L’Usine Nouvelle – Coffee prices have soared, particularly for Robusta. The reasons include strong demand in China – Starbucks opened two stores there per day last year – and the failure of the main producer of this type of coffee, Vietnam…
Blaise Desbordes, General Manager of Max Havelaar France: We are around $5,200 per tonne of Robusta, a price multiplied by four in a year. This confuses the issue for roasters, because before they had a cheaper material to put in their blends, playing on the balance with Arabica, the noblest bean. Normally, the price gap is three times that. We are currently close to parity. This is historic.
Especially since, if the curve is less spectacular, Arabica, highly prized by the European market, also remains at a very high level. To what do you attribute this increase?
Historically, peaks above $5,000 are exceptional: there were 1986, 1998, 2011 and therefore this cycle since 2022. The players have put blinders on climate change, which is now very real. Good Arabica is found in the mid-mountains, between 500 and 1,000 meters above sea level. If the temperature curve moves, you cannot, at the land level, move your coffee trees like that. As a result, productivity is falling. There have been studies on the subject, articles, but the operators have not acted accordingly.
Added to this is a denial of the aging of both people and plantations. There is a problem of abandonment of plots. And there, we arrive directly at the third denial, linked to the first two. How to stop aging? How to invest against climate change? We need to have a better price. There is a denial linked to structurally too low prices. We also regret that locomotives of development of the coffee market like Starbucks, which stamped 7% of its coffees, abandon “fair trade” (editor’s note: fair trade). We need big brands to promote sustainability.
“Non-deforestation and traceability are not new subjects for manufacturers!”
Blaise Desbordes, Max Havelaar France
But what are you changing in terms of remuneration?
As soon as a partner disengages, thousands of tons fall back into the speculative market, with the yo-yo risks that we are currently seeing. We offer regularity and visibility to farmers. We have a premium of 8% of the value of world prices that allows for social development. We provide investment capacity.
The entry into force in early 2025 in Europe of the ban on products from deforestation seems to fuel a race for stocks and therefore boost prices…
The players stock coffees that have proven compliance with the regulation. By January 1, all products on the shelves must be compliant – not just purchases. The penalties are very high, up to 4% of turnover, so it’s very motivating. Everyone is behind on compliance, which is fueling the increase, because there are few compliant stocks on the market. There is a lot of lobbying to have this regulation cancelled. But non-deforestation and traceability are not new topics for manufacturers!
You present yourself as a solution for companies that need to comply. Why?
There is a European register where stakeholders will have to submit their proof of compliance. Where is my production located? What are the deforestation risks associated with this location? What are you doing to address this risk? On this last point, you have to provide elements such as certificates, maps, etc. We have done a lot of work to track our 850,000 coffee growers.
And, once on the ground, we are in reality: we have an approach that allows us to cover the real costs of producers and therefore to limit the temptation of deforestation. When you cut down a forest, the plot set up benefits from a “rent” with doubled yields for ten years. Without remuneration, the temptation is crazy.
We have also established a global partnership with Satelligence, which allows us to ensure that our producers’ data is correct and to compare it with other mapping data. Furthermore, we have set the bar higher than the European Union, by banning deforested areas until 31 December 2018, compared to 2020 in the regulation. In short, we can provide companies with a clean supply.
“For a large part of the coffee market, the question is one of sharing value, of managing margins.”
Blaise Desbordes, Max Havelaar France
Let’s get back to the price increase. Has it allowed a better distribution of value?
Between 2022 and 2023, traders who had bought before the price increase made a huge margin. After a year, producers were able to assert their rights to the new contracts. But, especially for small producers, their remuneration is far from keeping up with that of the prices. The trickle-down effect remains complicated.
With rising prices, it may be tempting to no longer want to pay the premiums linked to “fair trade”…
Brands say that they risk losing consumers indeed. Except that we are in danger of collapse: we need to invest more in coffee. Let’s take advantage of the crisis to stabilize a real price. In a pod, which corresponds to 44% of the French market, sometimes sold between 50 and 60 euros per kilo, the purchase cost of the raw material is 5 to 10 euros. For a large part of the coffee market, the question is one of sharing the value, of adjusting margins. The consumer can probably also make an effort. We are lucky to have a raw material that has a special place in the basket.
The fact remains that there is, on the contrary, a risk of headlong rush, particularly with emerging markets that are less demanding in terms of CSR. Today, basic coffee is a speculative product. There is a huge trading problem. We need to get away from the logic of convenience, have a counter-proposal that gives predictability to the market with long-term commitments that provide security to economic operators and brands.
Isn’t that what some big brands like Nespresso do?
The big brands have a plan, they cannot afford to jeopardize their supply. We must decommodify to be resilient. The food sectors have only focused on prices with the inflation of the last three years, but we must not neglect the deep trends: the question of climate collapses will arise again, as will attention to what we put in our shopping carts.
Source: www.usinenouvelle.com
