SCA Sustainability Webinar Farm Profitability and Prosperity #3

all right well thank you all for being on this webinar welcome my name is alena Ionescu I'm the chief sustainability officer for the Specialty Coffee Association and today I'm really excited to be here for our third webinar on the topic of farm profitability and prosperity I as I've done in the past I will introduce our moderator who will then introduce the panelists and begin the discussion but before we do that I just wanted to let you all know as webinar participants that as you may pardon the announcement you're in listen-only mode so if you have a question for the panelists you may direct that to any one of them using the question function in GoToWebinar so if you type in your question I'll be managing the chat and directing those questions to vera and to the panelists we may run out of time if we have a lively discussion and a lot of questions we may run out of time before we're able to get to all of those but in the case that that happens I will follow up afterwards and make sure that your question gets to the appropriate panelists or to the entire panel and we'll post the responses to those questions on the SCA news coffee page that includes they will also include a recording because this session is is being recorded so with that I think that I've got the logistics out of the way I'll introduce Vera española Raphael who works in sustainability and shared value for a cigar fly in Mexico is a longtime volunteer for the Specialty Coffee Association and leads the farm profitability and prosperity working group within the sustainability Center so um Bharath thank you so much for for moderating and I'll leave it to you Thank You Kim good morning to everybody this is the third webinar I should just said the volunteer group has been working quite hard I'm trying to put this topic on the agenda of on how can we discuss about this topic and how can we approach ideas and proposals of people the industry of the sector and in a wide arena and what we found is that these webinars has been quite productive because were able to discuss it in a very open way in a very transparent way and people have really signed up so we really appreciate for everybody that is now tuning in and being part of this conversation having said that we invited these three individuals to this webinar because we believe that they have strong opinions about the matter and opinions that can help us digest the issues that are happening currently and what is happening is is the the implication of the volatility of coffee prices today the coffee market woke up to one point eleven dollars per pound still for many they believe that's under the cost of production of of coffee farming so it's definitely a continuous discussion I would like to ask each of the panelists to introduce briefly in themselves Iranian I can I start with you Yvonne yeah I cannot hear you now yes all right so first of all thanks to everyone for joining this webinar and it's a pleasure for me to be here and share some information about what we are doing and how the coffee prices are affecting our farmers and this is a challenge that everybody at the coffee rationed production has so forgotten me I started I had a love Ally 2007 so right now I am in the specialty coffee tea permit under Louisville is a farmers association that started 19 Edition and got into the pocket business back in 2000 and having steadily growing every year and right now we have over 11,000 members and from those 4700 are small coffee farmers so for me it's a very good to be part of this webinar because as one brutish but one of their conscience that is producing coffee right now we also been affected by the low prices thank you so much Vanya Paul are you can hear me okay yes yes thanks for inviting me into the webinar I work with Catholic Relief Services and I've been based in El Salvador for almost 10 years and I've been involved my expertise is in water resource management and my participation in the coffee industry the coffee sector started with looking at water resources management and how coffee production impacts on a lot of resources in many countries including El Salvador throughout Central America and many countries in Latin America and our recognition that good coffee management equals good watershed management and and so we've been working on that and and then through that we've been working with people on marketing coffee and trying to find prices that help farmers implement the good agricultural practices that are necessary to restore their farms to restore their soils and manage their water resources and and that's where I started really paying attention to what's happening with funds with incomes and and then the volatility of coffee prices thank you Paul Peter oh yeah my name is Peter Roberts I'm a professor in the business school at Emory University since 2009 I been an academic director of a research center called social enterprise at galleta what we aspire to do from the beginning was take all the things that we think we know about how markets work when they're working well and turn our attention to places where markets aren't working particularly well didn't take us too long to find specialty coffee right there's a place where markets aren't working particularly well and particularly the the lack of correspondence between the prices that we're seeing in retail markets for roasted specialty coffee and the way that prices are determined at origin and so we've started a couple of programs ones for empowerment where we work with small women coffee farmers in northern BC agua and we try to kind of give them that incubator accelerator kind of experience to help farmers become entrepreneurs and then the other project will spend a bit of time on talking today is transparent trade coffee where we try to leverage the goodwill of a lot of the more progressive players and specialty coffee to try to make some of the pricing dynamics more transparent in the belief that if if pricing information is more transparent than will they will respond and react more appropriately and we'll talk about that today thank you so much Peter so I summon just mentioned you know the Margaret could woke up today at one point eleven even yeah my immediate question is always so how our current organizations dealing with the situation we're working on these reference price where gamma currently is in a harvest season starting its harvest season how is your organization