It is now very common for consumers, roasters, and store owners to require transparency in the coffee supply chain. Importers and exporters of green beans must provide more complete information so that the pricing of coffee is not just an abstract concept but something with an integrity link.

But because there are no standardized operating standards or actors in the supply chain, transparency and data can be difficult to interpret, making it easy for some companies to manipulate or even modify the coffee they handle.

Often, information that is not shared is more important than information that is shared and cannot be properly understood without the complete context. Information that sounds correct may not be the case, or it may not be as good as described.

In this article, let's take a look at how to identify the correctness of transparent information and how to prevent fake information.

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The Importance Of Contextual Relationships

Transparency of information should look at contextual relationships, such as data metrics and averages, must provide enough information to understand what the data actually represents, and must be specific enough to be compared with other data.

Without looking at the context, it's easy to misunderstand and misinterpret the facts. Let's look at an example.

"I paid $3 per pound for raw beans, which is three times the price of futures trading, so I have a positive impact on the industry chain!"

Here's what the author saw recently on social media shared by a roaster, and it probably got a lot of likes and won the hearts of some fans. However, this sentence barely mentions the required context and background references.

For example, when this roaster purchased the coffee, what was the state of the batch? Where to buy from? Most coffee producers, unhulled green beans cost $3 at the farm gate. If the roaster were buying directly from the farm, that would be a veritable positive impact.

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But after an in-depth understanding, the author found that the price mentioned in this post is the FOB price paid to the exporter. FOB prices include any overland transportation costs from the factory or warehouse to the origin. And that doesn't measure farm gate price (the net value of the product when it leaves the farm).

Also, while green beans are priced at three times the futures price at $3 per pound, the statistic shared on social media is for Costa Rican coffee, which is currently priced at $3 per pound. Trading at $0.84 above futures, based on futures prices of $0.93 at the time of writing, the base price of Costa Rican coffee should be $1.77 per pound.

So $3 is not three times the base price, but more than 69% of the price. Sure, it's not bad, but it doesn't sound as good. Considering this post is for boutique-grade micro-batch coffee, $3 per pound is a fair price, but not above average.

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Consider Who Benefits

In the case of social media posts, it's important to consider the $3 per pound the roaster is paying.

Are these fees still paid to the importer? Roasters have to pay importers more, so importers pay exporters more, and they can pay farmers more. But not every player actually passes the ball. So when a roaster pays above-average prices, it's an excellent first step but should not be construed as having a positive impact on society or doing economic justice.

Do roasters pay exporter fees? Again, this is a step in the right direction, but it does not necessarily mean the supply chain is ethical. Exporters may not know and may not record the money farmers receive. The exporter may or may not also share with the roaster, so there is no way of knowing how much the farmer gets out of it.

There is nothing inherently wrong with paying importers and exporters. Working with both roles is the most efficient way to get coffee from farmers, ultimately making farmers the most profitable.

But without transparency of the price paid in each transaction, claims of ethical behavior or positive social impact cannot be justified. This is a bit like boasting that you have resource recycling, environmental protection, and love the earth, but it is not implemented for reuse but one-time disposal when it comes to the back end. Yes, you did your part, but it didn't make a real difference.

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Connecting Producers And Roasters Directly May Not Be The Most Beneficial

Let's say the roaster pays the farmer $3 directly, but that also raises some questions. How do roasters deal with farmers? What type of coffee does the roaster buy: green in the shell or fruit? Do farmers have to pay for the harvest and logistics? Are farmers' remuneration paid in one lump sum? How long does a roaster commit to sourcing coffee before delivery?

Let us explore these issues in more detail.

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Let Producers Make FOB Export And Purchase

Buying coffee directly from farmers may be the way to get the most income for farmers. But having a way to simultaneously export, raise money, supply enough coffee for export, and wait for buyers to pay for it is not something a small farmer can afford. While supporting farmers at this level and raising their incomes isn't a bad thing, doing so has not lifted anyone out of poverty, and claiming it's a positive social impact is a bit of a misnomer.

Farmers using this method may get a higher price than if they traded through a middleman, but they also spend a lot of time and money getting their product to FOB, so they may actually end up with less profit. You can't compare this price to the farm gate price because the gate price doesn't include any packaging and logistics costs.

