A common
question we get is “How much more are farmers getting paid for this coffee?”
The short answer is, well, it depends on the quality of the particular coffee
in question. We pay above Fair Trade prices for all coffees that we purchase, but there isn’t a simple fixed price we pay all farmers for their coffee.
While this answer may be adequate for some, we’ve always felt
that we’re only half-answering this important question about how our program
supports farmers. Therefore, we will begin publishing the prices that we pay to
each and every farmer, starting with this year’s harvest. This allows anybody
to compare the prices we pay with the prices paid by other coffee purchasers
(provided they publish this information).
One important note—UMF only purchases parchment coffee, or coffee
that hasn’t yet had the shell removed. The price per pound in parchment is the
only truly representative number of what we pay farmers. This number is
calculated as the amount of money that we directly pay the farmer divided
by the amount of coffee the farmer sold to us—giving price per pound. In 2012,
we signed contracts for parchment coffee with each farmer in our La Unión
office, and paid exactly this amount to the farmer. No hidden prices or
complicated math; it’s the most transparent number we can provide.
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UMF purchases parchment coffee, which is coffee that still has the shell attached.
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The Basics
UMF received and cupped 132 different coffees from 84 different
farmers in the 2012 harvest. From these candidates, we selected and purchased
the best 49 coffees from a total of 31 farmers. Eleven of these farmers participate
in UMF’s microloan and training programs. In all, we purchased a total of 54,830
lb of parchment coffee from farmers. Next, we sent the coffee to a processing
center in Honduras to remove the parchment and prepare it for exporting. This
left us with 38,354 lb of green coffee, ready to be exported to the United
States and sold.
The smallest amount of coffee that we purchased from a farmer was
61 lb of parchment coffee, and the largest amount was 5,000 lb of coffee. The
highest price that we paid was $1.98/lb parchment, and the lowest price paid
was $1.62/lb parchment.
Transparent Reporting of
Prices
Coffee is
generally sold either as fruit (cherry), parchment coffee, green coffee at the
farm it was produced, or green coffee FOB the port of export. There are
variable processing losses and costs that occur between fruit, parchment, and
green coffee. There are also variable costs incurred for export preparation,
transportation, taxes, and licenses between green coffee at the farm it was
produced and green coffee FOB the port of export.
Many
farmers sell their coffee in one form, but coffee buyers report their numbers
in another. The variability between each of these stages leads to the reporting
of numbers that are inherently nontransparent. The only number that we consider
transparent is the price per pound in the form that the coffee was purchased.
UMF purchases parchment coffee, so this is the only number that accurately
reports the price that we paid farmers—price/lb parchment.
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Once the shell (parchment) has been removed and coffee has been sorted, the green price can be calculated.
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We also
report price/lb green and price/lb green FOB Puerto Cortés, HN. These numbers
are included to provide a benchmark for comparison to numbers that other
companies and organizations report. It’s important to remember that, by virtue
of how these numbers are calculated, they’re estimates. The formulas that we
use to calculate price/lb parchment, price/lb green, and price/lb FOB Puerto
Cortés are included in the glossary at the end of this report.
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The FOB price of a coffee is determined once a coffee has been processed, packaged, and shipped to port.
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Contracts
That said, we firmly believe that this document
accurately and transparently represents the prices that we purchased in the
2011–2012 harvest. “How much do you pay farmers for their coffee?” isn’t the
easiest question—but now we’re proud to have a more complete answer.
The last two words in this term, Puerto Cortés, refers
to the seaport that all Honduras coffees are shipped from. You’ll encounter the
term “Price/lb FOB Puerto Cortés” when comparing other Honduran coffees, but
the last part of the term will be different when looking at coffees from other
countries.
This value is calculated as:
To illustrate how we purchase coffee, take a look at a sample
contract (below) that we signed with Alexis Moreno. Don’t be discouraged if you aren’t
fluent in Spanish. Here are the most important parts in the contract and a
brief explanation of each:
•
Código del Café (Coffee Code): A unique code
assigned to each sample we receive.
•
Cantidad (Amount):
The amount of parchment coffee we purchased in qq, or quintales. (One quintal is 100 lb, so here, 10.05 qq
corresponds to 1,005 lb.)
•
Oferta (Offer): The rate we offer for each carga of coffee. (One carga is 200 lb, and the price is listed in the Honduran currency,
Lempira. Here, 6,172 Lempira is equivalent to about $325 -- which means we’re
offering $325 per 200 lb. of coffee.)
•
Precio Contrato (Contract Price): The total
price paid to the farmer -- the amount of coffee purchased multiplied by the rate
offered. (Oddly, the standard practice is
to list the amount of coffee in quintales, or multiples of 100 lb, and to make
the offer per carga, or 200 lb. It’s a confusing system, and we didn’t invent
it. The contract price takes this difference into account.)