managing the current price preference well it takes a lot of different strategies to do it and it's about the same working and the farmers association that is selling about one containers two containers now working on producers association that is largest in 2007 I remember we were selling about 30 containers of coffee and we're we're about 200 producers and right now 4,000 in 260 containers is a lot so we have to do many things to look for better price efforts for our members it's not the same quarantine a good price for 200 members than 4,000 so we have been doing this in many different ways for example how can we promote a coffee and differentiate for the rest of the coffee from Nicaragua because when we offer it to different clients with normally are competing not only Nicaragua but also with other producing areas and the problem is affecting everyone so one of the things we have been doing and that I want to share with all of you is how to develop direct relationships with Roasters and this is one of the ways we have been what I'd say in from one the quality number two a long-term relationship number three price risk management because when we do direct trade coffees the roaster knows where the coffee is produced and the farmer knows who is buying this coffee and it develops not only a commercial relationship like friend relationship because and the roaster get more knowledge about what is the cost of production what it means for a coffee farmer to produce that coffee how much effort they put into producing the quality and from the other side the farmer said nose was a quality the client is asking for well that's the the efforts they need to do to improve the quality every year and keep in this relationship for many years so that's one of the ways we have been doing it to be less impacted by that lower prices right now the other thing we have done is some of your coffee maybe small as factory not only coffee is soulless rich even when we are certified since 2004 another Coffee certified Fairtrade only about 30 percent of that is salt as for trade there's not enough market for fair trade coffees so we have to do different ways to select the other thing we are doing is promoting or coffee produced by all women peppers and how to link that coffee to social impact in the communities and that way the roaster semi-porous have more information about how a coffee is produced how they can get involved in the coffee communities how they can support the development of a community and how the price can work on a different way not only based on the new your seed prices when an after trade free trade that way to do the business so one of the questions that we already receiving to our chat and it's actually on one of the questions that I also wanted to ask you so currently from the members that you that there's other coffee um how much are able to sell above their craft of production if I have right now we had a study in the harvest mm-hm so it's difficult to get that answer for the current crop however last harvest we were able to sell about 85 percent of her coffee above the cost of production but if you remember last year then your seat price was it started when we had the harvest the price was into one point forty 1.75 sorry one 135 then England and slow us one 2119 115 but if we had different different contracts with tray contracts direct trade social programs specialty coffee or met coffees we have developed some brands for capital so that helped us to differentiate from the market and get more premium to warranty is minimal price for our members at least the cost of production however a second see for the current harvest it's turning more difficult because the first thing I'm saying this harvest is the sales for factory coffee's as being down this year if last year at this point of the time from all my selves were 40% for trade at this time we are have only sold about 5% oh my gosh yes because many of the wires are asking for more commercial three coffees lower prices coffee and also I think there is like a very hard competition between central coffees and a big production also fell but there's a lot of coffee in the market so that that's also affecting differentials for coffee so it's when I'm offering this price normally I receive an answer like you know Honduras is offering this price Colombia is offering a lower price or Peru who is offering this price I got some differentials at lower price so it's difficult to get the industry to work outside the newer si market is difficult to get them understand how can I sell you a sustainable coffee how can I sell you how can we say we are working sustainability in the coffee areas when if I asked you to warranty the production costs for all members to say no and to compare the new your sleepless a differential that is not too good for covering the cost of production mm-hmm so what is around the average cost of production for your organization's and and do you believe that in comparison to the cost of production in general in Nicaragua is it in the same range well for underlings core members are small coffee producers so the cost of production may be around 140 cents per pound and this is the same I'm hearing for Colombian coffee they are smoke of the universe – also in Guatemala I'm happy to put some producer from Mary Mallon and they say that range of cost of production is 135 140 cents per pound so and I am 19 that surprise a cost of production for most of the farmers in Nicaragua I have been choking so to some of them and they said if the coffee price would be 140 we are good enough to keep production the coffee and not losing any money have you have already heard about problems of finding enough pickers for the coffee because the prices are variable okay not right now not budget okay that's it okay so so coming back to that Ivana I mentioned the the C market the C price the contract said that are coming from that mechanism of C market I want to go back a little to it and not only focus the conversation on that market mechanism but it is an important one to tackle and I want to direct my question to Peter as a professor the business school I've been having quite some conversations and many ask me as well knowing my background in economics and that they asked me so does the same market work from a general perspective because many people also say it's what it's not working refer to Paul in a minute for that but so from from from from your perspective as a professor what is your response