Do you pay a higher percentage of the money to the farmers? Will they spend $1 per pound on logistics and end up with a $0.20 profit? Or hand over the business to exporters, who will spend $0.30 on logistics, exporters take $0.20, and farmers take $0.70 in profit? Is the goal to deal directly with producers or use the method that provides them with the fairest income?

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Trade Unshelled Beans Or Fruit

When discussing price, it's important to understand the coffee you're buying and selling. Depending on the quality and other factors, clean green beans make up about 70 to 80 percent of the weight of green beans in the shell. So when we're talking about how much you pay a farmer for a pound of green beans, it can vary depending on the type of coffee you choose, such as screening mechanisms, flaws, etc.

In another social media post, an importer claimed to have paid farmers in Colombia 1 million Colombian pesos (about TWD 9,700) per carga (about 275 pounds) of fruit. It may seem admirable to share numbers like this, but how many roasters know if it's a good price? The statement is actually complex and unclear, even to those familiar with Colombian currency and local coffee terminology.

First, a carga is about 125 kilograms. In the coffee industry, this weight and measure are commonly used for green in-hull beans, whether sun-cured or washed. But the post mentioned the fruit again. Is this payment all for 125kg of fresh fruit? If true, the green beans would cost more than $7/lb, which is a very good price for farmers.

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In the comments to the post, someone asked for a clearer explanation. It turned out that farmers were getting a price of $5.13 per pound, excluding the outer weight, which is a calculation of the fruit's conversion to green bean weight in the shell.

Therefore, although the importers in the local sector procure the fruit, their share of the price is calculated from the reasonable conversion of the fruit to the weight of the green beans in the shell. But who can see that from the post? Does the importer want people to understand it? Or just grandstanding for sharing the number? However, based on the local purchase price, this is still a very good price.

Then, there is the issue of currency exchange. At the time of writing, 1 U.S. dollar is equivalent to about 3,250 Colombian pesos, exchange rates affect transactions, but the local cost of living is mostly consistent in the short term. Therefore, when the coffee is sold, the quality of life of the farmer is strongly correlated with the price at which it is sold. Most of us understand this and can figure it out without any hassle, but how many of us pay attention to this topic while swiping our phones?

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In general, it is assumed that if a company publishes information, it must be ethical and positive, with integrity. But information and data should be carefully analyzed before concluding that a company is creating meaningful social impact.

Procurement Consistency And Long-Term Impact

Importers or roasters may pay above-average prices, but is it a one-off? It would be dishonest to use this as propaganda if it is only a small transaction or a single occasion. These deals are unlikely to benefit farmers in any meaningful way.

If a roaster buys three to five bags of coffee at a very good price, but the rest of the farmer's harvest is sold at futures prices, there is little to no positive financial impact. This is often the case at auctions, where the bidding grades usually make up only a fraction of a farmer's output, and the competition almost always has a different winner.

We should also consider when the farmers get paid. Did the farmers get paid what they were originally quoted when the coffee was processed into green beans? Or do they have to leave the green beans on consignment and borrow money from loan sharks to cover the funding gap? Or, do they receive a deposit, and then the buyer pays off the rest a few months later?

The flow and structure of payments can have a huge impact on producers depending on the size of the payments, and if they are forced to take out loan sharks while they wait for payment, this could eat into their profits.

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How To Protect Yourself From False Information?

When you start analyzing transparency data, it's easy to get frustrated or even angry. But don't be swayed by emotions. Take any plausible news with a grain of salt, and research the facts behind it.

Read comments and articles from supporters and opponents and consider their arguments. For example, there are dozens of academic papers and articles on the pros and cons of fair trade. Read them and consider whether you are willing to buy this type of coffee. More information can help you better understand the relevant information and know what you want when shopping for coffee.

Buying coffee is a responsibility. Your choices can greatly affect a farmer's family in one corner of the world, and it's the responsibility of each of us to understand the complexities and dynamics of the supply chain to understand how to unearth problems.

We need to fully understand the information that is being shared and determine what is not. By becoming more conscious consumers, we are contributing to the overall sustainability of the coffee supply chain.

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