What a Change in Coffee Prices Means | De La Gente’s Sustainability Efforts in the Coffee Supply Chain

By Aliisa Oake

De La Gente Coffee Sack

Recently, there has been a shift in output levels of green coffee beans, causing the price of Arabica coffee beans on the C market to increase. This shift in the global coffee supply directly impacts our partner cooperatives and buyers. With the coffee C market failing to support sustainable growth for coffee producers, De La Gente offers assistance through a trusting support system and a reliable coffee supply chain – providing a loan program, training, and direct market access.

The global C market often exposes producers to fluctuating, low prices that fail to reflect the work that goes into cultivating their high-quality specialty, Arabica coffee. By addressing these issues, we created a direct coffee supply chain by partnering with cooperatives in coffee growing communities and establishing risk management initiatives – forming agreements that guarantee a higher, fairer price than what they would receive by working with middlemen or more traditional coffee markets. We value supporting coffee producers and believe they should be showcased and compensated for the quality and hard work they pour into cultivating specialty green coffee beans. 

De La Gente’s Transparent Coffee Supply Chain

The process of growing coffee is very time-intensive. When a coffee sapling is planted, it takes about five years to reach a full maturity level. This long growth cycle makes it nearly impossible for producers to increase their output to take advantage of price growth, working towards boosting their income. In addition, it’s very difficult for producers to adjust production levels while adhering to a change in demand by changing their supply level of coffee and adjusting to price changes in the C market. 

With the challenge of producing enough coffee to make a profit, many small-scale producers rely on middlemen to buy and sell their green coffee beans. These middlemen, also referred to as coyotes, typically purchase coffee at a lower wholesale price and later sell them to buyers at higher prices, in turn making more money than what the coffee was purchased for. This often leaves producers with a fraction of what their coffee is really worth, causing exploitation of coffee producers and a weakened position for them in the market. Many coffee producers aren’t fairly compensated for the labor and resources required to produce and process coffee, particularly specialty coffee. 

Antonio from Ijat’z Cooperative - Drying Coffee Cherries

De La Gente has acknowledged the unfairness of typical coffee supply chain systems and by supporting coffee producers, we work to protect coffee producers against exploitation. Our coffee supply chain is based on a business model that differs from traditional pricing or supply-demand dynamics. We’ve created a relationship-based trade model that directly connects producers and roasters, diminishing middlemen and fostering long-term collaboration. Roasters directly source their green coffee beans from producers and are provided with a transparent pricing structure. A major benefit of a relationship-based coffee supply chain is that a shared risk is established between parties. When prices are low, buyers still honor agreed-upon prices, recognizing that long-term relationships are more important than short-term market conditions. 

Our business model is designed to maintain the sustainability of the coffee industry by creating a system of mutual support that helps protect producers and roasters from unpredictable fluctuations of the C market. Coffee producers and buyers collaborate to establish annual contracts with stable pricing structures. Having an established relationship between producers and roasters creates a deeper understanding of the challenges that are faced on both sides of the market. A financial cushion against market volatility is created, ensuring that farmers receive fair and predictable prices, while buyers secure a steady, high-quality supply of coffee. This relationship creates a mutual, deepened bond, which is beneficial for both parties when seeking a pricing solution. 

Directly supporting coffee producers is important for them to be able to continue to carefully cultivate and improve their crops, furthering the sustainability of the coffee industry. Without producers having the opportunity to make a fair profit, many turn towards abandoning coffee altogether - threatening the long-term sustainability of the coffee industry. To diminish this, De La Gente makes sure that trade transactions between partnerships aren’t based on market-driven principles, but are influenced by interpersonal relationships, trust, and reliable social networks.

Commitment to Fair Pricing and Sustainability of the Coffee Industry

When considering the price of green coffee beans, specifically the price of Arabica coffee beans, with levels of the supply of coffee being produced, De La Gente views the true price level in the coffee C market as a reference point and considers the levels of capacity that producers are able to work with. Additionally, with De La Gente’s coffee being considered a specialty coffee grade, it’s of higher quality which encompasses pricing levels based on quality, origin, and flavor notes, rather than market trends. While the C market dictates the price, mostly for commercialized coffee, specialty coffee operates in a decentralized, quality-driven exchange where pricing differs from what normally occurs in the general commodity exchange for green coffee beans. 

To combat volatility levels, De La Gente stabilizes the price of Arabica coffee beans without impacting producers and buyers in the way the C market does. We make an estimation for how much it will cost to produce and factor in additional costs related to exportation, transportation, and marketing efforts. We also commit to the volume of coffee reserved before export in order to prevent any losses.