towards such a question so thanks so it's almost a too big a question is it working I think the you know the bigger thing is to try to sort of maybe organize that into kind of different pieces and starting with is it appropriate and I think the whole notion of KCK looking at all the mechanisms and Paul's done a great job over the last little while helping understand when you match commodity production to what's going on the commodity index there's a lot of problems there but in a weird way the you know the problems are all kind of localized I think the bigger problem for specialty and specialty coffee is just the sea price isn't appropriate is that if you're thinking about ways to talk about kind of how much a coffee producer a producer of specialty coffee should get paid the whole notion of going down and saying well the commodity price looks like this then we're not selling a commodity anymore when we're over in specialty and if you look at end part and end market dynamics kind of on the on the retail side for specialty coffee there isn't that day-to-day week-to-week month-to-month volatility there's a lot of a lot of variance in prices pay but the variance is due to things like you know how good is the coffee how good is the farmers story and so I think the issue for most of specialty coffee is not necessarily that kind of general question about kind of how weather markets work or not I think is the primary thing is the moment that someone goes from talking about I would like to produce you know to buy some coffee at some point in the future versus I want to buy your coffee then we're immediately at a fork in the road where we should have some other mechanism where we talk about what a coffees worth and it should be worth talking about things like you know how good is it how long they'll be been working together you know am i talking about 700 pounds or a container like there's certain things that should determine prices and and that's leads when we get to in a second what we try to kind of pick up with the transaction guide project is to just try to find that more appropriate set of reference points so farmers don't have to talk about see price and gonna have that weird notion of going how how different are you from commodity and then second thing to be painfully honest when you look at how specialty is sold I think farmers should be allowed to have you know a little bit of consideration on what happens on the demand side and not just the cost side so if on you I love the idea of saying a buck you can cover cost of production and that will be fine if I'm especially coffee producer I'm the child of a specialty coffee producer finds not good enough anymore right if dollar 40 is what it cost to produce good coffee but somebody's paying you know 15 20 bucks you know for the bank later on then we should be talking about what is an appropriate price that basically takes into account the fact that people love your coffee right and so so I think you know there the the issue of working or not I think should be secondary to an issue of is this an appropriate reference point or benchmark for specialty car and the answer is clearly no and and I think especially that that that's and I'm involving all went into this following what I will be saying is when it comes to the the the this the C mechanism we should just separate the ish the discussion between the C markets the commodity and the C market for specialty because they're from what I've been reading and what I've been having this conversation with people is that these are they're two separate things that we need to discuss because that will enable us to find solutions and strategy for each of these different coffees sort of say oh you've started this interesting blog series since is it already two months now and where you started with initially the discussion with the famouse five proposals briefly can you share with with the audience so what was this what was or what is this eFRAG raposa and what is your take on it at this moment 15 don't November I'll back up a little bit more and describe how I how I got into this in the first place and sure it's part of it is we're working with coffee producers large and small in El Salvador and throughout Central America promoting the best agricultural practices the ones that lead to more resilient production higher quality production and the types of practices that reduce run off reduce erosion and improve water recharge so very much from our perspective of blue harvest how do we promote those good agricultural practices that are good for water resources and what we know from that experience is that there's costs involved in that and so in the last couple of years working with the safe platform working with funding from the in American Development Bank what we've been looking at how do we connect these blue harvest producers to markets that pay the price that covers the cost so it's it's more than just the cost of production is the cost of production in a responsible way that lead to the outcomes that we're looking for and we've had some great experiences we've been working on price risk management what the microcredit and other partners looking at how we can help mitigate some of the price volatility but then this year that the price just was not recovering so we you know there was these predictions as the cost is going to that the see price is going to recover from 2017 there were predictions that it would recover and it it was never recovering and so probably six months ago I started asking what's happening how does this work what what is driving down the price of coffee people talk about the record production in Brazil talked about the devaluation of the Brazilian rail and start getting into it and trying to understand it but the more I asked the deeper that you know I was peeling back the layers it didn't actually make sense that there were some fundamental issues behind the the prices so so I I decided to dig in deep at with this blog series to try to understand this to provoke a conversation maybe to provoke some reactions to try and see if we could understand it and in the in the discovery part of part of the discovery was was seeing that the low price is definitely an issue probably a deeper issues is price volatility and that if you actually look at the price over the long run what we see is that the average price over the last decade is about a dollar fifty a pound and the average price over the last five years is about a