Viroqua Food Co-op: Coffee on the Rise

Everybody seems to have the same questions: What’s up with coffee prices? How high are they going to go? Will they stay high? We here at Kickapoo Coffee have been asking the same questions, to ourselves, our fellow roasters, our importing cooperative and, finally, our growers. The answers we’ve found were uncertain and unsettling–at first. With time, they have become less unsettling but still remain somewhat uncertain.

When the coffee market began its rise one year ago, we didn’t think much of it, mainly because the commodity market for coffee had long been below the fair trade minimum price we’ve always guaranteed the farmers we buy from. We also don’t like to think of our coffee as a commodity: we offer a unique product produced by real people we know.

But alas, we are not immune to the major price spike of the past year. Coffee, the commodity, is traded on the New York “C” market, and its price is subject to change. A futures market, coffee’s price fluctuates according to prospective harvests, demand, and investor interest. Early on there were some stirrings that this rise might be more dramatic than the average. One of our importers warned of $5 dollar prices for green (unroasted) coffee, a level more than three times what we had seen in the past.

When the prices began accelerating, hitting $2.00+ per pound on the “C” market, we began to think differently about what the market was doing. Today, as the market peaks at a hair below $3.00, everyone in the industry is thinking differently about coffee and what they pay for it. With prices for green coffee from some regions more than doubling, we’ve entered a new coffee paradigm.

A recent article in the New York Times told the story of Luis Garzon, a coffee farmer in Colombia whose family has been growing coffee in the Cauca region for generations. This is the same region where our Colombian Fondo Paez is grown. Over the last five years, production on the Garzon’s farm has dropped 70 percent. The cause of the dramatic decline is the same on Garzon’s lot as it is many places around the world: global warming. Coffee is a climate-sensitive crop. Growing in a narrow band around the equator at specific altitudes, coffee is finicky and needs predictable cycles of dry and wet weather to produce high yields. As climate change generates chaotic, extreme weather, farmers around the world are struggling to maintain the rate and quality of production they—and those who buy their coffee—had grown accustomed to. The story of Garzon and farmers like him tells part of the tale of today’s high coffee prices.

As global warming disrupts and diminishes the supply, coffee demand is only increasing. In emerging market countries like Brazil, India and China, urban populations are growing and as they do so too is their consumption of coffee. This added pressure on the disrupted coffee supply has added fuel to the price spike as well. Compounding the acceleration further was the fact that the potential for a price spike wasn’t lost on investors. In a market where investments in real estate and stocks seem stagnant or risky, investors have jumped on the commodity market, making this price spike particularly sharp.

And so, here we are. The weather is wicked, coffee is scarce, and the market is high. Time will only tell if the current prices will continue to go up, hold or–if we are in a bit of a speculative bubble–drop. Even if prices do drop, they most likely won’t fall to last year’s levels.
There is, however, a silver lining: most farmers are now getting prices they deserve. The high prices you’re paying are making their way back to the growers. Current fair trade premiums are actually well below the going rate for specialty coffee. That said, our form of fair trade remains relevant for many reasons; the most important being we support small farmer co-ops that provide critical services to underserved farming communities the world over. It’s essential that we stick with them now to make sure they are around when the prices tumble. And that’s what we plan to do. While there are many challenges in a market like this, we view this as an opportunity to deepen our relationships with our trading partners by remaining committed to them during a time when economic realities are pushing many to sideline their ideals in order to cut costs.

-Luke Brekke and T.J. Semanchin of Kickapoo Coffee