Insights

The Price Of Distortion – Speculation And Alternative Trade Models In Coffee

by | Oct 16, 2018

Key Insight

“The commodity coffee complex is an absolute beast and we aren’t going to tame it into good behavior by circumventing it, nipping at its heels, or asking or shaming it to play nicely.” Adam Kline, founder and CEO of Coffee Unified.

After my recent posts on the Scandal of the C-Price, I reached out to Adam Kline, founder and CEO of Coffee Unified, for his insights. Adam has a career in the coffee trade: as an importer, coffee buyer, and now as a development entrepreneur in the coffee sector with Coffee Unified. We’ve edited our many emails and chats over the past few weeks to construct a Q&A format for this post.

Adam highlights the risks of speculative trading in coffee, and how this can drive price volatility.

PH: First, thanks for taking the time to walk me through the complexities of the coffee trade – I’m learning a lot from the exchange. You’ve challenged me with some great articles, forcing me to dig deeper into commodity markets than I was expecting.

Can you explain your understanding of what’s happening in the coffee market, to cause so much volatility in prices?

AK:

Thanks Paul! I’ve enjoyed reading the Coffeelands blog for many years and I’m excited to be a digital guest!  As for my understanding of the market, here’s a disclaimer:  I’m a coffee guy, not a commodities market expert.  My company – Coffee Unified – is a social enterprise that builds relationships to support specific sustainable development goals. So I’m not typically combing over supply and demand numbers or analyzing coffee futures charts. That said, for years I sat with a futures screen on my desk and was witness to some historic market changes and days of what can only be called “ridiculous” volatility.   Part of what I saw was an evolution of price dysfunction. Increasingly, the problem has felt very systemic, but many proposals (including your C-5 benchmark) are focused on treating the price symptom alone.