This is the first installment in a Q&A series with Laura Perry. (Link to the second installment is at the end!)
We did the q&a over Instagram DM in Sept 2018, and shared the convo via screenshots.
Laura Perry is the founder of LÜNA Coffee. She has happily spent more than a decade of her life in specialty coffee in Canada. Before starting LÜNA, she was the green coffee buyer for 49th Parallel in Vancouver, BC.
What actually is it ??
Umeko: Hi Laura, thank u so much for doing this q&a!
Laura: Of course!
UM: So to start - in layperson's terms, what is the c-market price for coffee?
LP: The c-market price for coffee is the base price per pound of unroasted coffee that is traded internationally. This price is decided via the stock market and is largely based on yields in larger markets like Brazil or Vietnam (large players in commodity coffee).
UM: Ok so the main forces that cause the c-market to rise of fall - those would be yields in countries that produce a lot of commodity coffee? Can u tell me more about that?
Like if there's a smaller yield than expected, or a larger yield, how does that impact the market price?
LP: Yeah, it's supply and demand, in tandem with market speculation. In no way is this price determined based on quality or cost to produce.
Market flooding from Brazil is the main reason.
For example, the last time the price dipped below a dollar, in the late 90s and early 2000s, Vietnam flooded the market with plentiful robusta. This led to extreme poverty and a lot of death due to malnutrition and loss of income amongst the over 25 million coffee producing families worldwide.
UM: That is horrible. I didn't realize the extent of the damage caused by something like this, it's horrifying.
$1 per lb, Past and Present
UM: So we're talking about this because recently the c market price dropped below $1/lb again. Can we expect similar fallout? How long can we expect before the price recovers?
LP: I'm not sure if you'll be able to make that larger and post separately (*chart posted above*), but that's the C market price over the last 40 years or so. Just to get a sense of how volatile this really is.
Last time the price hit below $1 it was horrific. This time around, we're dealing with leaf rust, and lack of labour in the coffee lands.
Partly, the c market price of coffee is also tied to the valuation of the US dollar, so there's another factor to consider.
With climate change on top of that it's difficult to say if there will be recovery in time - there's a lot of uncertainty.
UM: Right, that makes sense. And that's really scary.
So just to make sure I understand - the recovery time would be impacted by leaf rust and labor shortages? As well as climate change and the valuation of the us dollar.
LP: Well, for most small holder farmers I know, their main problem is lack of people to help them pick coffee. Everyone is headed for cities where they can get better paying, more stable work. People are abandoning their farms. It's happening in El Salvador en masse. This c-price isn't helping, it's below the cost of production.
It's all those factors at play, yes.
How Do We Stack Up?
UM: Right, that makes a lot of sense. Looking at that chart, it seems like the c price has been p stagnant at an average of around ~$1.50 since like 1975? Am I reading that correctly / is it adjusted for inflation?
LP: Astonishingly this isn't adjusted for inflation.
UM: So - ok wow. On its own that is a huge problem, since the cost of production most certainly has gone up.
How does this compare with other commodities?
LP: Coffee is oddly kept at a volatile and low price compared to other commodities.
If you look at the market price of other things like legumes, sugar, and other staples, there are obvious ebbs and flows with supply and demand.
But coffee is a very time and resource intensive crop compared with a lot of others.
The specialty coffee sector aims to help with this volatile pricing, but there are some problems that we need to work through together.
UM: Thank you for bringing that up because I wanted to talk about that too!
Specialty Vs. C-Market
UM: So to compare to the c-price -
and I know this a pretty complex questions w a lot of factors so I'm sorry! -
but what is the average price range that a specialty company pays per lb for coffee?
LP: Ok that's where it gets Very Very murky.
For Specialty, many companies have a large weighted average geared towards espresso, and 99% of the time, the price paid is lower than the filter, or more high end drip lots. Often, $2.80 FOB (price paid to an exporter, this is without importing costs) is a common price for "blenders" or espresso focused lots, and $3.50 FOB or higher for more filter focused coffees.
How Transparent is Transparency?
LP: The trouble is, there are loads of well meaning people (roasters, etc) who believe they are doing the right thing and paying a higher price for coffee - but a huge portion of the price they pay goes to an importer or boutique sourcing company. I'm not saying these companies are bad - In fact, as a smaller roaster, I need to rely on these folks to get access to the coffees I need - But I am saying that people see the high price and think that most of that is going to a producer.
It's Critical for everyone to inform themselves and ask how the prices are broken down. It's up to us to hold people to task and get a hold of the people who are on the other end of the chain, to confirm that they are being paid what you intended, and in a timely manner.
UM: Tbh I would love to do a whole other q&a on how to go through that kind of process!
LP: That would be great!
The C-Market Affects Everyone
Another thing to consider is the fact that Specialty coffee is a TINY player in this. It's important that we continue to grow our market share, but please know that for 100% of farmers, this C-market price affects them. No matter what. For a producer I've been working with in Colombia over the years, 70% is sold as specialty (thats an abnormally high %) but 30% of his coffee is still tied to the C. This affects everyone.
UM: Thank you so much for that reminder.
UM: So I just learned A LOT. The c market price drop impacts so many millions of people, and we've seen horrific damage result from this in the past.
So this is a super broad question, but are there any solutions out there? What would help this? Or at least mitigate impact?
LP: I think talking about it as a specialty coffee industry would be a very good start. Our trade organization, the SCA has come out with a sttement regarding this crisis a few days ago, and my main takeaway from their statement was that we knew this was coming. For many years we know, but continually we'd look the other way. As a consumer or cafe owner, don't be afraid to ask questions of the roasters you buy coffee from. It all starts with having discussions like this one.
UM: Thank you so much for that. And I would really love to do a q&a on that soon! Like - on how that process works, how to questions, and who to ask.
Thank you so much for your time Laura! I know u probably have to get back to roasting and a million other Luna things. I really appreciate you, and I always learn so much from you!
LP: We're roasting tonight in fact 😊 thanks so much Umeko!
The third installment is here.
The fourth installment is here.
LÜNA Coffee is online at enjoylunacoffee.com
and Instagram at @enjoylunacoffee
Umeshiso is on Instagram at @umeshiso_