Global coffee auctions can be important to small-scale coffee farmers. This week I discuss how.
Show notes
Article 1
The price for the top-scoring coffee broke the auction’s previous record, with Thailand-based Aroma Group Ltd. offering $246.50 per pound for a 105.2-pound lot of coffee produced by first-time auction participant Hifthallah Alhaymi.
- This was the fourth Best of Yemen auction conducted by Qima and Ace.
- The top-scoring lot sold for $246.50/lb with a total of 105.2 pounds
- all of the auction lots sold for at least $25 per pound
- Perspective: current c-price: $2.30/pound
- Global auction: winning bidders = more than 50 companies from 17 different countries
How National Yemen Coffee Auction works
- Producers submit their coffees
- Coffees graded (I assume green-graded)
- Blind cupping conducted by a national jury (talked about in S3:E3)
- Top 50 lots sent to Boot coffee for cupping & to determine which go to auction
- Winners are further evaluated by the equivalent of an international jury for final scores
Article 2
- Top-scoring coffee: $400.50 per pound, breaking the record for the highest price ever paid for a CoE-winning green coffee.
- CoE organizers believe it is the highest price ever recorded for an Ethiopian green coffee
- Winning lot size: 1,058-pound lot of coffee (shows incredible farmer-level consistency)
USAID one of the organizing partners of annual Ethiopia CoE competition
By linking small-scale farmers to coffee buyers across the globe, we’re putting more money into Ethiopia’s coffee-growing communities and a cup of the world’s absolute best in the hands of countless coffee lovers.
— USAID Mission Director Sean Jones
Rationing function of price: “distributes scarce goods to those consumers who value them most highly—those with the highest willingness-to-pay.”
See also: Local Consumption Wins in Brazil and Colombia
Gets even more interesting if you think about the commercial buyer/bidder as a representative of its customers. Their confidence in being able to sell that coffee, for a profit, represents an even stronger signal of correct valuation.
Why auctions like this are important to smallholders
- High prices ($246.50 and $400.50/lb) can be inspiring
- Producers talk and share techniques (maybe not all, but often enough to inspire)
- The national jury establishes the characteristics of what the best of a country can produce (episode 3 this season)
- High scores can make a country competitive in a global market
- Auctions are a pretty good way to determine value
- Tastemakers
Transcript
This is the Weekly Coffee Report from Oil Slick Coffe. Each week, I find a few coffee stories that pique my interest and discuss how I make sense of the story.
In the previous episode, I focused on some benefits of local consumption. This week I’ll focus on global markets. Both, it’s global markets and local consumption have their benefits for local producers.
The first story comes to us from Daily Coffee News by Roast Magazine. The article is titled "High Prices Come Through at Best of Yemen and National Yemen Coffee Auctions." Here’s a quote from the article.
"The price for the top scoring coffee broke the auctions previous record with Thailand based Aroma Group, Ltd. offering $246.50 per pound for 105.2 pound lot of coffee produced by first time auction, participant Hifthallah Alhaymi."
And I apologize if I butchered the name.
Some key points I’ve pulled out of the article. This was the fourth Best of Yemen auction conducted by Qima and the Alliance for Coffee Excellence or ACE.
The top scoring lot. Sold for $246 and 50 cents a pound. With a total of 105.2 pounds. Now to put that in perspective; yesterday’s C price for coffee was $2 and 30 cents per pound. And that’s for commodity grade coffee. So this winning lot went for $246 and 50 cents a pound. That’s a pretty good price.
Also from the article, all of the auction, lots sold for at least $25 per pound.
It’s also a global auction. With the winning bidders coming from more than 50 countries companies, sorry, spread across 17 different countries. So this is truly a global market. Compared to what I talked about in the previous episode, which was local consumption in which the coffee is produced in the country and consumed in the same country.
This is a case of people from all over the world, coming together to evaluate the coffee and then bid against each other in order to find the value of the coffee and purchase it.
The National Yemen Coffee auction is a unique coffee auction. It’s related to the Cup of Excellence competitions, but somewhat different.
And I’ll provide a link in the show notes as to where I got this information, but this, these are the basic steps of the National Yemen Coffee Aution; First, the producers will submit their coffees. Now that the auction organizers will put out the word through WhatsApp through social media, through local radio, local events, to get the word out that they’re going to have this auction and for producers to submit their coffees. So producers willingly submit their coffee. So there’s a bit of a selection bias there.
Then a blind cupping is conducted by a national jury. And I talked about national juries in episode three of this season’s podcast. And I really find the national juries fascinating and important because it’s the it’s experts from the country, defining what the top quality coffee is from their country. And so I find that very important. Uh, and very interesting.
Now going back to the National Yemen Coffee Auction process. Once this blind cupping is conducted. The top 50 lots are sent to Boot coffee in California for cupping. And to determine which go to auction. And then the last step, the winners are further evaluated by the equivalent of an international jury to determine the final scores.
So you can see if you’re familiar with Cup of Excellence, the National Yemen Coffee follows a very similar process to Cup of Excellence. And it makes sense because it’s partially organized by ACE. Both of them are.
Now the second episode uh, second story I’m going to pull in here is also from Daily Coffee News by Roast Magazine. And the title of the second article is "Ethiopia Sidama Coffee Breaks Cup Of Excellence Record at $400.50 Per Pound."
Now some bullet points I pulled out of here. The Cup of Excellence, organizers, believe that this is the highest price ever recorded for them for an Ethiopian green coffee.
