"The End of Coffee As We Know It"

Farmers, keen to avoid another meltdown, have learned that they are better off producing higher quality coffee in a sustainable manner, not just more coffee.
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Coffee pundits are fretting about a coffee "shortage", which has led to a 35% price spike over the past four months on the NY ICE Coffee Futures Exchange. We're hearing dire predictions of doom and gloom, an "end to coffee as we know it." Leave it to mainstream media and hedge funds to create a mountain out of a molehill. Yet as a green coffee buyer who scours the world over for the best boutique coffee, works with trusted importers and growers to bring it to my doorstep, roasts it with artisan sensibility and packages it for the retail and wholesale coffee market, I am inundated with high quality coffee -- more than I know what to do with. The truth is that while there are legitimate concerns about supply, from where I sit the future of coffee has never looked so good.

My reason for optimism is simple: we are in a renaissance that is transforming coffee from a cheap commodity to a much more sophisticated beverage. I work for Equator Coffees & Teas in San Rafael CA, and I seek the best, most exotic coffees in the world. I evaluate coffees from Africa, Asia and Latin America every day, and travel to coffee farms several times a year.

What I find absolutely striking is that throughout the industry quality is up, even if supply isn't. So, is the shortage such a bad thing?

Back in 2002 when I started in the industry, green coffee prices were at historic lows. The market price was $.40/pound, while the minimum cost of production was twice that. Farmers were going broke daily, abandoning their farms in search of work in the cities or abroad. It was devastating.

Flash forward to 2010: green coffee prices are up around $1.90 and everyone is alarmed - except for the farmers who understandably love the price. There are a number of reasons for the price spike: smaller than expected harvests in Brazil, Colombia and Vietnam; farms that went broke during the crisis earlier in the century are still not at peak production (it takes 3-5 years for a coffee plant to produce); increases in global demand are outstripping increases in supply; and a weak global economy means that hedge funds are pouring money into commodities like coffee hoping for short-term returns. I don't feel comfortable with the bubble risk posed by institutional investors, but all of the other reasons for the increase are legitimate and stem from the fact that people are drinking more coffee -- arguably a good thing.

What I really find encouraging about the trend that has emerged in the wake of the coffee price meltdown eight years ago, especially as we head into another "crisis", is that consumers are willing to pay more for quality and sustainability. And farmers, keen to avoid another meltdown, have learned that they are better off producing higher quality coffee in a sustainable manner, not just more coffee. 20 years ago practically the only measure of a farm's success was its yield -- now quality is the number one issue. Today coffee growers are approaching their work, and are viewed by consumers, as artisans rather than struggling farmers at the bottom of the food chain. They are taking control of the situation and delivering coffee consumers are willing to pay a premium for. More farmers are focusing on the quality of their harvests, refining their growing techniques, installing hi-tech, efficient processing equipment and doing more to promote themselves by entering their coffees in competitions and reaching out to roasters via social media (most recently, a Salvadoran grower has communicated with us on Facebook). This positive development stands at odds with the "crisis" we are told is destroying the coffee industry.

Consider what has happened to coffee in Panama over the last few years. It has gone from an undervalued origin to one of the most prized. I spend a couple of months each year on Equator's own coffee farm, Finca Sofia. Since starting the farm from scratch three years ago we have planted 25,000 "Geisha" variety coffee trees, which we tend with the attention of a new mother. Geisha, an heirloom variety from Africa, took the world by storm a few years ago, sweeping every tasting competition it entered. Coffee judges could not believe it was grown in Panama - known primarily for clean, mild coffees, not wild, exotic ones. They were convinced it was from the crown-jewel of the coffee world, Ethiopia. Since then, green, unroasted Geisha grown in Panama has been selling at astronomical prices ranging from $25-170/pound. By first shattering taste expectations, this coffee went on to shatter price expectations. This had a trickle-down effect -- the best coffees from many other origins now sell for prices exponentially higher than the commodity price. Rarely do coffees sell for over $100, but it is quite common to see coffees from El Salvador, Guatemala, Ethiopia, Colombia and Peru sell for $10-40. This is the exciting future of the coffee industry as I see it.

So while the coming "shortage" will quite possibly have an impact on the world of coffee, and consumers will have to pay more for their coffee, they will also likely be treated to better quality coffee. Farmers will be rewarded for investments in quality and sustainability. If this is the "end of coffee as we know it", good riddance. The renaissance already underway suggests that the best is yet to come.

In future posts I will reflect upon the changing world of coffee.

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