How is Pricing Determined Anyway?


We all know and agree that coffee prices are too low and this is certainly the case in Ethiopia where the average farmer (owning an average of 0.1 ha, or 200 trees) earns USD $260 per year from coffee. Even in Yirgacheffe, where coffee prices are about three times higher, the income is too little to properly support a family’s needs on.

Yet we also notice that prices for Ethiopian coffee are increasing year-to-year and not just for the top qualities. So what are these increases based on?

In the case of Q1 coffees, the price increases (in my opinion) are fair. When we compare the price we’re paying for Kochere gr. 1, taking into account its cup quality in comparison to what we’re paying for for top qualities elsewhere, the price is similar. But we’re not just seeing increased prices for Q1s, we’re seeing exponentially increasing prices for the lower qualities too. Last week Yirgacheffe AQ1 was sold at ETB 2000 per 70KG of parchment while A3 fetched 1950 ETB. What is this A3 pricing based on?

In comparison to most of the other countries we’re working, this is the reality about most Ethiopian coffee:

  • Much of it is not traceable and what is claimed to be traceable is often questionably so (even at top quality levels). In contrast, in Central and South America, farm-direct relationships are the norm for specialty coffee.
  • There is very little investment in evidence-based agricultural practice. Say what you want about the FNC; their investments in research and continuous developments in best agricultural practices are indisputable.
  • Processing and quality control is mostly at a lower standard.

Last week I talked about the importance of intercultural understanding in coffee buying. Within the course of the past week, I had the chance to meet with professionals from other industries here: a tourism operator, grocery store owner, embassy representative, an architect, and a woman who runs a workshop and sells the textiles it produces. Some of these women are Ethiopian and others come from abroad. The common concern everyone expressed is that business in Ethiopia is becoming harder and harder. In the past 3-5 years, conditions have noticeably deteriorated. In the case of the grocery store owner, she is dealing with customs that doesn’t understand the products (e.g. camembert cheese which they think is spoiled, rather than knowing that its smell is supposed to be the way it is) she’s importing and whose ‘solution’ is to burn the food it refuses to clear. Burning food: in a country where people are without food!

For next week’s newsletter, I’m working on finding out what has become of ECX’s geo-tagging system, which it implemented at the beginning of the season.

- Melanie