{"id":75648,"date":"2024-09-27T10:32:34","date_gmt":"2024-09-27T00:32:34","guid":{"rendered":"https:\/\/projectorigin.coffee\/?p=75648"},"modified":"2024-09-27T12:23:25","modified_gmt":"2024-09-27T02:23:25","slug":"green-coffee-available-on-spot-will-run-out-is-your-roastery-prepared","status":"publish","type":"post","link":"https:\/\/projectorigin.coffee\/es\/green-coffee-available-on-spot-will-run-out-is-your-roastery-prepared\/","title":{"rendered":"Green coffee available on spot will run out. Is your roastery prepared?"},"content":{"rendered":"\n

PART I: The Australian coffee market has been struggling. <\/h2>\n\n\n\n

Wages are up, inflation has made the cost of all inputs higher, interest remains at the highest level it\u2019s been in over a decade. Now add to that the cost of buying good quality coffee just keeps going up.<\/strong><\/p>\n\n\n\n

How is a roaster supposed to navigate this? Let\u2019s look at a scenario together.<\/p>\n\n\n\n

You\u2019re a roaster. You rely on having good quality green beans, consistently coming through your door every week, and being able to pay as you go, because you sell to your cafe clients every week. You need coffee from at least 5 or more origins, and many of them you need all year around. <\/strong><\/p>\n\n\n\n

It\u2019s August. Around the time you usually plan out stock from countries like Brazil, Colombia and PNG. You know that contracting is the best way to get good pricing, and regular supply from your importer. But this year, when time came to renew your contract for [enter origin here], the price jumped from, say, AU$8.50\/kg to AU$11.00 or even AU$12.00\/kg\u2026 <\/strong><\/p>\n\n\n\n

\u201cWhat the\u2026?\u201d<\/strong><\/em><\/p>\n\n\n\n

Your importer says, \u201cIt is because the coffee market price is much higher, all costs have gone up, pickers are demanding more pay in producing countries, freight rates are high, interest costs for holding coffee are high. Blah, blah, blah!\u201d<\/p>\n\n\n\n

You say, \u201cNo thanks. I\u2019ll shop around.\u201d Or, even better, \u201cNo thanks. I\u2019ll wait until prices come down.\u201d Sweet. Let\u2019s see how that\u2019s going to work out. Ready?<\/p>\n\n\n\n

\n
    \n
  • Roaster doesn\u2019t commit to contract coffee from importer.<\/li>\n\n\n\n
  • So importer doesn\u2019t commit to import coffee from supplier at origin.<\/li>\n\n\n\n
  • Roaster shops around. Finds most prices are similar. They\u2019re all high. <\/li>\n\n\n\n
  • Roaster continues to wait.<\/li>\n\n\n\n
  • Several months pass. Roaster did not contract anything because the price did not come down.<\/li>\n<\/ul>\n<\/blockquote>\n\n\n\n

    As stock gets critically low, roaster reaches out to every green supplier they\u2019ve worked with since they started in business. No one has enough spot stock to offer them to meet their production needs. And anyone that does is charging AU$13.00\/kg for it now.<\/p>\n\n\n\n

    Roaster now has two choices<\/strong>\u2026 1) pay a price they could\u2019ve avoided, or 2) stop roasting.<\/p>\n\n\n\n

    Now ask yourself this question, if faced with those two choices in the next 6 months, is your roastery truly prepared?<\/strong><\/p>\n\n\n\n

    And if not, how can you get prepared?<\/strong><\/p>\n\n\n\n

    <\/div>\n\n\n\n
    \"\"<\/figure>\n\n\n\n
    <\/div>\n\n\n\n

    PART II: How can a roaster prepare for stock shortages when prices are so high? What are the options<\/strong>?<\/h2>\n\n\n\n

    If you don\u2019t want to be stuck paying a crazy spot price a few months from now, or worse, don\u2019t want to actually run out of green beans to roast and sell your cafe clients, what can you do to prepare?<\/strong><\/p>\n\n\n\n

    In short, you should contract coffee at least 4-5 months BEFORE your current contract ends.<\/strong> Don\u2019t play the risky waiting game, because if it goes badly it\u2019s your business, your livelihood, that suffers.<\/p>\n\n\n\n

    I\u2019m sure you\u2019re thinking one (or all) of the below: <\/p>\n\n\n\n

    \n

    \u201cI never needed to contract that far in advance before. So I shouldn\u2019t need to now.\u201d<\/p>\n\n\n\n

    \u201cThe price is too high and I can\u2019t pay that much.\u201d<\/p>\n\n\n\n

    \u201cI\u2019m sure something else will come available.\u201d<\/p>\n<\/blockquote>\n\n\n\n