•
Firma (Signature): This contract was signed in
UMF’s La Unión office by Alexis and Charlie Heins, UMF’s Financial Accounts
Manager.
This contract is just one of the 44 contracts signed with 31 farmers. It’s an example of the only sort of transparency that we consider to be complete. We know exactly how much each farmer is being paid for their coffee because we are sitting at a table with them when the contract is signed; there’s nobody else in the middle.
Without further ado, here is UMF’s 2011–2012 Coffee Transparency Information:
Without further ado, here is UMF’s 2011–2012 Coffee Transparency Information:
There are a few parts of this document which may need more
explanation. A mezcla is the Spanish
word for “blend”—we refer to any coffee that combines more than one farmer’s
harvests as a mezcla. There isn’t a
price/lb green or FOB reported for any coffee that was part of a mezcla. During
the parchment removal process, the amount of weight a coffee loses varies. The
coffees are mixed before parchment removal, so there isn’t a way to accurately
state the processing loss that occurs for each farmer’s coffee. We use the sum
of all contracts and the total amount of green coffee to calculate the average
amount that all farmers were paid. This prevents us from reporting green prices
for individual farmers whose coffees are part of mezclas—there just isn’t an
accurate way of doing so.
Another peculiarity is the lack of price/lb parchment for
Mezcla #8. Coffee can only be exported from Honduras in 151 lb sacks.
Typically, the amount of green coffee isn’t an exact multiple of 151. (For
example, after processing, the amount of coffee we purchased from Rigoberto Paz
came to 3,739 lb. We shipped it in 24 sacks for a total of 3,624 lb -- 115 lb
short of the total he sold us.) Mezcla #8 is comprised of this leftover amount
from all of the microlots. The green price is calculated using a weighted
average of the amount of coffee from each farmer that went into Mezcla #8 and
the green price of that coffee. It’s an estimate, but it’s as close as we can
get to an exact price for the coffee.
You may notice that some farmers appear more than once on
this document. This occurs when farmers sell us more than one lot of coffee. We
cupped each lot separately, and if the flavor profiles were different, we kept
them separated. Farmers like Bernardo Ponce appear both as a farmer who
exported a microlot, and a farmer who contributed to a blend. He’s the same
farmer, but he sold us two separate coffees with distinct flavor profiles.
This document represents several years of work both by UMF
employees and the farmers that we work with. It’s the first time that we’ve
published this information, and we ask that you understand that it’s still a
work in progress. We’re already planning improvements for next year’s
transparency report, and we encourage any feedback or suggestions.
There are several ideas that are presented in our
Transparency Information that probably aren’t familiar to you if you don’t work
in the coffee industry. We’ve tried to explain the basics above, but if you’d
like more information—and especially if you’d like to compare our prices to
those paid by other coffee buyers—please refer to the glossary below.
Price/lb parchment:
Parchment coffee is coffee that has been picked, processed,
and dried, but has not yet had the shell (parchment) removed. All coffees that
UMF purchases are “in parchment” since local farmers don’t have access to the
equipment used to remove it.
This value is calculated as:
Price/lb green:
Green coffee refers to coffee that has been processed to
remove the parchment. Removing the parchment from coffee decreases its weight,
but the exact amount of this weight decrease can vary. Parchment coffee prices
are rarely reported by other organizations, so we include the amount that
farmers were paid per pound of green coffee that they sold us.
Since the amount of weight lost when processing parchment
coffee into green coffee can vary, this number isn’t a completely accurate
representation of the price we paid to farmers. For example, we paid both
Antonio Castellanos and Pablo Paz (Lot #1) the same parchment price. Due to a
higher processing loss for Antonio’s coffee, we were left with a smaller amount
of green coffee in his lot. This means Antonio’s green price is $0.31/lb higher
than for Pablo’s coffee—even though the parchment price is the same!
This value is calcuated as:
Price/lb FOB Puerto
Cortés:
Of the three prices reported, this is the only one that
includes money that was not paid to
farmers (unless the farm is large enough that it has its own mill for
export preparation and the farmer is able to directly export coffee). This
price includes all transportation costs, export preparation costs, export
licenses, and taxes. We include it as a reference since it’s commonly used by
others. But it’s important not to confuse this price with any sort of price
paid to farmers. It’s the least transparent of the prices—a high FOB does not
necessarily indicate a high price paid to the farmer.
The Spanish word for blend. When we combine multiple
farmer’s harvests into a single coffee to sell, we call that coffee a mezcla. All our mezclas are made up of
coffee solely from La Unión. Since the coffee all comes from the same region,
many other coffee buyers would refer to it as “single origin.” However, since
our mezclas are comprised of coffee grown by multiple farmers from multiple
fields, we insist on calling them blends.
