NY "C"

[K.C. O'Keefe]

How is everyone doing with the new NY "C" at a 12 year high today? What do you all think will happen? Will we see $2 soon? Some think if we break $2 then $2.5 is around the corner . . .
Scary stuff or just speculators trying to lift the C?

[chris.hallien]

...and then .15 drop in one day!
I imagine defualting would on the rise. I've often wondered how the relatively new and growing DT model would work if and when the market increased to point of competition.

[K.C. O'Keefe]

a quick revisit to the subject . . . just four months later and $2 sounds like a deal when we are staring at $2.25. H

ow is everyone doing out there? Any thoughts about where this is going?

Has anyone noticed declining coffee quality? I sure have.

For those in Direct Trade a year ago we were talking $2.20 FOB as a good starting point, I'd assume that has to be at least $2.70 now?

[phaelon56]

Andrew Hetzel offered some good insight and hunches about this topic on his blog recently.

Quick and worthwhile read:

http://www.coffeestrategies.com/2010/12 ... at-c-level

[Andrew Hetzel]

Thanks Owen!

[Oliver]

I never thought I would care but for some reason the C thing is changing things for sure. Quality seems a little less important to producers this year know that the "bonus" is just a little better normal prices are sweet and you don't have to pick ripe one's or keep anything separate etc etc.

[K.C. O'Keefe]

For sure Oliver. I had a hard time selling Direct Trade 85+ cup for $2.40 a year ago . . . now its a steal!

This might hurt some feelings but I estimate that the NY"C" jump of almost $1.00 will in one year financially benefit farmers more than all the last ten years of combined specialty coffee efforts (FT, Organic, DT, Smithsonian . . . ). Kind of humbling. From a strictly economic perspective a rising NY"C" is by far the best economic development in 13 years! I'd love to see the actual data drawn out and compared.

As for quality . . .

[chris.hallien]

K.C.,
I think you're right regarding the impact of a rising "C" being more beneficial than the past 13 years of effort in improving quality, just not too sure the money makes it all the way down to the farm level in the majority of the scenarios. As a coffee grader for NYBOT/ICE it's interesting to see that as the prices climb there are less coffees going through ICE and those that do come through seem to be mostly "re-certs" ... prices up quality down, it's an odd industry we work in.

[K.C. O'Keefe]

I agree Chris, odd industry.

Regarding not being sure the increased price makes its way down to the farmer I'm happy to say in Peru it definitely does. Internal competition is strong, and price manipulation very scarce, except a few very rural areas where there is only one buyer.

I think most farmers throughout Latin America definitely see a direct NY"C" calculated farm gate price within a tight margin by their local buyers. In fact I think the default system is actually very efficient in getting those prices to the farmers, working off of much smaller margins than we may think.

So I'm interested, what are the countries in the world where anyone thinks there can be dramatic price manipulation in relation to the NY"C"?

[Sean Starke]

K.C.,
I think you're right regarding the impact of a rising "C" being more beneficial than the past 13 years of effort in improving quality, just not too sure the money makes it all the way down to the farm level in the majority of the scenarios. As a coffee grader for NYBOT/ICE it's interesting to see that as the prices climb there are less coffees going through ICE and those that do come through seem to be mostly "re-certs" ... prices up quality down, it's an odd industry we work in.

I think a lot of the money has and is in fact making its way down to the farm level. Just look at the internal market levels in any arabica-producing country and you'll see that the farmers are doing exceptionally well. For example, historically in Brazil the level of 300 reais per bag of fine coffee ("bica corrida") has been the level at which they'd sell everything they could...and this year, with no frost, no drought and a crop of 56+ million bica is currently trading around 510 reais. It's unbelievable, really.

While I agree it's an odd industry I must disagree that there's anything especially odd about the situation we're seeing up at ICE. We're seeing poorer quality coffees there because the cash market is paying a better price than Certification is. Look at the differentials that coffee is trading at; it's not surprising that someone would pass on tendering it to the "C" (in spite of how much you and I would prefer that they put it up for grading to help pay our mortgages Awfully selfish of them, really).

[ellenstevens]

Such interesting times, huh? Past price increases have been a result of supply (conditions at origin such as weather, infastructure, quantity planted etc.) and world demand for coffee. This time around the price has been pushed higher partly because of actual coffee-related developments (increased demand), but also in large part because of speculation in commodities (coffee).

Nothing in the world stays the same, and eventually this type of speculation will slack off for some reason. When that happens, the NY"C" will probably come back down. When, I have no idea. In the meantime, hopefully enough farmers are seeing higher prices trickle down to them, and are using them to increase quality down the road.

My humble prediction (for what it's worth)? We are in a commodities speculation bubble, and eventually it will burst.

Thoughts from the front lines?

Ellen

[Christopher Schooley]

The trickle down margins that farmers might be seeing are in some places being totally offset by insurance and security costs since coffee cherry theft is a pretty big problem. This, and you also have to keep in mind that fuel costs are also on the rise, which from what I've been lead to understand means fertilizer prices are on the rise as well. So, better prices but also more expenses.

[Sean Starke]

Well, I know in "some places" that might be the case, but in the weightier portion of the producing areas they are having an exceptional year. Yes, there are cherries being stolen, yes there are higher fuel/fertilizer/insurance costs, but the fact is that folks who were doing "ok" at $1.30/lb on the "C" are doing a damned sight better at $2.75, especially given that the differentials for not only the finer coffees but also the washed commercial grades are still at premiums.

[K.C. O'Keefe]

Some think if we break $2 then $2.5 is around the corner . . .

Hasn't been even a years yet.

I'll confirm again that prices are reaching the producers here in Peru. Very high competition is lining up by exporters to purchase parchment. It's going to be a difficult year for any organization which is not on their game . . . very high risk. Privates are maxing out their efficiencies and beginning with pre-harvest support to gain farmers . . . coops are going to have to have very faithful member support, or buy from the privates to meet their sales.

All in all I think the competition is healthy and economically benefiting the farmers.

[Sean Starke]

...very high risk...

amen to that, brother.