Falcon Green Coffee Buyer Mike Riley

An interesting view on the coffee trade by Mike Riley from Falcon, Specialty Green Coffee Importers.
(This is the company we bought this great Colombia Villa Esperanza from) :

The market is reaching low levels so this is a great time to buy coffee as cheaply as possible and to increase margins. Happy days... unless you’re a coffee farmer.

At the time of writing this blog the Arabica market has closed at 135.65 cents per lb. These are seriously low levels for coffee farmers since, for many, it means they will be selling their coffee below the cost of production.

During my recent trip to Mexico, El Salvador and Costa Rica I asked the various farmers we work with to tell me their cost of production. The range I was given was around 150 to 180 cents per lb. Of course top quality coffees command a quality differential above New York, but in El Salvador for example this stands at around 20 cents a lb. So breakeven is absolutely border-line for many farmers and those who farm below SHG altitude will certainly be facing tough times unless things improve soon. Of course this is before we even factor Roya (leaf rust) into the equation for our friends in Central America and with yields falling those costs of production are going to rise by 20 to 40% or even higher in some cases. Unhappy, uncertain days!

Through experience, we recognise the incredible difficulty, stress and suffering that marginal and low prices bring about and as such, all our commercial activities are focused on creating business models that help our partners negate this risk. While we will always pay well above the cost of production, we are also aware that buying even 50% of someone’s crop does not guarantee their survival unless those farmers are working with other like-minded buyers.

The coffee crisis, a period of depressed prices between 1999 and 2005, was responsible for human suffering on a massive scale across the coffee producing world. It brought about malnutrition, the abandonment and loss of farms, mass illegal immigration, the increase in illicit drug production and countless other untold stories of hardship.

At Falcon Speciality we believe that farmers must always be paid a price that covers his/her cost of production and we do this by several means:

•   We pay outright prices – fixed at a level above the cost of production and inclusive of a healthy margin for the farmer.
  
•   We will utilise our futures book on behalf of the farmer if the market level is favourable for them.
  
•   If the quality is high enough we will buy Fair Trade coffees which protects farmers from a falling market by
  guaranteeing them a minimum price aligned to the cost of production and an additional social premium.
  
•   Whilst always seeking out speciality coffees of great quality, we believe that certifications such as Rainforest Alliance, Utz and Fair Trade have principles embedded in International Labour Law (ILO) and as such the coffee workers’ rights are respected. Such certifications also include environmental standards
  designed for sustainability of agricultural land and its natural eco systems.
  
•   We support community projects and NGOs that are committed to quality improvement and consequently
  price improvements for coffee farmers – TechnoServe being one such example.
  
•   As a qualified social auditor with 5 years of auditing experience on coffee farms around the world – I will
  visit and audit farms where necessary to ensure they meet our ethical standards.
  

Roasters who buy our coffees will benefit from all of the above points in order to meet their own ethical criteria. Our aim is to create positive social impact through all of our business transactions. Indeed each of our coffees has its own story – please feel free to engage with us to discuss any of these issues and how they relate to the coffees you buy from us.

We believe that there should be no losers in the coffee chain – especially the farmers and their staff - without them, there is no future in coffee.