From the start.
The most important part of coffee sourcing is building lasting relationships. In these newsletters, over the last few months, Ruby has examined the coffee price crisis, and looked at how our sourcing model strives to create more sustainable models for farmers. With the newly released offering from Finca Natamaya in El Salvador, we wanted to take a deeper look into what that really means, so we went straight to the source.
Hermann and Nena are 4th generation farmers, and the land at Finca Talnamica has been in Nena’s family for 100 years. In 2005, Hermann and Nena bought Finca Natamaya, a parcel of land that had been used for coffee farming but had been abandoned fifteen years ago. As coffee farmers, their involvement traditionally ended with the fruit:
“We grew fine arabicas with the best agricultural practices available at the time. Our farms produced fruits that were sold to processing companies (Beneficios) and exporters.
This practice of selling the coffee to Beneficios coupled with a lack of feedback on issues such as process, cup quality, storage and packing, made us blind to quality and limited for the commercialization of our product.
Naturally, if your commitment ended with the delivery of fresh fruits, you miss the rest of the game. And we were. We found ourselves ill prepared to value our product and sell it in a market where quality is rewarded by better prices.“
The transition to specialty coffee farming presented an opportunity for their coffees to fetch higher premiums and help stabilize farm income in the face of rising production costs and falling coffee prices. Nearly ten years ago, during a visit to El Salvador, Jared, co-founder of Ruby, was introduced Hermann and Nena at this crucial transition period for them, and he was able to share his input as a roaster and green coffee buyer. While Hermann and Nena had learned and built experience farming beautiful coffee cherry quality, many farmers are often in the dark about how that is translated into amazing quality in the cup, and how many steps along the way can affect coffee quality. Those early conversations with Jared helped Hermann and Nena examine the idea of quality continued through processing, and how negotiating for prices with roasters and importers based on processed coffee dried in its parchment rather than cherry could greatly increase the prices paid for their coffees.
The next steps.
Those initial chats at the farm led way to strong relationship foundations that Jared recalls:
“With continued dialogue and conversations while Ruby was starting, I knew that Talnamica and Natamaya would play an important role in our menu and our identity as a company. Finding myself in a sea of new options for coffee sourcing, it was the relationships I had built that felt the most gratifying to explore, even if that sometimes meant more work.”
The relationship that Nena and Hermann built with Ruby was immediately different from the other people that Hermann and Nena were selling coffee to:
“First of all it very rewarding to know our coffees are in Ruby’s hands. Jared has walked the farms with us, has met some of the workers, has visited the school he has sent funds to, he has seen the trees where the coffee comes from. So the fact that he chooses to buy our coffees is specially meaningful.
Jared tastes our coffees and corresponds with us giving needed feedback on quality, he is enthusiastic and passionate, he invites improvement through better processing practices.
Other buyers, are anonymous! We only meet with their employees, thus there is no personal contact or special feedback about our coffee. The difference is from night and day.”
One of the earliest projects between Jared, Hermann, and Nena was setting up a massive lot separation plan. Instead of bulking all of their coffees together, Hermann and Nena worked with Cuatro M, a coffee mill in El Salvador, to set up an experimental approach of sorting coffee by the day it was picked and the location of the farm, which Jared remembers fondly:
“I believe it was in 2013 that we tasted roughly fifty tiny lots from their two farms when I went down to visit them in El Salvador. It was just remarkable, like a veil had been lifted, to see the broad range of flavor that was present. Some batches were fruity and juicy, others rich and creamy. We were able to use that sensory data to better understand quality potential of the farm plots, with the additional understanding that these may change over time (although they’ve remained quite consistent in years since). When I would walk the farms on that and later visits, I have an enriched and expanded sense of association between flavor and place. Some of those lots we tasted were only 300 pounds of coffee from tiny tracts of land and we could identify the small cluster of trees the coffee came from. I also developed a much keener understanding of the logistics involved in such lot separation and that such experimentation, while enjoyable that first year, wasn’t a practical or economical manner in which to process coffee in this market. In short, it costs way too much to the producer and exporter. So in the years since, we have struck a balance in building larger 3000 lb+ sized lots to build high quality lots that are more manageable logistically and reach a better margin for the producers."
