CoE In Bulk Quantities

coffee competitions, auctions, best of panama, etc

CoE In Bulk Quantities

Postby onocoffee on Thu Jul 27, 2006 3:20 pm

While reading the other thread about CoE/NCA and Geoff Watts' commentaries regarding, I started to wonder: what if the highest scoring lot of coffee offered 250 bags - would it be able to command as high a price?

For example, let's look at the 2005 Brazil auction where Michels Espresso, Instaurator and Caffe Artigiano paid $49.75 per pound for the Fazenda Santa Ines with a total value of $78,969.79 for twelve bags. That coffee scored a 95.85 - one of the highest ever.

My question is this: if this lot had been for 250 bags, would it have been able to achieve such an impressive price? If so, we're now talking about a cost of $2,779,751.46 for 250 bags. Could this (or any) consortium of bidders) afford that price tag?

How much does lot size play into the auction price?


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Postby Aleco on Thu Jul 27, 2006 4:08 pm

I think it plays a huge factor. Look at this year's Guat CoE lot sizes and auction prices vs. that of El Sal. Word from the jurors after the El Sal cupppings was that the coffees were off the charts while word from the jurors after Guate was not so much the same. However, if you get enough buying power together you can pull off price levels like La Virginia recieved in Colombia's first harvest.

As a guy who entered lots in the Cosecha de Oro auctions for a few years, my strategy was the smaller the lot the higher the price potential.
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Postby nick on Thu Jul 27, 2006 4:08 pm

Within the current realm of coffee production, a lot of 250 bags wouldn't and couldn't have cupped the way Santa Ines did.

Maybe and hopefully someday... but not for a while.
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Postby Jaime van Schyndel on Thu Jul 27, 2006 4:44 pm

nick wrote:Within the current realm of coffee production, a lot of 250 bags wouldn't and couldn't have cupped the way Santa Ines did.

Maybe and hopefully someday... but not for a while.


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Postby onocoffee on Thu Jul 27, 2006 4:53 pm

nick wrote:Within the current realm of coffee production, a lot of 250 bags wouldn't and couldn't have cupped the way Santa Ines did.

Maybe and hopefully someday... but not for a while.



That's not the question or the point.

The question is when lots are of that size and quality, will they still be able to achieve the same auction price - or will size play a factor in limiting the auction price.

Or are you saying that a group like the Michel's, Inny and Artigiano group can broker a $2.7 million coffee purchase?
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Postby Jeff Givens on Thu Jul 27, 2006 5:39 pm

I can't see how the lot size wouldn't play greatly into the final bidding price. It's human nature: the rarer something is (all other things being equal), the more it is valued.
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Postby Robert Goble on Thu Jul 27, 2006 6:05 pm

The economic laws of supply and demand will apply. To remember is that both supply and demand can be manipulated.
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Postby geoff watts on Thu Jul 27, 2006 6:33 pm

yeah, that is true, if it did indeed happen that a 250 bag lot was allowed to enter and won (I think there is a current max limit of 150 bags, but don't quote me on that) then the auction price would likely be lower than if the same coffee appeared as a 15 bag lot. Scarcity definitely plays a role. There is a handful of roasters worldwide who have been the traditional buyers of top 5 lots, and most of them are relatively small. When they are forced to compete with each other to acquire the top coffees you end up seeing these record prices.
We were in the running for that Brasilian coffee and dropped out at the end because our group started to atrophy once the price broke 40 bucks.
As a buyer, I can go out and get a couple of bags for sky-high prices and be fairly confident that we will sell them and recoup our costs. But I would surely struggle not to lose money if I had to try to sell 100 at such a high price. I think the industry is still a few years away from that.
There are other things that affect auction price as well---in CoE auctions with fewer offerings (ie, 18 as opposed to 28 coffees) there is normally heavier competition and higher prices.
When the competition is underway, there is no knowledge on the part of the jurors about what the lot sizes are. The best coffee wins, no questions asked. You could run stats on the 25+ CoE auctions that have taken place and probably come up with an range of quantity (say 15-23 bags) that would maximize earning potential given a high ranking in the competition. There are several variables, of course, but one could probably come up with a formula of sorts.
But there are more bidders every year, and this will have an impact. As CoE gains commercial recognition, the formula will shift due to the influx of new buyers with different resources and agendas. On average it is much more expensive now to get these coffees than it was three years ago.
Looking at it from the perspective of the farmer, one should also consider gross profit...is it better to sell 15 bags for $20.00 and 235 for $1.50 or sell 250 for $4.00?
Speaking on behalf of the Small Axe group, I'm very certain that most of the members would be thrilled to get 50+ bags each of a smoking hot competition winner for $4.00/lb, and this would work to the advantage of the aforementioned theoretical farmer.
Either way, the CoE is about much more than auction profits. The most important goals are better market awareness as regards quality (as much on the industry side as the consumer side, or perhaps moreso), the celebration of the farmer, the advancement of cupping skill at origin, the promotion of unheralded appellations/growing regions within a country, etc. Maybe the best accomplishment of the program is the connections that are created between specific roasters and specific farmers--people who otherwise may have never become acquainted. Farmer A has great coffee and Roaster B wants great quality--but how do they find each other? CoE works brilliantly for that.
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Postby barrett on Thu Jul 27, 2006 7:31 pm

2.7 million in dead money, sitting on a shelf is probably not a wise business practice.

Robert is right. Supply and demand take precedence.
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Postby geoff watts on Thu Jul 27, 2006 7:55 pm

Precedence over what? I'm not sure I understand the argument. Supply and demand influence price in most cases, sure...but what is the point you are making?
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Postby Robert Goble on Thu Jul 27, 2006 9:00 pm

I think he's saying that supply and demand would also make it highly unlikely that you'd see that quantity of coffee sell for that high a price (all things remaining the same).
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Postby aaronblanco on Thu Jul 27, 2006 10:33 pm

Robert Goble wrote:I think he's saying that supply and demand would also make it highly unlikely that you'd see that quantity of coffee sell for that high a price (all things remaining the same).


...is why, from the other end of the spectrum, we are paying arms and legs for gasoline these days: the perceived lack of available petroleum.
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Postby barrett on Thu Jul 27, 2006 11:05 pm

exactly. excess supply drives down price.
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