask is whether an importer’s baseline rates allows producers and producing groups to meet their costs and reinvest in their farms and infrastructure. No matter what they pay for quality premiums, if the baseline rate doesn’t allow producers to survive and thrive, it’s not sufficient.

While asking these questions of your importer, it’s equally important to check in with yourself, your business, and your customers. How much are you willing to pay for a healthy, resilient supply chain where everyone meets their costs? Can you still meet your costs if everyone gets paid fairly? Will your customers pay what they need to in order to make it happen? If not, why not? What can change their minds?

It’s crucial that people learn more about the supply chains they work within. The more questions you ask your importers, the better. To ask us a question, email us at info@redfoxcoffeemerchants.com, or contact us on twitter or instagram.

To learn more about the complexities of coffee pricing, take a look at Part 1, Part 2, Part 3, and Part 4.

By: RJ Joseph

If You Haven’t Tasted Kolla Bolcha Yet, It’s Time

Kolla Bolcha is the newest jewel to be unearthed in Agaro, and if you haven’t tasted it yet, it’s time.

We’ve been after this cooperative since we learned of its inception three years ago, one year prior to ground being broken on the washing station construction itself. Why? Location, location, location. A short walk over the hill from Biftu Gudina in the southern end of Gera, Kolla Bolcha’s altitudes soar into the forests, and those of you who’ve tasted Biftu enough times are aware of the quality potential. We believe that Kolla Bolcha will become as sought after as Nano Challa, Nano Genji, Biftu Gudina, and the very small handful of washing stations that headline Agaro.

With a ripe red fruit character (think cherry and currant), a heavy cola sweetness, and a lustrous, honeyed mouthfeel, Kolla Bolcha brings the heat on any brew method, at any roast level. Building on the wider history of Agaro, where an investment by USAID’s Technoserve project helped bring brand-new processing equipment to this previously underserved and undifferentiated region, Kolla Bolcha’s immaculate processing leads to an incredible showcase of the coffee’s natural potential for a ridiculously long time off harvest. The secret? After Penagos processing equipment mechanically removes most of the fruit and mucilage from the seeds, they soak overnight in fiberglass tanks, allowing any remaining sugars to be fully removed from their surface so that the coffees are perfectly clean by the time they hit the drying beds for the eight-plus days they’ll need to dry.

Since its inception, Kolla Bolcha has been a Red Fox staple, a perfect representative of everything Agaro has to offer. It’ll go fast, so get in touch now to pick some up. To learn more about Red Fox and Agaro, read about it in our journal.

Paying for Coffee—It’s Complicated: Part 4

Part 4: Not Just  What You Pay, But How You Buy

Historically, many have viewed importers as middlemen, a gateway through which coffee passes on its way from the farmer to the roaster, adding nothing much but hassle and costs. While the direct trade movement has done a lot for promoting healthy supply chains in specialty coffee, it has inadvertently reinforced this narrative, downplaying the role of importers in sourcing, logistics, and overall quality. Depending on the importer you work with, they can play a major role in your coffee’s quality from start to finish, and when you buy coffee from an importer, you’re also buying into their supply chains and the roots they have—or haven’t—put down in a particular region.

How Does Your Importer Set Coffee Prices?

Many importers fix their prices around the C market, paying a certain amount over it at any given time. It’s good to ask if your importer does this or not, because the C market is extremely volatile; importers who price coffee that way may beat the C market price, but they’re still subjecting producers to a fluctuating income, leaving them vulnerable to not recouping their costs in a given season, much less being able to reinvest profits into their farm.

Other importers pay just slightly above average baseline rates for the lower quality brackets they purchase, then pay out premiums for higher quality brackets in an attempt to incentivize higher-quality production. It’s important to remember that no matter how talented most producers are, the main bulk of what they produce will still live in the lower quality brackets, so the baseline price an importer pays is essentially who they are as a coffee buyer.

At Red Fox, we see our prices as a key part of our sourcing strategy, allowing us to access the best producers and producing groups while allowing them to do their best work year after year. To do this, we set our baseline rates not against the C market and not against the local average, but at a rate that incentivizes producers selling their coffee to us rather than someone else, which benefits all parties. Beyond that, producers also receive quality premiums for higher-scoring lots, allowing them to allocate resources toward producing special microlots without being afraid to lose money in the process. Since we also think of this as a retention strategy, we pay more to producers over time, especially when their work is stellar. For a frame of reference, the average FOB price of our coffee in 2018 was 200% above the Fair Trade floor price, and the highest price we paid for a coffee in 2018 was almost 700% above the Fair Trade floor price.

