Insights

A Closer Look At What A $2.75 /Lb. FOB Minimum Price Means

by | Mar 13, 2017

Key Insight

In certain circles in the coffee and the cacao supply chain, price is a dirty word.  Price is established by the relationship of supply and demand, some cry.  Yet we know that global supply and demand have little to do with the transactions of lots of high quality coffee.

A few weeks ago, Kickapoo Coffee Roasters publicly committed to paying farmers in their supply chain a minimum of $2.75 FOB per lb. FOB (FOB stands for Free on Board, which means this is the price of the coffee ready for export) for all of Kickapoo’s green coffee purchases.  Their press release says that it is the highest published minimum price for green coffee, which is true.  I have seen quite a few roasters publish their average prices, or prices paid for certain coffees, but to my knowledge, others have not established a public price minimum.

Let’s take a closer look at $2.75.  Compared to the NY C price, this is incredible.  Perhaps a more accurate reference price would be the other milds price listed by the International Coffee Organization, which is at 159.26 on March 9. The Kickapoo minimum price is over 75% higher than this price.  However, if we compare this price to other prices paid for specialty coffee, we see that it is in the same ballpark.  Last year, Michael Sheridan wrote a piece on the Transparent Trade Coffee project out of Emory University  that discussed their report on transparency and how traceability and how retail price correlated to if the farm name was used as part of the marketing. On their webpage, they have a list of transparent coffees. Looking at the 52 “transparent” coffees on their website, the average FOB price paid is $3.65, and only 8 of the 52 coffees had FOB prices lower than $2.75/lb.