dollar forty a pound but the price volatility within that is the thing that's really creating havoc in the market if I was a producer and I knew that people would be paying the average price coffee I could plan I can I could invest in my farm but if there's a risk that I'm gonna be making less than my cost of production then I'm really going to put the brakes on the kinds of investments that I need to do to make to invest in good agricultural practices to improve the quality and to really look for those markets those opportunities where I can sell add up at a premium and then and then that then then up that part where the see price a lot of the people that we work with are obviously not buying at the see price but the see price does have it bends the price down and so you know we feel good about helping facilitate a purchase we're roaster has bought at a plus fifteen because of because they're recognizing the good agricultural practices that the farmers are employing but but then the when the see price has dropped as far as hat it's completely wiped out any of those premiums so so does the the blog series was an attempt to sort of provoke this discussion and understand it and and it kind of comes from a perspective of I've been in this for long enough that I know I know enough to know that I don't understand but I know enough I know more than sort of a lot of people know about what's happening in the coffee market and so I can have conversations with people that kind of penetrate and and try and understand what's happening and I felt that the see price that there's a little bit of a black box in there or at least a dark gray box where not a lot of people understand what's happening with those mechanisms so in the evolution of this of the block series what's become clear are three things one is that the price volatility and coffee is extreme if you compared it to almost anything any kind of stock price you might look at or other other things that people are investing in or people that would be trading on it's it's extreme number two it's the farmers and the farm workers that bear the brunt of that volatility they that we work with farmers who depend on this annual revenue from coffee to cover a lot of their basic needs and so when when the farmers or worse the farm workers the get that annual revenue during the coffee harvest it really has an impact on their livelihoods on their health and and they start looking for alternatives when they don't have that including moving to the cities finding other jobs or joining caravan going north and that's you know there's definitely anecdotal evidence showing that there's enough people who are who are looking for work in in North America because the precisely because the coffee sector is in a bad state right now the third thing is that when we look at the value of coffee even when the market is good the rate that the portion of the value of coffee that you know that if we look at sort of the retail end the portion of that that goes back to farmers and farm workers is very small and so there's an inequality there's a structural inequality in the coffee sector especially commodity but not just commodity so the seed price the c-5 price was my sort of I'll say an amateur proposal because I I was talking about it informally with people and saying what do you think and and and the conversations were interesting and nobody was rejecting it outright and saying no this is this this is off the wall so the idea was to put it out there so the idea of a c-5 price is to say we have a floating benchmark where we look at what is the average price of coffee over the previous five years and we use that as a benchmark to start negotiations between buyers and sellers or producers and and and exporters and I I didn't and in the blog post kind of gets as far as I thought through that proposal and the idea was to spark some some discussion after all the series I there's I think it's I think it's still something to continue discussing the logic of looking for a benchmark that avoids the volatility or the froth that is in there in the in the sea price but I think that there's some other issues within the coffee sector that probably need to be dressed and are probably more urgently addressed or more deeply nor deeper issues that we should be discussing so can I can i from from the responses from Peter and from Paul connect can I um perhaps conclude that in general the see market works in in how it's supposed to work but that the coffee sector in itself have manipulated or have acted upon that for that reason we are concluding that well one of the things which you say and that has a tremendous effect on these countries fall is that's a proportion of the value that that the engine is received by the farmers is lower I would say structurally there's some structural inequality in there I don't know that anybody's intentionally gone in and said you know we're gonna manipulate the market for this purpose ed can't he in the last webinar put it very well the C price does not serve the industry very well and it doesn't serve the caught the farmers and the farmworkers very well clearly I also think because of the volatility you give a lot of mixed signals to producers because at this point you're saying coffees hovering you know they're around a dollar 10 it was at 96 or 97 cents a month ago you know if you're a coffee farmer you're gonna put the brakes on in any kind of investments because there's not a return on that investment and so globally we and and the trader the coffee traders and in their blogs and in their messages but there's you know they're they're predicting that there's going to be a scarcity on the market in the 2018-2019 and so expect some some spikes in the coffee prices and so so now you have people reacting in a completely different way introducing different kinds of risks into the market so if I'm a if I'm a coffee roaster if I'm a coffee retailer if I'm anybody in the coffee market I'd like to have some more stability within the market and and you know and partly inherently it's a it's a perennial crop that takes four to five years to mature from planting to harvest so I that what we should take in mind is that the see price is not a force of nature it's a it's it's constructed and and there's rules around it and I think what you're very worth looking at is how could the si market be constructed differently to sort of take out some of that froth and excessive volatility in the pricing that the