Challenges.
While specialty coffee prices have grown in the last four years, the price paid for commercial grade coffees has stagnated and dropped. The cost of producing coffees for Hermann and Nena has consistently risen, but commodity pricing for coffee has dropped to dramatic lows that have never been seen before — returning to prices from the 1970s, but without any adjustment for nearly 50 years of inflation:
“The principal challenge is economic; the low prices we have been getting over the past four years have caused us great difficulties. Overall the price we are paid for the total farm harvest is lower than the cost of producing the coffee.”
Jared also was concerned about the total production costs:
“This is something Herman and I talked about four to five years ago really extensively. Not just that the commodity price was an issue, but I asked questions like: How does combing off the top 5% of coffee impact the quality of the rest of the coffee. Do resulting prices/premiums make up for the drop in quality of the larger lots? Is the quality premium enough to justify the amount of work? And these questions have informed my requests and approach to other, new relationships and made me a more responsible buyer.”
Previously, commodity pricing had presented an opportunity to help cover the cost of producing specialty coffee, but as commodity prices have dropped coffees grown on the lower elevation portions of Finca Talnamica and Finca Natamaya had begun to be sold at a loss:
“Another huge challenge is climate change. Two years ago, it was harvest time, the trees were full with ripe cherries and then an off season heavy rain pour came down, and the ripe cherries fell and cracked and part of the harvest was a loss. These challenges can be minimized with better agricultural practices (Shade management, fertilization, plantation renewal with young more resilient plants).”
Staying connected with Hermann and Nena helped Jared better understand these external factors:
“I was actually there when this happened in December 2016. It was pretty devastating! Everyone was so optimistic about the harvest and then BAM, sudden windy downpour and it was a total shift of energy and emotion.”
While these agricultural difficulties from climate change can be mitigated with a number of different initiatives, each one of those costs money to implement, further creating a bottom line loss for the farm operation. To combat some of these factors, Ruby is proud this year to strengthen and push our commitment to our partnership with Hermann and Nena. The first is a larger purchase of coffees from both Finca Natamaya and Finca Talnamica to feature these lots in Creamery Seasonal Blend, while the second is establishing advanced orders and fixed prices for future coffee seasons:
“We welcome Jared's increased order, we actually look forward to having advanced orders/fixed price to secure the income to practice a better agriculture. Having the certainty of a purchase conveys a sense of economical security, peace of mind, decreased financial risk that encourages us to produce better coffees.”
Onward.
As Ruby has been able to grow, we’ve been able to invest more into our farming partnerships every year. With both a greater demand for coffee every year and more working capital for Ruby to pay higher prices, and with Finca Talnamica and Finca Natamaya pushing for quality improvements in their coffees, this year saw a massive order of coffees from Hermann and Nena at specialty coffee premiums for coffees that previously would have been sold at lower prices. This was an easy decision to make for Jared:
“As we developed a green coffee outlook for summer and fall 2019, part of that consideration is how we can maximize our impact with our existing partners and strengthen those relationships as much as possible. Rather than buying a coffee that meets our quality and cost needs but comes up short on social or environmental impact, we dug in to the opportunity to become a fuller partner with the folks in El Salvador. “
Every year, Finca Talnamica and Finca Natamaya have seen jumps in the quality of the coffees that are produced, but seeing the entire coffee production on the farm transition to specialty lots reserved for single origin releases isn’t a realistic shift:
“The ideal outcome is for the market to buy coffee for a fair price. For the past couple of years, since meeting Jared and since our incursion into the specialty coffees our higher altitude coffees get bought at better prices, this leaves us with the rest of the crop, which is around 80% sold at inferior prices.”
It’s important to note that stories like the one this newsletter is telling often end on a positive note — hope for the future, and a celebration of new initiatives. The issue with that is it ignores the reality of the situation. Even with more than doubling the amount that we buy from Hermann and Nena and setting up advanced contracts, it still leaves a large majority of their coffees to be sold at lower costs than they should be. The Coffee Price Crisis is just that: a crisis. With climate change rapidly advancing and no foreseeable shift in the commodity coffee market’s pricing, it’s important to note the amount of risk and uncertainty that coffee farms like Finca Talnamica and Finca Natamaya face.