Thoughts on El Salvador COE Auction

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The 2009 El Salvador COE auction took place this week.  Transcend wasn't bidding directly, but was happy to take some cartons of fine coffee through Mercanta.  The size of auction lots are still too big for us to handle on our own.  After the auction was over I commented on Twitter that the results were very disappointing.  The overall amounts paid for the coffee were very low compared to previous years; with the average price paid per pound dropping almost $0.75.  You might think as a green buyer that I would be happy about the low prices, and on a purely commercial level, I guess I am.  But from a more global perspective taking into account the human factors and looking towards a sustainable model, the lower prices disappoint me.  I know first hand how hard everyone works at the Consejo, and how well organized the El Salvador COE event is.  I am discovering how great the coffee out of El Salvador is, something most other specialty roasters knew long ago (remember I am pretty new to the specialty coffee industry).  So what is the reason for this drop in prices?  Truthfully I can only speculate.

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One might argue that the current global recession is to blame, and that generally speaking, roasters just are only willing to pay around $2.65 - $3.50 per pound for great coffee.  Sure it is true that the first place coffee sold for over $22 per pound which is the highest price paid yet for in El Salvador's history.  But when we look to some of the other auctions this year, we have already seen much higher numbers, with the Best of Panama Auction, the Esmeralda Auction, and even the Colombia COE Auction.  So truthfully, I don't think we can blame the recession for the auction results, as it is clear roasters are willing to pay premiums for what they consider quality.

Another factor might be the average lot size put forward through the El Salvador auction.  While on average the lot sizes were bigger this year, they weren't that much different as each box was vacuumed packaged and contained 75 pounds.  Perhaps scarcity?  We know of the shortage of coffee in Colombia this year, and the same can also be said for Panama.  Perhaps higher prices for these previous countries are a result of short supply?

One of my followers on Twitter suggested that the problem with low prices this year was due to the lateness of the auction, and suggested that most roasters already had filled their orders and the containers had already sailed.  This might also be true, and to be honest I don't know if this is true.  If it is, then for next year it is a simple fix, at least in theory; hold the auction earlier.  The balance though is allowing the coffee to be harvested and processed, and then allowing it enough time for it to rest, so that it shows its true character.  So maybe the fix isn't so simple after all.

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Another possible reason for why the auction results aren't as good as in previous years is that the COE program is working.  Essentially the COE program is a high-end marketing venture, which aims to promote the best quality coffee within a participating country, to a discerning marketplace.  One of the natural by-products of assembling an international jury in each country, is that those who volunteer to judge get to know growers directly, and start to have more and more opportunity to buy directly.  I know that I visited some farms in April, and as a result made some purchases of coffee not submitted to the auction.  I know of many other roasters who did the same thing too.  So perhaps the lower prices in this year's auction are a result of decreased demand, as more and more roasters are sourcing their coffee directly.  If this is the real reason for lower prices, than it is a mixed blessing.  On one hand we would like to see COE coffees obtain better prices, and on the other hand, farmers who achieve the COE standards have new opportunities to sell more of their coffee directly to buyers, at higher prices, and in higher volumes.  To me this sounds like good sustainable business practices.

At the end of the day, I don't know what if any one, or any combination of the above resulted in the lower prices this year.  If you have any thoughts on this, or any other issue facing coffee prices, please share your comments with me.