How Does Your Importer Build Supply Chains?

One of the things that’s important to know about your importer is how they work within a supply chain. While the myth of the importer as useless middleman is largely just that, that doesn’t mean that all supply chains are created equal, and it’s important for importers to speak honestly about the role they play.

Many importers, especially ones on the smaller end of the spectrum, receive samples from exporters, cup them, and buy their favorites. While this is a perfectly legitimate way to buy coffee, it doesn’t take up nearly the same amount of time and energy that it takes to seek out new farmers and try to close gaps in market access. It also doesn’t constitute the same investment in developing resilient supply chains.

If that investment matters to you as a consumer, it’s important to talk to your importer about how they buy coffee; things like how much time they spend at origin, what they do when they’re there, who hosts them when they go, who coordinated the hosting, will give you some clues as to how vested they are within a region.

At Red Fox, we work very particularly in regions where we can work within our ideal purchasing model: deep investing in regions that are hard to reach, that have historically lacked market access and differentiation from the larger pool of regional coffee. While we’re very much focused on curating quality, we’re also deeply embedded in the supply chains we work within.

How Does Your Importer Add Value?

When you think about the price paid to the producer, it’s important to think about what kind of value an importer adds to the producer’s work.

For instance, at Red Fox we spend hours each day cupping samples. We might cup hundreds of samples to put together a bulk regional lot, separating out extra high-quality offers along the way and reporting our results back to each producing group. To make sure our cupping protocols are accurate and unbiased, we use a double-blind cupping system called signal detection where samples are randomized with multiple cups placed apart from each other on the table. To make sure our roasting protocols accurately represent every coffee that comes through our door, we do countless Ikawa experiments, tweaking our profiles constantly in order to find the profile that will show us who the coffee really is. And, once coffees arrive at the warehouses we work with, we taste every coffee every 30 days for as long as we’re in our position to track their quality over time and use the information to keep getting better.

Beyond that, people may not find logistics very exciting, but they can have a huge impact on quality. It takes a lot of work, but we make sure that coffee gets from origin to here in as timely and direct a manner as possible, ensuring that it lives up to its full quality potential from start to finish.

Importers come in all shapes and sizes, and even more than asking how much a producer got paid, it’s critical to learn about yours and how they work.

To learn more about the complexities of coffee pricing, take a look at Part 1, Part 2, and Part 3.  Stay tuned for part 5, which will cover how to ask an importer the right questions to make sure your purchases fit your values.

By: RJ Joseph

 

New Fruits You Should Try: Nariño and Inzá

If you haven’t bought Colombian coffee from us yet, the time is now. We have delicious, versatile coffees from Nariño and Inzá on both coasts that shine on the cupping table and absolutely stun at production roast levels. Just as important as their quality, Colombia is home to some of our oldest relationships, and these coffees represent the absolute best of what community leaders can do from a local to a global scale, in terms of both impact and quality.

Our relationship with Inzá-based ASORCAFE dates back to 2006, when Geovanny Liscano farmed just one hectare of land with his wife and father. The coffee was superb and the infrastructure was humble, but over time, Geovanny reinvested profits back into the land, bought surrounding plots, and built up processing infrastructure into a thing of beauty for the whole community. ASORCAFE is incredibly well-organized with a laser-focus on ethics; they don’t allow corruption in their ranks, and this value shows in the cup. The coffees they produce are some of the most complete coffees in the country, bringing to the table a succulent sweetness, a juicy, ciderlike mouthfeel, and bright, clean acidity that can be malic, pear-like, and even kiwi-like. They’re perfectly structured and essentially flawless.

In Nariño, we’ve been inspired since 2007 by FUDAM leaders Raquel and Jeremias Lasso. With soaring altitudes and ideal varieties, the quality was always stunning; even more importantly, Raquel is an innovative leader that inspires the best work from her community and gives it in return. More recently, she’s formed a group within FUDAM called Manos de Mujeres, focused on the empowerment of women growers within her community, with projects ensuring they see a fair 50% of farm profits and a goal of opening an organic fertilizer facility. Currently in the process of becoming certified Fair Trade Organic, FUDAM is a perfect example of how community investment can and should represent an investment in quality. Flavor-wise, we see Nariño as the proverbial fruit basket: the best lots run the gamut from ripe, succulent stone fruits on the yellow flesh side (peach, apricot, nectarine) to tart, refreshing white grape and Granny Smith to perfectly sweet citrus of the most coveted varieties (tangerine, satsuma, and even sweet lime).