Marcela Méndez, our Coffee Commercialization Program Manager, shared detailed information on the C market and De La Gente’s pricing strategy:

Santa Anita Cooperative Meeting - Don Mincho (left) and Marcela (right)

“With the C market showing a base price [for all coffee], it doesn’t refer to a specialty coffee price, it refers to the general stock market price of green coffee - taking into account the entire coffee market. Therefore, specialty coffee prices will be slightly higher. We believe specialty coffee should be worth at least 30% more than the second grade coffee, but that doesn’t always happen in the C market.

In recent years, De La Gente has had the mission of providing a competitive price to small producers. In such cases, like this year, when the C price is equalized, it complicates the sales cycle and affects the quality of coffee. Until now, De La Gente decided to maintain 30% above the price, but committing to volume reserved before export [and the amount that is accessible], to prevent losses.

When specialty coffee is priced higher in the market, it can be both a positive and negative thing. If prices are high, there will be roasters who do not want to buy it, but there will also be producers who sell it on the street to coyotes, who are not interested in the quality of the coffee, [purchasing green coffee for less than what it’s really worth].”

- Marcela Méndez

With De La Gente’s coffee pricing system, we created a strategy that allows producers to earn a higher income that they otherwise wouldn’t have access to. At least 30% more income is provided to producers in our partner cooperatives than what’s typically seen as the base price on the street level. The outcome of this is that producers don’t feel the constant stress of rapidly fluctuating coffee prices or feel pressured to sell their green coffee beans to larger companies or coyotes for lower prices than they should be receiving for their specialty coffee beans. 

Supporting Coffee Producers by Cultivating Long-Term Relationships

Long-term relationships with roasters and coffee buyers are beneficial in providing a reliable source of income for producers of our partner cooperatives. In supporting coffee producers, De La Gente provides a platform for the creation of partnerships and long-term relationships between producers and roasters. With this, green coffee beans are purchased at an agreed upon price per pound that is established between green coffee buyers and producers. This price point is always higher than what’s typically seen in the coffee C market. Partnerships provide roasters with the opportunity to build unique, tailored coffee offerings, as well as support producers by promising them an ethical and reliable income. 

One of De La Gente’s long-term partner roasters, Nossa Familia Coffee, recently visited us and spent the day with two of our partner cooperatives in the Antigua coffee growing region of Guatemala - Coffee Growers of San Miguel Escobar and La Familia Collective. Nossa Familia Coffee has been working with and purchasing coffee from La Familia Collective since 2017, and is an example of a reliable, trustworthy member of De La Gente’s coffee supply chain.

During the visit, Augusto Carneiro, the owner of Nossa Familia Coffee, shared some insight on the C market and the importance of his purchase decisions as a roaster and coffee shop owner when considering the price of green coffee beans.  

Augusto Carneiro (left) from Nossa Família Coffee with Manual Gómez (right) from Coffee Growers of San Miguel Escobar

“The direct trade relationship model is more beneficial for the long-term ... since there are market oscillations and [coffee producers] want to continue to prosper, it has been more beneficial for them to have longer-term buyers.

In an ideal world, a farmer would be able to measure their cost of production and have a fair profit margin, operating at a profit to be able to continue taking care of their land, and maybe even buying more land … We pay anywhere from $0.50 to $1.50 above the C market because we’re getting a higher quality coffee.”

- Augusto Carneiro

At Nossa Familia Coffee, they value social and environmental responsibility, quality coffee, and fostering relationships – aligning with De La Gente’s vision of creating an equitable and inclusive coffee industry. When thinking about pricing, Augusto believes in looking at the value of coffee and the work that goes into it. This is a major area that De La Gente works towards improving for their partner cooperatives, something that the C market neglects.

By providing income stability for coffee producers and price stability for coffee buyers, De La Gente strengthens the entire coffee supply chain. By creating a relationship-based trade model that fosters long-term connections, we form specified contracts between producers and buyers, and with careful consideration, we ensure predictable pricing - overall providing more access to coffee markets. This further empowers coffee producers to invest in their coffee production and local infrastructure, develop their communities, and achieve future goals. Producers receive a fair price for their green coffee beans, often above the typical C market rate, and are able to rely on coffee to obtain a more consistent income. This furthers us in achieving our goal of supporting the resiliency of coffee producers and fostering the sustainability of the coffee industry.