Why the Price of Your Coffee Should Increase a Latte

Why the Price of Your Coffee Should Increase a Latte

Coffee is undoubtedly one of the world’s most desired commodities. While coffee is sourced from a variety of different countries, Brazil produces ⅓ of the world’s supply of Arabica coffee. This year, many coffee-growing countries faced unprecedented and dismal coffee growing conditions. Both Brazil and Vietnam alike were struck by uncompromisingly extreme weather conditions. According to Forbes magazine, southern Brazil, which hosts the majority of coffee production, experienced abnormal dryness that impacted initial coffee plant flowering. Flowering is normally stimulated by the heavy early-season rains typical of coffee-growing regions throughout the world. Additionally, conditions such as rare frost have also affected coffee production. In response to this, the C market price for coffee has spiked to over $2 per pound, which is the highest reported commercial coffee price since late 2016. This news has rippled across the media. Unfortunately, the rhetoric that the media has adopted lacks a holistic view of the foreboding problems all producers now face with frequently occurring volatile weather conditions. As consumers, we must be cognizant of the multi-faceted nature of this problem. It is exceptionally complicated. 

While most coffee drinkers recognize the cost of their latte going up, it is far more nuanced than that. While many sources have done an excellent job illustrating the relationship between the increase in price and its relation to the decidedly dismal conditions imposed by climate change, they have neglected to acknowledge the burden this will subsequently have on coffee producers and workers, who still earn much less than a profitable, or in some cases, a living wage.  Rather than examining the rhetoric that encompasses the problem, they’ve chosen to acknowledge the rather superfluous consequences of the impact of climate change: the increase in the price of your latte. While the increase in price is relevant to consumers, as it is your hard-earned money, the “why” becomes incredibly important. 

Basic economics will tell you that when supply is low, cost increases. In other words, it makes sense that the drought and climate conditions presented in Brazil would impact the cost of your daily cup of coffee. This increase in price does not address the uglier truth about coffee prices. Even with this price increase many producers will continue to suffer in poverty. Yes, a higher price per pound is good for farmers, but less so when it comes at the expense of their total output. The global coffee industry is valued at over 465.9 billion ​USD, and yet many coffee farmers are unable to reap a profit, let alone a living wage. 

The lack of transparency surrounding the pervasive poverty among many coffee farmers perpetuates this cycle of debt. Marketing strategies have largely blinded consumers to the severity of the problem. Using buzzwords like: sustainability, equity, transparency, and fair trade, businesses have been able to foster relationships with coffee producers that produce little to no livable output. Unfortunately, embedding these terms into marketing strategies does not even tangentially help fix the issue. On the surface these words are great, but there is rarely any palpable change resulting from them. To effect change, we need to address the root causes of the problem. While the C market is in a constant state of perpetual change, there is an element of consistency in its volatility. In understanding its inherent elasticity, it’s important to provide a more stable financial business model for producers and roasters alike. While consumers might initially bemoan this concept, acquiring a better understanding of the financial impact it provides producers might alleviate their laments.

Here’s where we come in. For us, transparency is more than just a buzzword. It’s one of the foundations of our core values. There are several ways that we have committed to creating meaningful relationships with coffee producers. One of the ways we do this is through The Pledge. The Pledge ensures that coffee companies are held accountable for ethical and sustainable sourcing. What does this mean? It means that consumers have the right to know where their contribution is going. In accordance with this, The Pledge ensures that money allocated to coffee producers not only meets the bare minimum but provides a certain level of absorbability to the elasticity that the coffee market presents. In other words, The Pledge is a common code for transparency in green coffee buying, which clearly outlines the FOB price (Free on Board) paid for coffee. Moreover, the Pledge outlines the relative quality of the coffee and the length of relationship we have had with a specific producer.

Over the years, we have worked to develop relationships with as many coffee producers as possible.  For example, in Costa Rica, we have established long-term relationships with producers such as Sumava, Sin Limites, and Santa Lucia (to name just a few). Building direct relationships with producers works to eliminate many of the intermediaries other larger companies employ in the coffee supply chain. When third parties are exempt from the coffee production process, and ultimately the supply chain shortens, more funds are then available to be allocated to producers directly.  The more direct involvement a coffee producer has over the entirety of the coffee processing, the more control they have over the price they receive for their efforts.

While implementing terms such as “fair wage”, seems to effectively communicate action, it is not a term that is impervious to the volatility of the market/external climate conditions. Conversely, a “living wage” allows for this. We pride ourselves on not only facilitating these authentic relationships but alleviating some of the plights that these coffee producers face through our purchasing efforts. Too many transactions within the global coffee market are bottom-line driven. However, this purely transactional approach to pricing doesn’t take into consideration the real issues facing coffee producers when it comes to sustainable living wages. While the trend among some in the industry is to at least cover producers' cost of production, this only ensures that they are not moving backwards, and does not facilitate a more sustainable and fair living wage. 

When you purchase coffee at Transcend, you’re not only contributing to these long-term relationships, you are also helping to fund a sustainable business model for coffee producers and those that they employ. Buying from Transcend means supporting a transparent supply chain, which translates in the participation of something greater than just a great cup of coffee. You’re part of a movement that is more than just words. Your contribution allows us to actively advocate for the economic prosperity of coffee producers; with tangible and transparent results.

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