We have a ton of history with these coffees, and we want you to as well. Flavor profiles are diverse, so get in touch and we’ll help you find the perfect coffee for your menu.

Paying for Coffee—It’s Complicated: Part 3

Part 3: Sustainably Meeting Costs—Why Context Matters More than Numbers

Without context on cost of production and other costs throughout the supply chain, the price paid for coffee is just a number. Think of it like rent: if I told you what I pay for my apartment, the number would be meaningless without knowing more about its size, location, and the general cost of space in my region. The same is true for coffee pricing.

The main factors that affect cost of production for producers are the size of the farm, the varieties and yields on a particular farm, transportation costs, processing costs, and the labor laws that govern the region. Towards the middle of the supply chain, similar factors apply over top of this, namely the costs faced by importers (often affected by their size and operating costs) and how much margin they make over top of those costs in order to sustain their business.

Farm-side, the size of the farm has a huge impact on cost of production. Most farming equipment expenses are fixed, costing a certain amount upfront regardless of how much coffee the farm produces, so large estates benefit from economies of scale that smallholder farmers (most of the farmers we work with) can’t access. On top of that, certain varieties yield more coffee per year than others, meaning that for the same amount of planting and harvesting work, farmers get a smaller volume.

Transportation costs also change from region to region, adding significant cost to producers in more remote areas (again, most of the farmers we work with), and similarly, milling and processing costs vary depending on producers’ setup and infrastructure.

Last but not least, labor laws have a huge impact on producer costs: for example, in Ecuador where all full-time employees are paid a minimum wage in addition to health care and paid time off, costs of production (rightly) go up.

Towards the middle of the chain, size and operating costs have similar impacts. Smaller importers face higher overhead through lacking the same economies of scale; for instance, importers who don’t have their own warehouses pay for warehousing through third parties, costs that are significant and that larger importers don’t incur.

Another factor that affects overhead is how much work goes into coffee selection. For instance, since we work primarily with smallholder farmers, we might cup through as many as 250 samples to form a container, whereas other importers will have cooperatives or producer groups bulk smallholders’ coffees into larger representative samples and may only need to cup one sample to put together one (or even more than one) container. On top of that, just like producers, importers have to set a margin around total costs so that they have money afterwards to pay other expenses and invest back into their business.

To learn more about the complexities of coffee pricing, take a look at Part 1 and Part 2, stay tuned for part 4, and part 5, which will cover the diversity of purchasing models and the influence they have on cost, and how to ask an importer the right questions to make sure your purchases fit your values.

By: RJ Joseph

Paying for Coffee—It’s Complicated: Part 2

Part 2: Farmgate, FOB, EXW, and Beyond—Terms for Pricing and the Factors that Complicate Them

When people in the coffee industry talk about green coffee pricing, they use a variety of terms that can often cloud how much buyers actually pay for coffee at various stages of the supply chain. Because no official term acts as a standard point of discussion, it’s important to unpack these terms and the context they require for proper discussion and build a shared lexicon with your importer.

The main terms used for coffee prices are farmgate, FOB, and EXW, which refer to prices paid at different points in the supply chain.

Farmgate price is a general term for what the farmer actually makes on the coffee after the exporter takes their cut. When accurate and based on solid data, this number is helpful in understanding whether or not producers are making ends meet, but unfortunately there are no official standard for determining farmgate price—often, when you ask people for the farmgate price of a coffee, the answer you get is actually the FOB price (defined below) inaccurately framed as the price the farmer got paid, or a general estimate based on an adjusted FOB, which can present various levels of accuracy about what farmers are actually making.

Unfortunately, since this isn’t standardized, asking for farmgate price doesn’t guarantee that you’re getting a number accurate to what the farmer made—much less once you factor in context of cost of production (which we’ll cover later in this series). For this reason, it’s critical to build a shared lexicon with your importer and make sure you’re having the same conversation.

