The journey of coffee from the plant to the cup is long and complicated. The coffee importer is the professional figure who simplifies this journey and makes everything flow smoothly.
The raw foodist discovers new coffees, works alongside producers to adjust the quality, interprets the needs of the roaster, knows which qualities are the ones that could best satisfy his/her needs and tries to anticipate consumption choices.
To discover new coffees and new processes, it is important to maintain strong relations with the origin and keep updated on new practices and processing techniques.
This is why we travel a lot to get in touch with potential coffee exporters and growers. It's the best thing about our job, what makes us look like an Indiana Jones-style adventurer.
There are basically two ways in which importers can buy coffee: with a "spot buying" or through a "forward contract".
With the spot buying, coffee is bought on the spot based on availability "ready" or "instore" at some warehouse. In this case, the spot price is fixed at the time of agreement between the parties.
The forward contract (futures price), on the other hand, is a promise to purchase at a certain defined price (outright price) or through a price differential to be fixed against the reference stock exchange. The importer undertakes to buy a certain amount of coffee before the harvest season or while the harvest is in progress; delivery is instead deferred at a certain time in the future (hence the term futures) defined by the contract.
This type of deal lightens the mind of the producer because he knows in advance that his coffee will be bought at a certain price. With a secure contract, he can have access to a credit more easily and invest in infrastructure and equipment that increase the quality of coffee in the long term.
The roaster, for his part, can in turn fix the required amount of coffee with the importer, having the certainty of knowing the cost of the goods, the safety of the freshness of the goods and guaranteed coffee for the set period.
On the other hand, speculators and investment funds use futures to buy and sell contracts, not actual products. Coffee could stay in warehouses forever and speculators could still make a profit without physically owning the beans. However, the speculative market supports the physical one and vice versa, since the former derives from the latter. Hence the name of "derivative markets".
Coffee is a food raw material that must cross continents and oceans in conditions that are not always optimal, with the risk that it may arrive damaged.
We cannot directly control that standards are met during transport; this is why it is important to examine the goods before their shipment and once they have arrived at their destination.
To check if the batch meets the specifications of the contract, the integrity of the bags is observed and the green coffee is visually analyzed. The maintenance of the organoleptic characteristics is analyzed in the laboratory through professional tasting called cupping.
The coffee is then stored in warehouses and here the environmental standards of humidity and temperature must always be respected (ideally below 60% and not above 20° C).
Two moments are critical for quality control through cupping.
The first occurs when we try a lot before boarding to see if it has interesting features or if it corresponds to what is required by the market.
The one who takes care of purchases is like an "executive chef" in a restaurant: he/she is the one who knows all the products the company needs. His/her task is to ensure a continuous supply at a price in line with company costs.
The second quality control takes place after the goods have arrived in the warehouses and it is necessary to understand if the organoleptic characteristics are the same that convinced us to buy that lot and if it corresponds to the description on the contract.
In the case of specialty coffee, cupping is also used to describe the coffee from an organoleptic point of view and establish a final score (for a specialty coffee we start from 80 points).
Behind the "Indiana Jones" part hides a slightly less exciting work made up of spreadsheets and inventories.
Having the numbers under control is essential in order to identify risks, assess their impact and predict the repercussions in the company.
The coffee market is extremely volatile: sudden price fluctuations can mean selling at the wrong time at a too low price. A risky move in this direction can be fatal.
Without considering the risk associated with currency exchange. In fact, it should not be forgotten that the reference price for the purchase of coffee lots (as well as that of the quotations on the stock exchange) is always the US dollar. As a consequence, sudden movements also in terms of currency exchange can be decisive.
The risk then also concerns that of the deterioration of the goods once purchased. In fact, coffee is a living material and the goods can suffer damage during travel or storage (for this reason its humidity should not exceed 12-13% and the water activity must be below 0.75).
Coffee that remains stationary for a long period can therefore lose its organoleptic characteristics or run the risk of developing mold or baggy taste.
An even higher risk when it comes to specialty coffee: the higher price makes it more difficult to place these qualities on the market, increasing the risk - and consequently the costs - of keeping them in stock longer than necessary. In fact, to preserve it longer, grain pro bags or similar are used.
Coffee has always been a commodity with a high volatility index, that is, subject to sudden price fluctuations.
These variations are due to the characteristics of the plant itself and of the areas in which it is grown but also to factors and actors that are found along the value chain.
The Specialty Coffee Association established the Price Crisis Response (PCR) in 2018 with the aim of producing a report on the actions that the sector could take to mitigate the crisis. You can give your contribution by accessing the specific section of the site.
The SCA Coffee Systems Map, on the other hand, is a valid tool to know all the players involved in the coffee value chain and who are a variable for the price.
It helps to understand what and who is "behind the scenes" and to keep track of the movements of the coffee from the plant to the cup.
A valid tool also for those who, like us, are already an actor and want to identify the nodes that could constitute a risk or an opportunity for their business.
The map in pdf format was recently released and is currently available in the SCA shop.
If you have any questions or comments, we will be happy to help you.
You can write us an email here: [email protected]