And another bullet point I pulled out is that the winning lot size was 1,058 pounds of coffee. And that to me shows incredible farmer-level consistency. So I imagine what they do is they’ll pull out samples from the entire lot that this farmer submitted. And given such a large lot they could pull samples from any of the bags.
And so for this farmer to win the entire competition means that he produced at least an 88-point coffee that was consistent across a thousand pounds or one ton of coffee, which is pretty. Pretty significant.
USAID was one of the organizing partners of the annual Ethiopian COE competition. And the mission director, Sean Jones said this:
"By linking small scale farmers to coffee buyers across the globe we’re putting more money into Ethiopia’s coffee-growing communities, and a cup of the world’s absolute best in the hands of countless coffee lovers."
This quote pulls in two different things for me that I want to highlight. One is supply. And one is demand.
So on the. Demand side. They’re linking small scale farmers to coffee buyers across the globe. So this is pulling in possibly small holders into a global market, giving them access to a market that they may not have otherwise had access to. Because you think about the network that Cup of Excellence or ACE brings to the table. They’ll they’ll know, more buyers from more locations —probably— then a local farmer who doesn’t travel much he doesn’t participate in these competitions often, um, doesn’t speak the language. So on so forth. So these competitions are a way to expose small holding producers or small scale farmers to a much larger market.
The other statement that I wanted to highlight in there was; ‘bringing a cup of the world’s absolute best to the hands of countless coffee lovers.’ So this is the rationing function of price, which distributes scarce goods to those consumers who value the most highly those with the highest willingness to pay.
So. This is why this is the juxtaposition to local consumption. Typically for a coffee region, coffee producing region, because most coffee production producing regions are in developing countries, there’s very um, little disposable income to spend on coffee. So by linking, by bringing this coffee out to where the money is we can get more people exposed to great coffee from that local country. So remember, in the previous episode I was talking about the virtuous cycle that is local consumption and how you get pride in the product? Well, this is kind of similar. You have producers who are sharing their coffee with buyers all over the world. And when they do well, they get an extreme bump in pride.
And it gets even more interesting. When we think about the commercial buyer or bidder as a representative of its customers. Their confidence in being able to sell that coffee for a profit represents an even stronger signal of correct valuation or uh, and even stronger validation of that quality.
So to me, these auctions are very interesting. I really like the thought that you have individuals, buyers, potential buyers who are bidding against each other saying, you know, I might be a bidder I would say, ‘I think that coffee’s worth $10 a pound.’ The guy next to me says, ‘well, I think it’s worth $11 and we do this back and forth while thinking about ‘I could have this coffee roasted. I can market it in such and such a way. And I can sell it to my consumers. And I think my consumers, my customers will buy that coffee.’
So we’re getting. This extension of valuation, almost all the way to the consumer because when a consumer buys a coffee, they’re validating that ‘yes, that coffee is worth $6 or $7 for the latte’ or what however it works.
So why auctions, like this are important to small holders? Well, Those high prices, that $246 or the $400 per pound can be inspiring. And, producers talk. They share techniques. Maybe not all of their techniques, but often enough to inspire other farmers to try something. Maybe, maybe a winning farmer will brag about a specific principle he used on the farm. Like, I don’t know, field hygiene. Um, or a specific pruning technique and he talks about it to other producers in the word slowly trickles out; ‘Hey, the guy who won $400 per pound for his coffee, he did skeleton pruning on his trees two years ago’ or whatever. And. And so that, that expands the, what the farmers are doing in their fields and it expands and advances their craft.
The national jury establishes that the characteristics of what the best a country can produce. And remember, I talked about that in episode three of this season. That the national jury to me is fascinating in that regard where the locals are able to say this is what represents our coffee. This is a, this is a high quality, beautiful representation of our coffee.
And then that is what trickles through the competition. Either the Cup of Excellence or a, what have you. That’s the coffee that trickles through and gets graded.
High scores can make a country competitive in a global market. So, coffee buyers will know that Colombia produces high-scoring coffee. Ethiopia produces high-scoring coffee.
Vietnam, while it’s one of the top producers by volume it’s not known for its extraordinarily high scoring coffees. That doesn’t mean that all the Vietnamese coffee is bad. It’s not by any stretch of the imagination. It’s just that, countries like Colombia or Costa Rica have focused on producing high quality coffee. And these competitions are a way to validate that work.
And then auctions are a pretty good way to determine value. And, uh, this also ties into the notion of tastemakers, which is something I’ve written about.
And is a, um, a concept that I read about in coffee from Ted Fisher paper that he wrote that I really like. And tastemakers are high-profile cafes such as Intelligentsia or Stumptown that can introduce a new taste profile to their customers and say, ‘This is what high quality coffee tastes like. This is an example of a high quality coffee.’ And the customers of these tastemakers have learned to trust tastemakers, trust their opinion know that they’re experts. And then they start to explore those taste profiles more. So these auctions are a really good way for those tastemakers to go into a country into these competitions, evaluate these samples. Bid on them. Buy them. Take them back to their cafe, roast them up, create a marketing campaign around them to tell the story, hopefully highlight the producer. And then expose those coffees to their customers. And through this cycle. Direct more money towards not only the producing country, but hopefully, towards the producer.
So these auctions are quite important for not only exposing small holder farmers to a large global market, but also exposing a large global market of consumers to a high quality coffee from a specific producing country.
So thank you for listening. This is the weekly coffee report from Oil Slick Coffee.