FOB price stands for the free on board price, which means the price of the coffee at the time when it’s delivered to the boat at the port of origin and ready to ship. This is the most commonly used payment term between importers and roasters, but it doesn’t tell you how much the farmer got paid, nor does it tell you about costs incurred by the importer once the coffee lands.

EXW price stands for the ex-warehouse price, which means the price when the coffee gets delivered to the warehouse in the country of consumption. Between the port of origin and the warehouse, the coffee has to land at the port, go through customs, and enter the warehouse. Since each of these processes costs money, the ex-warehouse price is higher than the FOB, further from what the farmer got paid but slightly closer to an actual cost estimate for the importer.

Each of these terms constitutes an important piece of the coffee pricing puzzle. If someone gives you a farmgate price, do you know what their process is for determining that number? The accuracy of their answer hinges on this question. Or, if you know the FOB but not the EXW, you may not have a good idea of how much warehousing and domestic transit costs affect smaller trading companies as opposed to giant multinationals. This, too, is an important piece of the puzzle of how much the producer got paid and how those costs echo up the supply chain.

To learn more about the complexities of coffee pricing, take a look at Part 1 and stay tuned for parts 3, 4, and 5, which will cover the importance of cost of production in coffee pricing, the diversity of purchasing models and the influence they have on cost, and how to ask an importer the right questions to make sure your purchases fit your values.

By: RJ Joseph

Three Forests: The Guji Uraga Story

At some of Ethiopia’s most extreme altitudes lies Guji’s Uraga region, a dense, mountainous forest that spans almost a thousand miles. Within this huge forest lie three smaller forests, and from these three forests—Yabitu Koba, Larcho Torka, and Harsu Haro—come some of the most extraordinary and sought-after coffees on our menu. These coffees are coming in soon, with our first containers having arrived, and they’ll go fast, so if you’re interested, get in touch.

Despite the incredible quality found in Guji Uraga, you wouldn’t have found these coffees on the market ten years ago—at least, not as Guji. Back then, Guji coffees lived under the Sidamo subhead, and the stellar coffees of Guji Uraga were trucked across the border into Yirgacheffe, where they could find a slightly higher price due to better name recognition. In 2010, Aleco tasted these coffees and recognized that they were unique, second to none, and worthy of differentiation. Now, eight years later, the three forests themselves and the distinct coffees within them deserve their own differentiation.

In Southwest Uraga lies the smaller Ugo Begne forest and Yabitu Koba village, where the Hana Asrat washing station produces a truly singular coffee. Managed by lifelong coffee trader Feku Jebril, Yabitu Koba brings with it incredibly ripe red fruits, blazing acidity, and classic Ethiopian florals like bergamot and jasmine. Originally hailing from Dilla, Gedeo’s capital, Feku sold the huge wet mill he used to own in order to move deeper into the forest, managing coffee production at Yabitu Koba with a laser focus on quality.

Heading northeast towards the center of Uraga, sky-high at 2510 masl, lies Larcho Torka forest. Managed by Feku’s brother Abdi Jebril, also a lifelong coffee trader, Larcho Torka coffee brings with it elegant flavors of candied lilac, a balanced lemonade acidity and dense, sugared sweetness. Abdi’s work at Larcho Torka is characterized by the same quality focus as Feku’s.

Towards Northeast Uraga lies the smaller Bire forest, a newer producing area where the coffee trees are young, only four to six years old. High up in the mountains at 2300 masl lies the Harsu Haro washing station, producing a coffee that offers the dense sweetness of raspberry and currants and the ripe, balanced acidity of clementine and yellow peach.

In all three forests, absolutely meticulous processing puts its signature on these coffees: first, they pass through McKinnon depulpers, then move into washing channels where they lose the rest of their mucilage. They move into soaking tanks for another 12 hours overnight, and in the morning, they’re laid on drying beds for eight to ten days.

The next step is key to the incredible shelf-life of Guji Uraga forest coffees: after drying, they move into the warehouse and rest for a week after drying to condition and stabilize. After that, the washing station teams hand-sort through the parchment, selecting only the cleanest coffee. Because of their incredible potential, consistently realized through meticulous processing, Guji Uraga Forest coffees not only come in sparkling, they continue to bloom and get even better over the course of the year. In coffee, there are two ways to do business: produce the most coffee, or produce the best, and Yabitu Koba, Larcho Torka, and Harsu Haro produce the best. These coffees will be here before you know it, so get in touch.

