How much does the farmer get per cup of coffee?
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The price of coffee has increased continuously and remained at a high level (over 2 USD/pound) for more than two years. Despite the higher prices, not everyone in the supply chain has benefited from this. Many farmers still sell coffee at low prices even though the profits are not enough to cover production costs or cover their living expenses. In contrast, roasters and coffee shops raise prices for consumers. So how much does the farmer get in the retail price of a cup of coffee? Find out with 43 Factory Coffee Roaster through this article!
Prices paid to farmers and costs in the supply chain
To understand the final price farmers receive per cup of coffee, we need to look at the upstream costs that contribute to the amount charged per bag or cup of coffee.
Farmgate Price vs FOB
Basically, the farmgate price is the amount the real, direct farmer receives. The term derives from the amount the producer is paid “at the farm gate” before export fees or additional costs. It is important to note that the farmgate price (the farmgate price) is different from the C price (the arabica’s trading price on the Intercontinental Exchange (ICE)). It is usually lower than the C price because the C price is mainly determined by supply and demand, if coffee is scarce, the price will push up. Usually, it is difficult to know the exact farmgate price because it is not publicly available. Only traders and roasters know this price.
The FOB price, is the amount to be paid for a container of ready-to-export coffee. This price includes the farmgate price and other costs such as milling, storage, transportation, insurance, customs and intermediaries’ commissions.
According to SCTG, in 2021 the global average FOB price for 87-point coffee is $3.70 per pound, while the average C price is only $1.42 per pound. And the farmgate price – the price the farmer receives is lower than the price C, so it can be seen that the farmer only receives a small part of the coffee value. They have to bear many risks and difficulties in the production process, but they do not benefit from fluctuations in world coffee prices. This is an economic injustice that coffee farmers are suffering when they are forced to price and do not benefit from the increase in the price of coffee in the international market.
Farmers’ profits decrease when paying for transportation and production fees
In addition to the cost of transporting labor and paperwork, there are many costs related to transporting and exporting coffee that farmers need to pay. For example, truck transport costs can be as high as $2 per 60kg bag to move coffee from the farm to the local cooperative. Total domestic shipping costs can be up to 4 USD/bag. This is a large expense that can become a burden for coffee farmers. In addition, if roasters import coffee through traders, farmers will have to pay a percentage to traders (commission fees), making the profits they receive already low. than.
Coffee farmers also have to pay many other costs to maintain production activities. They need to reinvest a large part of their income into their farm to buy new seedlings, repair and maintain equipment, replant old trees or purchase agricultural supplies. They must also share profits with other workers in the coffee supply chain, such as pickers and millers. According to Peter Roberts – Specialty Coffee Trading Instructor (SCTG), only about 60% of the FOB price (export price) is paid to the farmers, while the remaining 40% is used to pay the costs of the transaction. water and intermediaries.
Retail prices and costs of roasters
Peter shared that retail coffee prices are significantly higher than they were about 30 years ago. The specialty coffee retail price index (SCRPI) collected by Transparent Trade Coffee shows that most specialty coffee roasters in North America sell 1lb of roasted beans for between $18.28 and $38.99 USD. However, this retail price includes not only the purchase price of the green coffee, but also other costs incurred by the roaster. It is estimated that roasting, packaging, and labor costs add about $4 per lb to the retail price.
In addition, we also need to know that when roasting, coffee beans lose about 14.7% of their volume. This means that 1lb (about 0.45kg) of green coffee yields only about 0.85 lbs (about 0.39kg) of roasted beans for sale. Therefore, a standard bag of 60kg of green coffee is not equivalent to 60kg of roasted coffee.
How much does the farmer get per cup of coffee?
We must first determine the retail price of a cup of coffee. Based on the Specialty Coffee Association’s standard brew ratio (1 part coffee to 18 parts water) it can be estimated that a 16 oz (473 ml) cup of filter coffee requires 25 g of ground coffee. Therefore, one pound of roasted coffee can make about 18 cups of coffee.
The selling price of a pound of specialty coffee usually ranges from 18- 39 USD. Thus, each cup of coffee costs from 1 to 2 USD. However, consumers typically pay around $4 for a filter coffee at coffee shops. This shows that cafes can make between US$1.8 and US$3 in profit per cup before deducting staff and other expenses.
For farmers, according to the International Trade Center, producers account for only about 10% of the retail price of coffee. If applied to the above examples, farmers will receive about 0.4 USD per cup of coffee.
This is a very low payment compared to the efforts the farmers put in. According to Chad Trewick, owner and founder of Reciprocafé, consumers are still not paying enough for coffee so that farmers can enjoy the value of the product. While there are concerns about coffee prices going higher, Chad believes they are still not paying enough for coffee so that farmers can enjoy the commensurate value.
What about you, do you think 0.4 USD is a reasonable payment for the efforts of the coffee farmer? Share the article and follow 43 Factory Coffee Roaster to learn about coffee farmers in the next articles!