Today The Dow Jones Newswire carried a story which is the most significant development in Specialty Coffee in a decade. The article indicated that a new Futures Contract specifically for Specialty Grade Coffee will begin trading next year. As I have suggested in several previous posts including one 2 years ago (Delinking from the C Part I and Part II) and 1 year ago (The Shared Hedge), Specialty Coffee deserves and needs a special contract to more accurately set pricing and to insulate from the vagaries of the C which is fed and starved by speculation.
The establishment of the Specialty Coffee Futures Contract will necessarily (due to low liquidity/volume) trade with a much higher risk (Delta) premium than the C, as I suggested in the exchanged counterparty option contract of The Shared Hedge. This new Specialty contract should act as a true hedge rather than a speculative vehicle and therefore appeal mostly to coffee growers, green merchants, importers and roasters leaving speculators huddled around the C where volume and liquidity provides safety should they need to wind up a contract to free up cash. Mark my words...THIS IS HUGE!
Monday, March 25, 2013
Thursday, March 21, 2013
How to Save $10,000 Scooping Coffee
A short post on a very important way to save A LOT of money if you scoop,weigh and sell coffee by the pound. Every scale has a margin of error which is posted on the front of the scale. Typically a scale might be accurate from 0-30 LBS x 0.01, or 0-60 LBS x 0.02
If you have a wholesale order of 50 x 1 LB and you weigh the bags individually each time you fill a bag, you need to multiply the margin times 50. On that single order, if using a scale with a margin of 0.02, you could potentially give away 50 x 0.02 = 1.00 LB
If you are a coffee wholesaler and do this many many times per year, with a volume of say 50,000 LBS/Year, you could be giving away 1,000 LBS/Year in scale margin error. If you sell your coffee for say $10/LB, you have given away $10,000.
The only way to weigh out an order of more than a single unit is to calculate the weight of the whole order, weigh out the complete order, and subtract the individual weight of each item as you package it. In this way, the margin of 0.02 is divided among 50 units, (50 x 0.02/50) instead of multiplied by 50 units. (50 x 0.02)
It is very important to remember that the scale doesn't know whether you are weighing out an 8, 12, or 16 ounce bag and therefore the margin of 0.01-0.02 is applicable to each unit if weighed individually. This means the potential loss/savings is greater if you package 12 oz bags and roast 50,000 LBS/Year because you would multiply the margin x 66,666 units and therefore have a cost/savings of 66,666 x 0.02 = 1333.33 LBS.
Try this packaging method even if only packaging 5 bags at a time and you have cut your potential loss significantly.
If you have a wholesale order of 50 x 1 LB and you weigh the bags individually each time you fill a bag, you need to multiply the margin times 50. On that single order, if using a scale with a margin of 0.02, you could potentially give away 50 x 0.02 = 1.00 LB
If you are a coffee wholesaler and do this many many times per year, with a volume of say 50,000 LBS/Year, you could be giving away 1,000 LBS/Year in scale margin error. If you sell your coffee for say $10/LB, you have given away $10,000.
The only way to weigh out an order of more than a single unit is to calculate the weight of the whole order, weigh out the complete order, and subtract the individual weight of each item as you package it. In this way, the margin of 0.02 is divided among 50 units, (50 x 0.02/50) instead of multiplied by 50 units. (50 x 0.02)
It is very important to remember that the scale doesn't know whether you are weighing out an 8, 12, or 16 ounce bag and therefore the margin of 0.01-0.02 is applicable to each unit if weighed individually. This means the potential loss/savings is greater if you package 12 oz bags and roast 50,000 LBS/Year because you would multiply the margin x 66,666 units and therefore have a cost/savings of 66,666 x 0.02 = 1333.33 LBS.
Try this packaging method even if only packaging 5 bags at a time and you have cut your potential loss significantly.
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