With the commodity price of coffee dropping to the lowest point in 14 years, what is Volcano doing to support Arabica farmers in Brazil?
In 2018 Brazil produced an all-time record crop of some 60million bags (3.6 million tonnes) of coffee. While the coffee market remains unregulated, this has caused the market to become over supplied with Arabica, resulting in the commodity price for coffee (New York price) dropping to its lowest sustained point since December 2004. We predict the market will stay in a trough through 2019.
This means hard times for some small holder producers who are selling to traders in local markets. However, at Volcano we are working with export partners to secure fixed-price models well above the fair-trade price (currently $1.40 p/lb) in order to protect producers from this market volatility.
VOLCANO IN BRAZIL
We purchase our Brazilian coffees (80 tonnes each year) directly from the producer co-operative Minasul.
The quality of Minasul's coffee is very high so, in 2018, we are paying premiums of between +60c and +100c above our standard fixed price per lot .
The quality premiums we pay are determined based on commodity prices. So, while the market stays low, this actually means that our margins will improve in this supply - freeing up cash to purchase in other origins where cost of production is much higher than Brazil.
TAKING ON NEW PRODUCER GROUPS
As a part of the containers we are buying, we have added a new producing group called AMECAFE.
The group consists of 50 female farmers, who all hand-pick at 1400m (both of which are rare in Brazil). Historically they have been selling to local markets and would suffer significantly from this market drop. We have offered to purchase a full container at the Fair-Trade price of $1.40 F.O.B as a baseline price while absorbing all risk as a show of trust for what we intend to be a long purchasing relationship
This commitment will make a big impact to this producing group, and Maria (sales director for Minasul) was “profoundly moved” to hear we want to make this commitment.
We will be setting up a system to trace our premiums to the group, and some of our team will be visiting the group in October in order to establish objectives for 2019 harvest.