market works the Brett market is good for price seeking you know it's it's health you know it avoids any kind of arbitrary price setting but the market is constructed it's got rules and everything that's traded on the stock market or any kind of exchange has rules and I think it's worth visiting the see price and seeing how it might be adjusted so later later in this webinar I'll provide what what I there are the ideas that are that are bubbling up that I think but maybe once we want to pursue yeah I definitely would like to go into that before I go into the transaction and with further Paul just a quick question you mentioned something very important you know I'll coffee at the end of the day it should be produced in a sustainable manner meaning should be including management of good a quality practices inclusion of course the work that you are doing on the water research management in the work that you guys have been doing when it comes to including all these elements have you have any data on what is the average of cost of production taking all those sustainable practice into consideration I would I would rely on on the some of the rigorous studies that people have been published recently so I think dollar $15 20 would be kind of on the low end of what it costs to produce coffee I'd say if you're putting in good agricultural practices you're probably getting up a dollar 50 or above but the variability is very wide the cost of inputs the cost of labor the constant producing coffee in El Salvador is is definitely more than the cost of producing in Nicaragua because of the cost of inputs and because of the cost of labor so I'd be careful about putting on on anything like stating a flat number of what is the concert yeah it's definitely Anna topic and I just also would like to encourage the the listeners there is a recent study of Roma cafe on the average cost of production for what the Millau Luis El Salvador and Costa Rica and there it hovers between 160 all the way to 200 and that was a fair extensive study and I can share later on to the website of ICA Peter when it comes to the transaction guides and and the elements with Ivana and Paul just mentioned so was that also the reason for you guys to gather together and form this initiative and perhaps you can see the next slide on who is involved in there as well you know so this is a shout out to my colleague tri Chad Trebek who's sort of brought in a weird where it made a fantasy practical because you know when I would try to continue on that conversation about you know if you kind of know when you're not in a commodity transaction and you're in a specialty transaction somebody's coming and talking about buying this particular coffee you'd like to not make any reference at all he had two commodity but the challenge always was you know you got to make reference to something so you have to channel what Paul says a market needs structuring but also the channel would have Anya says we got to think about pricing in a different way so Chad and I started talking and I said well what you'd probably want in the best case scenario is if everybody who engaged in specialty market transactions last year like would donate their data to some anonymous source they'll protect it and next year you would basically come up with a table that would summarize then what did typical prices look like at different quality levels different quantity levels from different countries and my prediction there my thought of the time was is you wouldn't you would get away from this notion of trying to find a price yeah for coffee because when you're in these highly differentiated markets you know people will say buying containers versus buying micro Lots is very different buying an eighty-two versus buying an 89 are very different you would see prices and it's only way Chad encouraged me to push this forward and you know there's a there's a simplicity in the transaction guide comp concept and there's a complexity the simplicity is what I do is just calculations the complexity is convincing folks that it's a good idea and donating data so I'm really really pleased that we've got positive responses from anywhere between twenty and thirty importers exporters and Roasters that participated in specialty market transactions last couple of years they've agreed to donate their data to Emory University with the idea that I would make sure that none of the individual information be revealed but we're starting to put together tables and the folks that you see on the slide in front of you are are like they're my favorite folks right now because it's it's hard to jump on an idea when it's just an idea but we put preliminary tables together nine data donors 55,000 contracts over the last couple of years it doesn't represent a ton but does represent 50 million pounds of coffee that were transacted and I just get to look at certain tables that sort of tell you that actually this this sort of hidden optimism in terms of kind of the invisible structure of part of specialty coffee looks exactly like you'd want it to look you get fairly good year-to-year stability kind of within each category and by categories that you know they sort of behave themselves so if you're kind of buying near a container and you're kind of in the low 80s range like median prices are kind of in the buck 90 you're kind of range if you go way up in quality and you go way down yeah and micro lots that are excellent you've got median prices that are more than double that now when we as we roll this out so the idea and this is where the human element comes in you know this exercise is not meant to tell people what prices should be it's just meant to indicate the people what prices have been but I was like say like the the sad part about the farmer and you know specialty coffee farmers so you're making that decision to you know to put more effort into it to be more at risk and you want to get compensated you know for it you know once you've made that shift yeah it's nice to have some sort of understanding that if I moved up in terms of quality or if I found you kind of you know more relationships that I can look at real pricing distributions I can target those things if we as a sector kind of collectively get together and say these are better places instead of forcing farmers to always go back to absolute zero and build the case up from commodity you know they can go back you know to the you know I'm in Guatemala I didn't you know 87 last year someone wants