As coffee prices have increased in the past 18 months, more customers have inquired as to what goes into the price they pay for their roasted beans. Let’s take a look at the most common questions and determine what really goes into the cost of green coffee.
1) What is the NY US “C” futures price that coffee is traded on? The NY “C” price is based on the commodity market on any given day. It is the base price used for coffee purchasing. We then pay a differential, which is added to the overall “C” price.
2) What is a “differential?” Differential is the difference between the base, or “C” price of the green coffee and the final price that we pay. Differencial is determined by the coffee broker, the farm, or the country of origin, and is based on the quantity and quality available, in the long and short term.
3) What costs are involved in getting the beans from the farms and ports to our roasting facility in Raleigh, NC? A carrying cost is added for any contract that is purchased over time, to cover storage in New York, insurance on the coffees, etc. Often it is represented by 3 – 5 cents per pound, green. To ship coffee from a farm to the US, insurance must be purchased for the coffee. It is then sealed into a shipping container and goes through customs and port authority just like any other inbound shipment. Then it is unloaded, palletized and brought to storage facilities for a fee.
4) What factors cause the “C” and/or differentials to change? Outside commodity trading effects the “c” price of coffee. For example, if oil increases, so do transportation costs. Weather also plays a big factor – most notably weather in Brazil, since it is the largest producer of coffee today. Crop forecasts and predictions in Brazil, Colombia or even Vietnam can affect the overall “C” price of coffee. Let’s say an origin country is experiencing months of poor weather conditions and social strife. Economic forecasters can probably assume that coffee production would be less than what was expected and what consumers demanded. The shortfall would likely drive the “C” price up.
5) How does the quality of the coffee affect its price? The better the quality, the more work is involved during harvesting, processing, etc., therefore the differential is greater and thus, the coffee is more costly.
6) How do certifications (Organic, Fair Trade, Utz, etc.) affect the price of green coffee? More effort is involved in certifications, and the costs of certification agencies add into the overall price.
Also, keep in mind that one pound of green coffee typically only yields around 3/4 of a pound after roasting.
Mike Adams & Brandon Riggs
Stockton Graham & Co.