Paying for Coffee—It’s Complicated: Part 1

Part 1: Paying for Coffee—It’s Complicated

“How much did the producer get paid for this coffee?”

This is a question we’re excited to be hearing more of. Thanks to an epic and sustained dip in coffee’s C market price, more and more roasters are thinking about how much it costs to produce coffee and wondering if the producers whose coffee they work with are meeting those costs.

While it’s crucial that roasters interrogate whether or not producers are getting paid enough to survive and thrive, it’s even more critical that the answers they get are informed by the proper context. While asking about prices paid to farmers can be a great place to start, without the frame of reference about those farmers’ costs, how the importer is calculating that number, and what the middle of the supply chain looks like, those numbers can be all but meaningless. For real change to come from this conversation, we need to unpack the context that informs what coffee prices actually mean: we need to go further.

In this series, we’ll talk about why coffee pricing is complex, why context matters, and why it’s important to go deeper than asking for farmgate price.

In Part 2, we’ll talk about the terms for pricing coffee and the factors that complicate them: the meaning of farmgate pricing, the real numbers that underpin it, and the impact of shared lexicon—or lack thereof—on discussions around pricing.

Part 3 will discuss cost of production and sustainability, as well as why context often matters more than numbers.

In Part 4, we’ll talk about purchasing models and why what you pay sometimes matters less than how you buy.

In Part 5, we’ll explore how to ask the right questions about how coffee was priced and get real answers about your importer’s purchasing model.

As coffee lovers, we need to continue having that conversation and delving deeper; it’s absolutely critical to the future of coffee. To do that, we need to unpack all the context we can on what these numbers really mean, so that consumers at all levels of the coffee industry are able to make informed decisions about where their coffee should come from.

By: RJ Joseph

Newsletter: Ethiopia Agaro 2019

Agaro’s Back and it’s Better than Ever

It’s time to get excited about Ethiopia, and right now it’s all about the coffees we have coming in from Agaro—not just because they taste amazing, but also because they’ll be here soon, first of all our Ethiopian offerings.
Agaro coffees have always formed a core of the Red Fox menu, but our relationship with Agaro extends back far before Red Fox was born. Back in 2009 when Aleco first traveled to meet the Yukro, Duromina, and Nano Challa cooperatives, their coffees were flowing into the marketplace undifferentiated and undervalued. Once USAID’s Technoserve project, which focused on improving African coffee farmers’ lives by helping them get better prices for their coffee, established these washing stations, Aleco saw the unique character of these coffees and invested in developing relationships with their producers, which have grown stronger to this day. Two years ago, we were excited to welcome Kolla Bolcha, a newer cooperative neighboring the Biftu Gudina cooperative, into the Agaro family. All of these coops live under the umbrella of the Kata Muduga cooperative union, whose leadership makes all these coffees possible.
This is an especially exciting year for Nano Challa and it’s new sibling mill, Nano Genji. The members of Nano Challa have historically produced one of the most, if not the most, coveted coffees in all of Western Ethiopia. Doing such a great job with production & process has lead to receiving tremendous premiums, swelling membership to a level that pushed their capacity as far as it could go. This year, they opened a new facility a few miles away with brand new Penagos equipment along with dozens of drying beds to accommodate their growing membership.
While these coffees all hail from the same region, the Agaro portfolio offers an incredibly diverse array of flavors. At their most iconic, Nano Challa and Nano Genji bring an intense, lively sweetness like candied ginger and a sparkling, champagne-like finish, whereas Kolla Bolcha is perfectly complete bringing ripe red fruit character (think cherry, currant, etc), a heavy cola sweetness with a lustrous, honeyed mouthfeel. Our Yukro offerings are juicy and refreshingly tart like currants, both red and black, while Duromina offers ripe, sultry melon and apricot sweetness tied together by vibrant Meyer lemon acidity.
These coffees are special, and we want you to try them. We’ve worked together with Asnake and Efrem, Kata Muduga’s leadership, for ten years now, which affords Red Fox first right to lot selection. With mighty effort from our strategic trade partners in Addis, we ship these lots first as well—so, look for the first Ethiopian containers arriving on the east coast March 15 and on the west coast just a few weeks later. Get in touch with your contact over here, or reach out to info@redfoxcoffeemerchants.com to book some!