Sustainable Price Assurance

By: Chris Davidson

Feb 18, 2020

For the past couple of years while the NY coffee commodity market level has averaged below 130 usc/lb we’ve been focused on how Atlas and our roaster clients can better support our producer partners.  Roasters understand that their own companies couldn’t stay in business if forced to sell roasted coffee at a price below cost of production.  When we asked our clients if they’d be willing to pay above-market prices to ensure farmers were able to continue farming, the response was a resounding “OF COURSE!”

While the NY C market may seem byzantine and obscure at first blush, it does serve a very functional risk-mitigation purpose for coffee businesses.  Unfortunately, speculative traders have also played a significant role in the coffee market volatility we’ve seen in recent years.

Producers fortunate enough to be certified fair trade and/or have coffees of exceptional quality can at least count on a minimum outright price, offering some protection against a low NY market.  However, the majority of farmers are obligated to sell their coffee using differential prices which are tied directly to the NY commodity market.  More information about differential pricing and the NY C market may be found here.

In our experience it’s the producers of what we call “standard specialty” coffees who are at the greatest risk in a low market.  Very generally, these farmers produce the crowd-pleasing 80-84pt coffees that make up the bulk of many specialty roasters’ menus.  Roasting companies are motivated to take advantage of low-cost options in a competitive consumer market, which is perfectly understandable.  Less obvious is that an untenably low coffee market can lead to abandoned farms, often resulting in a supply shortage that causes prices to eventually increase to levels uncomfortable for roasters.

Thinking outside the box, now aware that coffee farmers are losing money in a low NY market, some buyers are intentionally paying higher prices in order to ensure the long-term viability of production.  For these buyers we’ve added a “Sustainable Price Assurance” to three of our most popular coffees:  our Honduras SHG EP, Nicaragua SHG EP and Nicaragua “Las Segovias Especial”.

While the idea of measuring a farmer’s Cost of Sustainable Production (COSP) may seem simple, the resources required to conduct a proper COSP study are beyond the scope of Atlas and most of our producers.  For example, the excellent COSP study conducted by Fair Trade USA and Cornell University  required over two years of collaborative research between PhD students and FT USA staff to provide accurate data for just four coops.  While most private organizations don’t have access to the resources required to conduct comparable studies for every producer group they work with, we can lean on our trusted exporter partners to provide a clear picture of producers’ cost of production.

Exporters provide a long list of critical services and have a vested interest in ensuring fair prices for their farmer clients.  For each of these three sustainably priced coffees our exporter partners have provided Atlas with a letter verifying that the prices we’ve paid exceed the farmers’ cost of sustainable production in the 2019/20 harvest.

Honduras SHG EP

Nicaragua SHG EP

Nicaragua “Las Segovias Especial”

Look for these coffees branded on our offer list and website as “Sustainably Priced,” and enjoy buying with the assurance that the producers will be able to continue farming as a result of your purchase.