Fewer links this week...disappointing I’m sure

The flip side of the world market is the local market. Here in Oku, we talk a lot about the world market. Farmers ask me very frequently what is going on with the world market or how the world market is affecting the price they are getting for their coffee. This is part of the reason I made myself write last week’s post, so that I would have something to say to them on that point. So far, my line has been essentially what I wrote before: Two bad years for South America raised the price and now an exceptional harvest is putting the price back down, but not so far as it was in the middle of the naughts, so let’s not be too discouraged, especially since demand is consistently outpacing supply lately. This seems to fly pretty well and leaves people satisfied if a little befuddled.

At the start of the buying season (that is early December or so), there was a lot of speculation in Oku. Many freelance buyers were offering prices from 800 to 1,000 F per kg (about $1.50 to $1.90 per pound). My guess is that they were basing their speculation on the prices of the past two years, because in the meanwhile the world market price was already very low, about the same as it is now (around $1.50 per pound), so these guys were setting themselves up for disappointment. In the same period, we hadn’t yet given a price per kilo because we were sitting on our hands waiting for the bigger players in the area (the Cooperative Union and OLAM-CAM) to call the tune and they were similarly dragging their feet, presumably because they didn’t want to open the season with a very low price.

Finally, after much anticipation, the Cooperative Union announced their starting price as 700 F per kg just in time for my return to the country. This signaled to us that we could go ahead and name our price and we did, starting at 725 F per kg. Our line has been that we are trying to get the coffee we need as quickly as possible, which is why we are offering the extra 25 F (which amounts to about $4 per bag of coffee; not nothing) and this is mostly true, but we have the ulterior motive of just wanting to give the farmers growing coffee in Oku the best price they can get without undermining our own business. So now we have some local competition, which is great, and makes the work here kind of exciting. One result of the competition is that the Cooperative Union raised their own price to match our own. I can only assume that this move was spurred by our work because there have been no significant changes in the world market price and from what I’m seeing farmers have been willing to sell, even if they grumble a bit at how the price has dropped since last year.

Weighing in at 85 kg, were he full of coffee, Cassman would fetch $130

You may be wondering why we are taking our cues from the Cooperative Union, when maybe we could afford to offer a higher price for coffee while still doing right by our own company. I’ve wondered the same. But what experience has shown us is that if we do set our own price without consideration for the other buyers in the area we can get ourselves into a heap of trouble both from those other buyers and farmers. Obviously the other buyers aren’t going to appreciate us inflating the local price. While we are buying farmer direct, they are selling onto the world market and thus they wouldn’t be able to match the price we could offer. And while we aren’t buying enough coffee to purchase everything produced in Oku we are buying a significant enough portion that we could severely undermine their business. Doing that could ultimately reduce the competition in the market that has been developing in Oku in the past decade and it is that competition that should support the farmer’s more than anything we can do as a single entity. On the other side of the equation, since we cannot buy all of the coffee in Oku, our inflated price couldn’t be extended to every grower which would lead to undesirable discrepancies in how much one farmer got for his coffee relative to his neighbor. This is a community/social concern. While we don’t necessarily seek to support existing power structures, we also don’t want to wantonly unbalance the egalitarianism that exists between small scale coffee producers here.

I’m certainly not going to claim that this is the perfect approach, and if the last paragraphs ring as me trying to justify something that isn’t quite right...well maybe...but we’re sincerely working on this. One way we are working on it is through the organic certification process. Given the limitations above, the organic certification provides something of an out for coffee pricing. By diverting organic coffee into its own marketing stream where we are the only player we have much more freedom in defining the price without upsetting other local interests (As above, if Cassman were filled with organic coffee he’d get $148, not too shabby). At the same time, we can’t include everyone in the organic program immediately and we still have to deal with that problem of neighborly egalitarianism so we can’t get out of control.