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Bear market boomerang.



The 1997 bull coffee market frightened many small U.S. roasters. The question on every roaster's mind was, "How do you sell a product whose raw material price is between three and four dollars a pound?" It took every ounce of courage for those roasters who held-back from the urge to buy into the skyrocketing market. For those who held back the reward was the benefit of a reversal in market fortunes, beginning in late 1997 and continuing into 2002. In the initial tumble of values those who had held back jumped on the opportunity to take advantage of their competitors' higher inventory costs. For others it was necessary to discount their inventory values and sell at lower margins to remain competitive.

By 2001 the "C" market was range bound, but the range was in the half-dollar range, and at origin the farm workers were deep into their second year of economic strangulation Noun 1. economic strangulation - punishment of a group by cutting off commercial dealings with them; "the economic strangulation of the Jews by the Nazi Party"
penalisation, penalization, penalty, punishment - the act of punishing
. Roasters were getting used to career low coffee prices, and at the same time were becoming aware of the need for supporting farm produce prices for coffee. Roasters, sensitized sensitized /sen·si·tized/ (sen´si-tizd) rendered sensitive.

sensitized

rendered sensitive.


sensitized cells
see sensitization (2).
, by articles in the trade periodicals, and newsletters, and programs sponsored by SCAA SCAA Specialty Coffee Association of America
SCAA School Curriculum and Assessment Authority (England)
SCAA South China Athletic Association
SCAA Spill Control Association of America
SCAA State Communities Aid Association
 began thinking about value added Value Added

The enhancement a company gives its product or service before offering the product to customers.

Notes:
This can either increase the products price or value.
 items from origin such as those certified by sustainable coffee organizations as Rainforest Alliance, and Smithsonian Migratory Bird Center The Smithsonian Migratory Bird Center is dedicated to fostering greater understanding, appreciation, and protection of the grand phenomenon of bird migration. External links
  • Smithsonian Migratory Bird center

This article or section needs
 (SMBC SMBC Sumitomo-Mitsui Banking Corporation
SMBC Stockport Metropolitan Borough Council (UK)
SMBC South Main Baptist Church
SMBC Single Mother by Choice
SMBC Stowe Mountain Bike Club (Stowe, VT) 
), Transfair USA, and the various Organic certifying organizations. A few even initiated direct partnering relationships with producer farms. But mostly we enjoyed the lowest prices for best quality coffee in decades, and few if any of the roaster trade thought that was a bad thing.

But something is happening, something strange and unexpected and dangerous to the health of all small roasters. Everything we sell is being reduced in value: our inventories, and likewise our accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying . While the number of pounds sold might have stayed steady or increased, unit sales unit sales

Sales measured in terms of physical units rather than dollars. Unit sales data are often used by financial analysts when evaluating the health of a company.
 did not increase at the rate that prices fell. Margins may hold their own -- even amidst growing competition they may even have increased for the lucky few, but the number of cents-per-pound profit just isn't what it was when the "C" was north of a dollar. Meanwhile overhead costs overhead costs

see fixed costs.
: rent, payroll, employee benefit packages, insurance costs, utilities, and capital expenditure costs have risen. One thing is becoming painfully clear in this third year of low prices. There is plainly less money to go around.

Halloween may have passed, but the goblins are at the doors and windows Doors and Windows is a multimedia disk by the Irish band The Cranberries. Track listing
  1. "Dreams Live" (London Astoria)
  2. "So Cold In Ireland"
  3. "Away"
  4. "I Don't Need"
  5. "Zombie" (Live Woodstock)
. Less money, lower profits, lower value businesses, and the specter of less choice coffees from origin, in years to come, may trigger another violent up-swing in specialty coffee values. The added wrinkle in this possible scenario is that poorer grades and Robusta coffees may stay at historically low price levels even as the better grades of best quality Arabicas will takeoff. In this story-line we may all want to hide under the mattress.

Four corporations, their subsidiaries and affiliates buy almost half of all the green coffee in the world. These companies individually and collectively seem to believe that the way to combat low prices is to work to increase consumption of coffee. What they are saying is that the world would be a better place if they did more business. These are the descendents of the same brands that brought coffee to its knees in the 1960s by selling products so bad in taste that an entire generation of Americans turned its back on them. These same companies are the largest buyers of the oceans of low grade Robusta ro·bus·ta  
n.
1.
a. The coffee plant Coffea canephora that is commercially grown but whose beans are of lesser quality than arabica beans.

b. The seed of this plant.

2.
 end Arabicas coffees that are drowning the price of better beans and the farmers that produce them today History and common sense tell us that bad tasting coffee does not increase consumption.

Oxfam International, made up of 12 organizations that work, in part, to ease poverty in the world, has issued a Coffee Rescue Plan. It includes proposals to destroy surplus coffee stocks, promoting trade only in quality coffee, paying farmers a fair price for their beans and creating a fund for farmers so that they can develop alternate means for making a living. You can read the full text of the 56-page Oxfam report Mugged: Poverty In Your Cup at www.oxfam.org.

Now is the time for all good men to come to the aid of the party. It's no joke. Buy some value-added specialties, get Organic Certified (get some of the costs bock Noun 1. bock - a very strong lager traditionally brewed in the fall and aged through the winter for consumption in the spring
bock beer

lager beer, lager - a general term for beer made with bottom fermenting yeast (usually by decoction mashing); originally
 under the National Organic Certification Cost-Share Plan, authorized by the 2002 Farm Bill) and start roasting organic beans. Join SMBC's "Bird Friendly" shade grown coffee program or other programs with sustainable coffee ideals. Buy some Fair Trade coffee to guarantee farmers a better than marker price. And where possible, upgrade your blends to better and better coffees, outclassing the competition. This takes work, but initiating programs as these will help your bottom line by raising your average price per pound. Support efforts that ease the lot of families at origin such as Grounds For Health and Coffee Kids (www.coffeekids.org) whose programs support alternate ways for coffee families to earn money so that they are no longer wholly dependant on their personal coffee economy.

We can add value to the things we sell buy buying the best beans, and by introducing products that support farmers while giving consumers broader market choices. It will not rake courage for roasters to do the right thing now, only a sense of self preservation, and a modicum mod·i·cum  
n. pl. mod·i·cums or mod·i·ca
A small, moderate, or token amount: "England still expects a modicum of eccentricity in its artists" Ian Jack.
 of common sense. For those who hold back the price may be a painful economic one to pay Those who choose their course wisely will help reverse the trends that are strangling farmers, and will soon engulf en·gulf  
tr.v. en·gulfed, en·gulf·ing, en·gulfs
To swallow up or overwhelm by or as if by overflowing and enclosing: The spring tide engulfed the beach houses.
 the small roasters at home as well. In the long run action now will save our own businesses, and our friends at origin.

Donald N. Schoenholt, practices what he preaches. His company, Gillies Coffee, Brooklyn New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
 is an original supporter of Coffee Kids, and Grounds For Health, a participant in the SMBC "Bird Friendly" shade grown coffee program, and is New York City's first licensed Fair Trade roaster. He can be reached at 1-800-344-5526
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Title Annotation:bear market in coffee
Author:Schoenholt, Donald N.
Publication:Tea & Coffee Trade Journal
Article Type:Industry Overview
Geographic Code:00WOR
Date:Feb 20, 2003
Words:1020
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