For all of you wondering what the hell all of the data on our info cards is, don't fear, here's a bit of an explanation, including some updates on my own way of thinking about how we should be reporting our transparency information and how much.
First of all, here's a glossary of the terms used:
Farm Gate – The price paid per lb or kg of coffee to the farmer, normally reported in local currency.
F.O.B – Freight on board – The price paid including all at-origin fees (can include wet & dry milling, export costs incl. export licenses, grain pro plastic bags, coffee sacks, logistics, port handling, management costs, QC, harvest financing and so much more).
EXW Total – Ex Works – Average price after all costs (sometimes also known as FOT, Freight on Truck) including import costs, logistics, insurances,port-handling, QC, Warehouse costs etc.
Cherry – the whole coffee cherry as it is picked from coffee trees
Parchment – the processed and dried coffee, still within its papery parchment layer
Green Coffee – raw coffee that has had its parchment removed and is ready to roast
When I first started working on our new packaging, and the design for the information card, I went down the rabbit hole on the various prices paid for coffee at each stage of the coffee supply chain. Naive as I was, I figured the best way was to go as granular with the information as possible. As well-meaning as this idea was, I wasn't fully informed regarding the amount of work involved in reporting farm gate prices. There is no copy-paste way to calculate this price even within one coffee producing country, let alone across all of them. It also puts a lot of extra work and expectation on coffee producers. Having said that, I do believe that where this information is available, it is good to be transparent and report it, as long as the farmer/producer is also happy for this information to be shared. The more transparent we are as roasters, the more we can set our sides from other companies professing to sell "sustainably sourced" coffee.
First, looking at the different levels of separation in the supply chain help understand some of the context behind different farm gate prices, and their level of complexity. A single producer with their own micromill in Costa Rica will, for example, be able to give a pretty simple farm gate price, at least for green coffee prior to dry milling and preparation for export. This is because they are in charge of the entire process from planting the seeds up until the point it's handed over to the dry mill and exporter. Those in Costa Rica without their own wet mill will, however, most likely sell cherry to a cooperative to process and be mixed into community lots (speaking incredibly simply). At that point, the farm gate price would be the price for cherry delivered to the coop wet mill.
Below is a full breakdown of all of the costs that go into the final farm gate price from our current Kenyan coffee supplier Lot 20. As you will see from the list, the amount of steps that go into producing a kilo of green coffee and the costs attached to them are many and complex:
Farmgate Price Calculation for Green Coffee
Context
The "lazy process" is a colloquial reference to a processing method that still adheres to a controlled fermentation protocol. It involves natural anaerobic fermentation with minimal intervention, followed by slow drying to achieve a complex flavor profile.
The cost structure here reflects the investment required to maintain high-quality standards while also compensating for post-harvest losses, transportation, and quality control.
Step-by-Step Calculation
1. **Cherry Cost for 1 kg Green Coffee:**
- Avg. cherries needed: 5.75 kg (average of 5.5 to 6 kg)
- Cost: 89 KSH Å~ 5.75 = 511.75 KSH
2. **Transport Cost of Cherries to the Washing Station:**
- Cost: 15,000 KSH for 3,000 kg of cherries
- Cost per kg: (15,000 / 3,000) = **5 KSH per kg of cherries**
- Total transport cost for 5.75 kg of cherries: 28.75 KSH
3. **Loss for Low-Grade Coffee (Assuming 7.5% Loss):**
- Effective cherry cost after losses: (511.75 + 28.75) Å~ 1.075 = **625.52 KSH**
4. **Drying Cost for Parchment:**
- 1.2 kg of parchment (assuming 15% milling loss)
- Cost: 1.2 Å~ 20 KSH = **24 KSH**
5. **Transport Costs (To and From Dry Mill):**
- Cost: 15,000 KSH for 3,000 kg (two trips)
- Cost per kg: (15,000 / 3,000) Å~ 2 = **10 KSH per kg**
6. **Milling Cost:**
- Cost: 7,000 KSH for 1,000 kg of parchment
- Cost per kg: (7,000 / 1,000) = **7 KSH per kg**
7. **Hand-Picking Defects:**
- Cost: 500 KSH per 60 kg of green coffee
- Cost per kg: (500 / 60) = **8.33 KSH per kg**
8. **Packaging Cost (Per 60 kg Bag):**
- Jute bag: **8.33 KSH**
- GrainPro bag: **4.5 KSH**
- Marking: **0.67 KSH**
- Total packaging cost: **13.5 KSH per kg**
9. **Yeast Cost:**
- Cost: 15,000 KSH for 75,000 kg of cherries
- Cost per kg of cherry: (15,000 / 75,000) = **0.2 KSH**
- Convert to green coffee: 0.2 Å~ 5.75 = **1.15 KSH per kg**
Total Cost per kg of Green Coffee (Farmgate Price):
Total: **625.52 + 24 + 10 + 7 + 8.33 + 13.5 + 1.15 = 689.5 KSH**
Conversion to USD (Assuming 1 USD = 145 KSH):
Farmgate price in USD: **689.5 / 145 approximately 4.76 USD per kg of green coffee**
Final Price Summary
Final Farmgate Price:
The updated farmgate price for one kilo of green coffee, considering all transport and processing costs, is
**689.5 KSH or approximately $4.76 USD**.
This level of transparency is rarely what we receive, with good reason. I'm incredibly thankful to Sidney from Lot 20 for such a detailed breakdown, as it helps to understand the complexity of the subject and why we shouldn't always expect to have all of the information immediately available to us as roasters. And if we expect to be provided with this information, we should expect the extra work to be reflected in the price we pay for green coffee.
At the end of the day, we need to choose who we work with carefully and trust that they are doing the right thing for everybody within the supply chain. That plus constantly asking questions about these topics and, as I mentioned at the beginning of the article, reporting whatever transparency information is available to us.
The more we question the status quo, the more we can understand what we should be doing to improve our own buying practices for the betterment of the quality of life of the most important members of the supply chain.
Big thanks to Dave from Omwani, who we bought the Lot 20 coffee from, for putting up with my questions and being one of the most helpful people in coffee! Check out our incoming Ethiopian coffees imported by Omwani later this year. They're all bangers!