Coffee Rumenations

I have been thinking quite a bit lately on the current state of the world and its impact on my world of coffee.  I received an email from Rachel Peterson yesterday, wherein she indicated that their harvest was half of what it was last year.  I am not sure if that is all weather related, but I know that the whacked weather that I experienced in February in Panama wreaked havoc with the coffee and was at least partially responsible, if not wholly.  Those 5 days in Panama have given me a lot to think about in terms of the future of Specialty Coffee.  Global warming seemingly is going to play games with the production of coffee, as I witnessed first hand, the confusion that the plants were experiencing.  The rain was setting bloom way too early, and as a result, those flowers will not set fruit, or if per chance there is fruit, it will be significantly reduced.  The winds that blew through Panama and Costa Rica, and as it turns out El Salvador too, were very damaging, not only to the plants (stripping them of their leaves) but also to farm's infrastructure as well (mills, drying beds, etc.).  In short, I think that our rapidly changing weather patterns are going to make the coffee world much more tumultuous, and unpredictable, and in the end the price of coffee will have to go up, as volumes shrink.  Demand will outpace production, and that will have to force the prices up.  On one hand this is a good thing, as farmers should be getting paid more for their crops, but on the other hand, I am not sure that the specialty coffee industry is ready for a 30-50% increase in the price of coffee.  Thankfully this topic is one of the issues being discussed at the upcoming SCAA Symposium, although I am not sure what we can do to prepare for this, other than brace ourselves and our customers for the price increase that is bearing down on us.

The economy looms large in all of our minds right now, and while I try to ignore the talking heads, who make things worse with their constant nattering and naysaying, the reality is that the world economy is in a tailspin.  Just simple factors like currency rates have resulted in our operating costs going up by 30%, a cost that we have not passed on to our customers as of yet.  I think that banks, especially in Canada, are both contributing to, and benefiting from the crisis, and are doing what banks do best, making money.  I know that the banking fundamentals in Canada are strong, and yet they are essentially shutting the valve on credit, making it very difficult to borrow.  I have heard that Royal Coffee is totally changing their terms and forward contracts, making it very difficult to buy coffee on forward, and it is all credit and cash flow related.  Companies are clawing back terms, and forcing customers to pay cash or credit card to avoid receivables.  All of this will play havoc with the specialty coffee industry.  When I hear of some of the low margins on wholesale coffee out there, I am sure that some companies will simply not survive.  Thankfully, our business has remained constant, and even grown a bit, which is encouraging in these tough times.  Nonetheless, the coffee industry has gotten a lot harder to navigate both here at home, and abroad, as I know that producers are having a hard time financing their crops, and will likely have a hard time buying fertilizer and other key ingredients required in the growing of quality specialty coffee.

While it might seem like I am spewing doom and gloom, I am not.  I am however painfully aware of the changes that are coming our way, and as an industry, we can either be prepared and weather the storm, or we can be overwhelmed and sink.  I personally am trying to get my head around how things are changing, and how we as a company and as a global citizen can participate in an ongoing and meaningful way.