    If you\u2019re thinking like that, you\u2019re not alone. It\u2019s very understandable. Unfortunately it\u2019s also insanely risky<\/strong> for your business. The business you\u2019ve worked hard to build!<\/p>\n\n\n\n

    Most roasters in Australia right now are thinking like that. The trouble is as more and more roasters avoid contracting importers bring less stock in, and hold less for spot sales – we\u2019re at the lowest level of spot availability that we\u2019ve been at in recent memory.<\/p>\n\n\n\n

    But crunch time will come, and roasters will have to roast something.<\/p>\n\n\n\n

    If coffee market prices stay high, roasters will have to buy coffee at whatever price is going, but will be worse off because you\u2019ll only have whatever spot options are left, and it\u2019ll be slim pickings – either poor quality, a mish mash of lots, and prices the importer demands because you\u2019re out of options.<\/p>\n\n\n\n

    If coffee market prices drop, every roaster that is currently holding back from contracting will look to buy, and that boost in demand will drive prices up anyway, or at least it\u2019ll stop prices from falling very far.<\/strong><\/p>\n\n\n\n

    Either way, the risk is high,<\/strong> and it\u2019s you that suffers, so let me be super clear, the waiting game is not a good option.<\/strong> If you need stock in the next 6 months you should be contracting now.<\/strong> Remember it takes on average 4-5 months to import new coffee into Australia right now – from sample approval to all steps involving milling, packaging, container loading, sailing, customs clearance and the inevitable delays you never expect when it comes to logistics. <\/p>\n\n\n\n

    Add to this the consensus that the coffee market price is likely to remain in the $2.45-2.65\/lb range for the foreseeable future, 6-12 months, and it really doesn\u2019t make sense to wait.<\/p>\n\n\n\n

    So, what are your options? How can you contract stock without breaking your budget? Let\u2019s get practical. <\/p>\n\n\n\n

    Prices are high. And that hurts. But you\u2019re in the business of roasting and selling coffee, so you need stock. <\/p>\n\n\n\n

    The best options we recommend are:<\/strong><\/p>\n\n\n\n

    \"\"<\/figure>
    \n
      \n
    1. Have a long term plan with short term steps.<\/strong><\/li>\n<\/ol>\n\n\n\n

      1.1 Don\u2019t fix a high price for a long time.<\/em><\/strong> If you used to lock in contracts for 12 months, maybe consider 6 months instead. Or 2 x 6 months, where one 6 month period has the price fixed (no risk of further fluctuation or increases), and the second 6 month period is floating (so if you are hopeful the market price will drop you can take advantage of it).<\/p>\n\n\n\n

      1.2 Track the average cost of your blends over the year, <\/strong><\/em>instead of the live cost right now. And use the average cost to set your budgets, set your sales prices and measure your margins.<\/p>\n<\/div><\/div>\n\n\n\n

      \"\"<\/figure>
      \n

      2. Use time to your advantage. <\/strong><\/p>\n\n\n\n

      Break the habit of only contracting when you\u2019re about to run out of stock. Build a strong relationship with an importing partner you trust that can help you plan stock and prices for the long term. If you know you\u2019ll use Brazilian coffee in 2025 and 2026, consider contracting that far in advance but with floating pricing. You get the certainty of supply, and the benefit of locking in a price when the market level matches your budget, and you can do it any time before the coffee needs to sail from origin.<\/p>\n<\/div><\/div>\n\n\n\n

      \"\"<\/figure>
      \n

      3. Build long term relationships.<\/strong><\/p>\n\n\n\n

      If you\u2019ve bought consistently from a producer or producer group at a price that meets their needs, they are less likely to price against the volatile commodity market. So long as you\u2019re creating true win-win business relationships you should be able to negotiate supply and pricing that can suit both sides regardless of if the market goes up or down.<\/p>\n<\/div><\/div>\n\n\n\n

      \"\"<\/figure>
      \n

      4. Understand harvest cycles.<\/strong><\/p>\n\n\n\n

      Consider your key components and when they need to be contracted. Try and spread them out so they aren\u2019t all harvested\/contracted at the same time. That way 6 months from now you\u2019re contracting different origins, and can potentially benefit from changes in the market pricing. If all your major blend components are harvested at the same time of the year, the risk is you have to lock in supply for all of them at the same time, and if that\u2019s a time of high volatility and high prices, you are stuck.<\/p>\n<\/div><\/div>\n\n\n\n

      <\/p>\n\n\n\n

      <\/p>\n\n\n\n

      We are here for you! <\/p>\n\n\n\n

      We can book a call with our sales team <\/h2>\n\n\n