De-Linking with the "C" Part II

I've been thinking about my last post, and how the Specialty Coffee Industry might identify a baseline price for specialty grade coffee and de-link any association with the commodity price as established by the New York Mercantile Exchange.

The obstacles to creating a market where the grade can be established, and the price determined is perceptively prohibitive and would likely dissolve before any meaningful progress was made. So what if we established a system where we backed the price out from an industry average of price per pound sold at retail. (Ex: Specialty Grade Price 22.5% of average retail price) The average retail price would be fairly easy to establish with an online survey of selected industry participants selling specialty grade coffees. The retail price presumably is based upon the quality of the coffee, and therefore is not related to the vagaries of the commodity price and speculators. The elevated Specialty Grade posted price would provide immediate distinction between quality operators, and low grade supermarket brands by clearly displaying the price differential while still leaving room at the top to price super premium coffees. (Ex. Specialty Grade + $0.95) Establishing a Specialty Grade price would also remove the criticism often levelled at the industry when the disparity between the commodity and retail prices grow inexplicably large and we are forced to respond with figures relating to labour cost, rent, shipping and packaging as an excuse. A differential between Commodity and Specialty Grade prices would be a good story to tell in low market conditions and an opportunity to talk about why your local retailer is different.

I actually think this idea has some merit and needs to be considered by the industry under the umbrella of regional Specialty Coffee Associations. Obviously the weight of the calculations needs to be negotiated and agreed upon, the quality standards of the baseline green specialty grade needs to be established and a mechanism to track retail pricing, but these are pretty small details in relation to the hurt caused by fluctuating prices at the farm. Looking at the Commodity price right now, there's no urgency, but when the tide turns and we're all talking about low prices in a few years it will be too late for many of your favourite farms and their families.