to buy a hundred sacks let's actually kind of start from where we were last year and we still negotiate up or down based on and to be honest my fantasy's down the road people who look at these things and they will say that's a much better basis to talk about where prices should go from here and then people who do specialty once you've made that turn right there still will be all the stuff that Paul's talking about that will dominate a lot of the coffee market but you'll have this much more visible kind of space where these prices are more optimistic for producers and I'll just say the other part when people talk about the next generation of coffee farmer you know not wanting to stay in the business I was like chuckled no one ever comes to business school to learn how to make minimum wage right kids don't want to stay in coffee if well we can talk about is cost of production you know but if I can talk about things like you can credibly develop a plan to add a dollar fifty you know green pound to your to your prices people get excited about being in coffee but but selling coffee is supposed to grow again so I'll stop there and hope that at least part of that make sense quick question and that's I think it's a it's from the audience and I'm trying to translate correctly to you Peter are they the question basically is if you have other examples of other industries paying appropriate prices for raw materials for likely the end products which you can act as a guide to especially coffee have you found any good yeah I mean in a weird way copies a little on the rare side in the sense that it has a commodity version of itself and especially version at the same time you know we don't off to talk about specialty bananas are specialty sugar and that sort of stuff yet so but if you take something like the wine industry which I spent 15 years studying before I started looking at coffee you know the general rule of thumb is is that if you know somebody has a great napa cabernet and it's great because the vineyard is on it you know the the folks that grew those grapes get paid for their grapes you know they don't have tables like we're produce Chris proposing because they're all cheek and jowl like when you're in Napa you just you you learn informally through your networks especially copy producers have this problem in the sense that people come and buy it and typically sell the copy somewhere else but I think the wine industry and especially the new world wine industry you know should be a thing of much more of kind of a positive example for the outcomes that we try to simulate in coffee and quicker so do you think that the work that you do is basically compiled from the last year or more if the study goes true continues is to have kind of a referenced in or indication of what the price has been in the past we think it's important to also start that work when it comes to cost of production having that the reference price for cost of production you know I see those as two very important correlated elements is that get a landscape of what prices look like and then have really kind of solid people underneath getting a landscape of what cost of production looks like it will vary by region as we know it will be varied by farm size as we know it will vary by quality aspirations as we know and I entice some conversations with some colleagues kind of in the specialty coffee sector but can you just imagine if those two landscapes could be married then we'll know exactly like if you're up and are able to sell your coffee at the top end of the market like you should I'm I'm going to guess live into these tables we're not having a conversation about cost of production anymore I mean not in terms of survival everybody would like to manage the costs I'm going to guess as we get towards towards the lower end we're going to see people going that's where we have a problem we have to sort of think about you know how can a market adjust better to the information that it's providing two things I want to answer to what you just mentioned mentioned and and and ivana also mentioned it it's important for everybody to know that even within a country even within a region there is a large range of different cost structures simply sometimes because external factors display a certain role in Mexico for the east to the west it's a completely different number simply on the the man and how its produced and I think another thing which is good to notice and and it's one that I already mentioned all coffee should be sustainable for example the study of from Roma cafe showed that one device has a lower cost of production but the wages are lower is that good I'm not sure if you see that the the recent migration of a lot of on Dorian's moving to the new north so it's something to consider it's not necessary because it's low it's better or it's more efficient it's there are many elements within that we should not stare blind to a certain number even yeah when you hear the efforts of this transaction guide focus on specially coffee do you think that that can also help your organization negotiate well every market cover market and the quality mursaleen is different so each transactions take different ways too much about pricing but something that I have noticed is going to put together the marketing together the trader and the sustainability manager one company so if they come together and talk about three different things that affect coffee negotiation when the social impact to that quality 3 the how they are going to serve this coffee to the Rossum so the consumer so the supermarket markets so when these three guys come together it's so much easier to negotiate because all of them understand how that coffee is produced and the other thing that also helps us to negotiate is letting the Roasters or the wholesaler or the supermarket to know the process to produce coffee I had a good experience at years ago where we invited some of the roses and supermarkets to come and visit us to know how the cookies produce to know order effort text and to understand the process they had never been at origin before they had no idea how to produce coffee they had no idea about the guy he was reaching all the bugs in their bags and in the back and running to a tribe or working some miles to get a coffee out of the mountains or in order to have access to a school they had to walk around to three kilometres or if they have a sick person in the family they had to wait till next day or maybe get a track for for three hours to get to a health center so all the social impact that you are doing within the cockpit for coffee business is knowledge once to get all the people involved in the industry not only nine quarters not only the roaster but also the wholesalers the supermarket our distribution chain all the people that is there so that helped us to rebuild the way we negotiated price with his clients specifically because the supermarket got to know how the coffee was produced and wad was a social impact they will do within that community and that they had no idea about it before so I think information is one of the best way to to negotiate with others that leads me to to a question that was was post among the the group of volunteers of this of this group Peter is there any work going to be done when it comes to of the transaction guide when it comes to more awareness with consumers on this front why have you been doing this but particularly targeted to the consumers yeah I would say eventually yes I think that the consumer facing side we a bunch a growing number of folks get together every year and try to figure out how to how to put kind of the the issue of transparency in front of consumers short answer is it's the extremely difficult thing to do I think that what I like to kind of see us focusing on is you know the the one thing that we have to remember and again I think this but few comments here and it's extremely important to recognize this explicitly what we're focusing on is the kind of things that are happening kind of as one moves towards the kind of the middle and upper end of specialty and so some of those kind of conversations about things like oh we have to get people to spend more on coffee they already are spending more on coffee right and so the issue is is there you know can we actually kind of having can we have the pricing of green coffee better match the way that folks are pricing especially so I think there's a lot of room to move to say you know it's I think there's a little bit of this sort of capacity building around relationship management and negotiations I think the coffee farmers are extremely smart and especially the next generation or extremely smart is they're gonna go listen I you're asking me to work harder and you're you're asking you to move frustratingly into this domain where other people right are you know we're talking 20-plus dollars for stuff that I'm getting a dollar sixty a dollar seventy four so I think this idea of kind of more transparency and then I think a mediating through some of the leading voices in the market you know we can start by actually saying you know let's get the folks that grow specialty coffee to be more appropriately compensated given what consumers are already paying and I think so trying to go back on top of this and say more and more I'd like to see if we can't find a way to say like make sure that everybody knows that the people who contribute to the transaction guide and let's get them a little bit of a brand bump in the marketplace these are the more progressive buyers of coffee and so you know if we can get more of the coffee moving through more of the progressive sources that like the idea right that says that you know the farmers need to get paid then I think we can punt the idea of saying asking consumers to pay more for transparency I'd like to have farm out consumers paying more for great coffee and how the individuals who are responsible for great profit get paid so I think that there's this is more of an organization so it's you know trying to kind of organize the more progressive Roasters importers and exporters try to make sure we have conversations that are rooted in data and then one of the things I'd like to be doing with our colleagues and students down the road is going in and actually offering workshops at origin talking to the next generation about you know what our aspirational price points in the marketplace and what do we have to do know and so that's that's kind of where I'm thinking although people that I'm working with my disagree at the margin interesting same goes actually to say you know all coffee all sustainable coffee should also have a certain price range call can't be prepared to see market can we restructure it by the end of this call you know I'll be careful I'm not I'm not an expert in the in the CE CE Marking coffee market but I will I'll tell you what I've learned and and and and what I'm thinking I started off the blog series saying quoting Pope Francis in in this amazing document called the doubt dosi which is a critique of the global economy and and the roots of environmental degradation and poverty in the world and and the quote is finance overwhelms the real economy and when I first saw that quote I was very fascinated what does that mean and and that's what that's how when you know looking into this this is sort of the the thing and what what does that mean and and what we're seeing in the sea price is an influx of a lot of traders and and one in one of the one of the posts you know if you talk about technical traders and you talk about speculative traders fundamental traders and technical traders what starting in the dot-com crash in the in the early 2000s you had a lot of large funds hedge funds others who are who are you know active in in trading look at commodities so not just coffee but but food commodities as well as an interesting potential investment that could diversify their investment portfolio and and the effort there was to was looking at you know the dot-coms were crashing and people are and money is looking for an alternative space so so so it with that you had a lot more activity within the see price there's some some certain value and of batting and increasing providing liquidity within the market and and so there's some positive things there but then in 2007 and 2008 with the crash you had you had even more and so over the last decade you have a pretty significant rise in the portion of people who are trading coffee who are coming from purely from from a kind of they're not it they're not coffee traders they don't know they don't necessarily understand the tray the what's happening the coffee they're not trading on the fundamentals that so the the the question is how much influence is that having on the price and is that improves it is that increasing volatility in the market so it's a it's a valid question some people you know when we when we talk about it sort of didn't dismiss it outright but as we as we've gone down deeper into it a lot of people are very seriously asking these questions there was a lot of those questions happening in 2007 then 2011 with the with food price spikes around the globe that were creating social economic havoc in many countries when people especially urban people couldn't afford that the cost of food so the question is speculation having influence on those costs do they actually overwhelm the supply and demand fundamentals of the market the response is I think compelling enough that it's certainly worth looking at seriously how is this role of speculators in this market bending or influencing or exacerbating the volatility in the coffee market and it specifically non coffee speculators right that's right and and so I I you know so one one I think one thing we need do is understand that role and and do and you know go to Peter his colleagues and and you know other other people who can who have the capacity to be able to to do this analysis and say okay is that really a problem and if so then one of the solutions would be improving the rules and and and using the word regulation you know improving the regulation of the seat price so that we we reduce that sort of froth in the market or they extreme volatility that's not healthy for the for the coffee sector in the few minutes so what I'd like to look at some of the things that we've been looking at as the potential solutions to be looking at but one of them is I think exactly what a lot of this conversation is is the more we have people move away from you know from from using the see price as their benchmark and getting into the types of fair trade direct trade the brilliant work that Peters doing and his and his partners in this I think that's where we need to go we need to say that specialty coffee should be sustainable coffee and I think the specialty coffee industry has to go more in that direction and say it's not just about specialty is it it is it it is about sustainability and we have to look high up into the value chain and looking up at the farmers and the farm workers and recognize that there are legitimate stakeholders in this and we need to put more value there the second is the idea of capital regulation on the see price and the third is is exactly the tools that Peter is describing when when I was looking at this and doing the research for these different blog posts I came across the something that that Peter was involved in before called return to origin and looking at the percentage of the value of a retail coffee or wholesale comedy's that makes it back to origin and putting on at least measuring reporting not in the transparent way and I think that would go a long way in giving consumers and other people other you know responsible minded people in the in the market that view into okay this is what I'm buying this is how much I'm buying it for and this is how much is actually going back to the producers so in the the next couple of blog posts we'll go into looking at the viability of those tools just a question it's related those to what Paul just mentioned to fulfill for Peter is there an arbitrage at the sea marker platform do you know Peter I unfortunately I wish I was a finance professor because finance professors and business schools get paid more than organisations professors I don't actually to be honest I I like to spend most of my time with this session just reminding everybody this was brought to you by Specialty Coffee Association and we do need to spend more time yeah that that wonderful world in the future that says that you know when you when you think about how you value in price specialty products and specialty coffee growers are definitely specialty then I would just love to spend most of my time talking a little bit more about more more sort of appropriate and go back to I notion of appropriate benchmarks so don't ask me what arbitrage have no idea how that works I'm gonna use and grasp two more minutes as we started to it's two minutes later um oh I think we should compile these questions the research questions and find a way on how we can work with Peter and perhaps with other professors to investigate on these questions that basically that we don't have a full answer on and private and I would like to add to to end this conversation that this webinar by saying you know the questions that are still on unfinished or unanswered Terry I will be answered soon as Kim easements at the beginning of the webinar Avaya was this webinar what is your takeaway of this webinar and will help your organization well I like a lot of the experience you have and all the different information you are providing us about how to engage the producers to understand how the coffee industry works at the other side so Peter and Paul do you have share a lot of information about all the how it takes the market how to understand the market how it works and how we can help our farmers to develop more long-term related with with a coffee industry how to get into quality related to the price they're selling their coffee for and how we can provide more information to educate the coffee industry the coffee consumers how we can do some project in the communities and how to ask them the buyers to get involved with this project so that may create like a way to link and develop more opportunities in terms of pricing not only not only on the same market so that for me that was excellent to have the information from you thank you veneer for that thank you Paul thank you Peter Kim we're finalizing more at the end of this webinar yeah can you hear me yes yes I had to move I had to move rooms in the middle of the webinar in case it looks a little bit different now and that but well thank you all so much thank you Vera for moderating Vanya Paul Peter thank you to everyone who's been office on this webinar listening for all the questions that you put into the chat window there are some great resources in here including the including the great questions there are also some links that I'll be posting to the ESEA news site as I mentioned further reading some more depth into research and interviews and cost of production analyses and just really great stuff for anyone who's a who's interested in learning more about that topic so with that you know thank you all again for your time and I look forward to the next of these conversations that we get to have thank you so much everybody I get

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