Red Fox Origin & Shipping Update: April 2020

Hi friends,

We want to give you an update on how our supply chains are looking and make sure you feel safe and looped in as things develop. We’re seeing a lot of speculation and fear out there, but our supply chains are unique and we want you to feel confident about buying coffee from Red Fox. Below is a rundown of our current shipment, harvest, and spot positions. If you have any questions or want to have a conversation about forecasting or managing your position over this volatile period, we are here to help. 

To preface, we don’t want to give you a superficial update: we want to share everything we know and make sure that you feel empowered to make decisions and communicate openly with us as we will continue to do with you. Once again, we are always, always here—please get in touch, even if you just want to check in.

Supply, Demand, & The ‘C’ Market 

Red Fox has always been able to operate outside of the scope of the C market, which is an antiquated measure of a coffee’s real value. Anything short of a massive rally would allow us to maintain continuity in our approach. 

That said, we need to be prepared for every possible outcome. We’ve seen a steady climb in the ‘C’ over the past month+ settling in just over $1.20 as trading against May comes to a close next week. The current global economic climate doesn’t necessarily lend itself to confidence on either side of the coin. The slowdown could grind demand to a halt and bring the market back down below $1. Any potential port closures, or container shortages which are a larger concern at the moment, could cause the market to rally and potentially to levels we haven’t seen in over a decade due to an eventual lack of supply.  

The indication we’ve received from our partners in Peru, Colombia and Rwanda is positive so far; the origins with their harvests on deck. They will be able to pick and process coffee business-as-usual as of now. Will Brasil be able to do the same? Will the medium to large producers in Colombia? Labor is very much an issue for the imminent harvests. We’ll keep you all apprised of the situation in the months to come.

Mexico

Update from origin: 

The Mexican government considers coffee to be a priority product, so dry mills are allowed to continue operations during the shutdown. Both of the dry mills we work with are taking all of the necessary precautions to stay safe. One of the mills we work with is operating with fewer workers. Shipping lines are accepting bookings and we expect to have the first containers afloat by the end of April and available in the US the second or third week of May. 

However, we are now getting word that several indigenous communities outside of the Oaxaca City capital, particularly in the Mixteca region, are proactively closing roads in order to prevent the spread of the virus and requiring anyone to apply for a special permission ahead of time to be on the road. This will affect a small percentage of coffee that is still stored in producers’ houses and hasn’t been brought down to the central warehouses and dry mills. We hope to see that opened up by the end of the month to be able to mill and ship the 50-75 bags we had planned to purchase from these communities that weren’t delivered yet.

Available lots:

We have a couple lots from the 2019 harvest in inventory for anyone that is looking for either a conventional or fully certified blend component. These lots are holding up well and priced to move.

Ethiopia 

Update from origin: 

Prime Minister Abiy Ahmed has been cautious with his mandates. As 80+% of the population relies on agriculture, and daily wages from it, a complete shutdown remains an impossibility. Roads to the countryside are closed to all other than trucks related directly to business. Government offices and public transport are closed officially. Large gatherings are forbidden.  Addis Ababa itself is essentially locked down.  

ECX remains open as of last week and has implemented a rotating system of buyers to maintain safe distances between people. This, coupled with the new minimum price floors instituted a couple of months ago, is causing purchases delays and the general movement of coffee between warehouses.  

Dry mills are operating at a slow clip. Shipments to Djibouti are also moving at a slower clip due to the port’s pace. 

Our dry mill and export partners are maintaining the safest, cleanest environments they at the moment, hence the slow down within.  

Available lots:

We have multiple containers of top Agaro coffees at both The Annex CA and Continental Terminals NJ SPOT now. Our final Guji, Yirgacheffe, and Sidamo shipments are somewhere between just afloat, Djibouti, and the PSS approval stage. Expect arrivals from early May through June.

Kenya

Update from origin: 

A nationwide mandated curfew is in effect from 7pm to 5am daily. The Kenyan government has effectively stopped all movement in and out of Nairobi with the exception of cargo. Coffee is still moving to Port of Mombasa which maintains a normal schedule with shipping lines. Food grade containers continue to be scarce but still obtainable.  

Available lots: 

Our Kenyan shipments have gone afloat as of two weeks ago and are due into port early May.  Our unallocated offerings will be limited. For all those that committed to forward contracts, we have you covered and samples will be available in the next couple weeks. These lots are stunning and we’re thankful to all those who committed and made it possible for us to make a return to Kenya. Anyone who is interested, get in touch ASAP.

Guatemala

Update from origin: 

Guatemala continues to be in lockdown with no civilian travel allowed between departments and curfew extended to April 20th. There are heavy fines for anyone caught without a mask. All international and domestic flights are suspended until April 30th. 

What this means is that there is a real migrant labor shortage. Certain regions like Huehuetenango, which was at peak harvest when COVID hit, are seeing as much as 20-30+% of the crop rotting on the trees for lack of pickers. Mills are running at much smaller capacity due to labor shortages as well. Though coffee is deemed an essential product and therefore allowed transit, individual communities are putting up roadblocks and not allowing any traffic through. This has slowed everything down.

Back in Guatemala City, the dry mills are operating at near normal capacity. Although there have been some minor lags with having enough shipping containers available, the coffees are mostly moving quickly once they’re milled. 

All that said, despite some pretty big obstacles this harvest, we expect to see Guatemala arriving in late May.

Available lots:

If you haven’t already, now’s the time to forward book.   

Colombia

Update from origin: 

The Colombian government has extended their strict stay-at-home mandate through April 27th as of the end of March. Coffee production, milling and exporting have been deemed essential business and exempted from the order.  

Our milling and export partners are working at a reduced 50% capacity due to curfews forcing them to go home earlier in the evening than normal.  

Transportation complications are reaching critical mass as availability decreases despite increased rates. Conditions are deteriorating for drivers as there are no longer stops to eat and to rest.  

Ports are generally open for business as usual though some have limited hours for loading and unloading to morning time.

A lack of pickers will have significant impact on the medium to large farms.  

Click here to read specific updates from groups we work with. 

Available lots:

We have a diverse array of Colombia spot coffee in Continental, the Annex, and DuPuy Houston from some of our longest-standing relationships in Inza and Narino. Lots range from Producer IDs perfect for single origin menu spots to nuanced yet approachable blend-ready lots that go through the same rigorous QC process. They’re at their peak now and will hold their own for months to come—they’re a great option no matter where you’re located or what menu spots you need to fill. 

Peru

Update from origin: 

The Peruvian government declared a National Emergency beginning March 15th, 2020 with measures including a nationwide quarantine and the closure of regional and international borders. These measures are currently scheduled to continue through April 26th, though the ports and shipping lines are not affected and have been operating continuously. Initially, the only agricultural activities permitted were those related to the provision of food, but, as of April 3rd,  the government exempted all agricultural activities—including the the harvest, transport, collection and processing of coffee—from quarantine restrictions, so long as each individual obtains a certificate from their local/community authorities accrediting that they in fact work in agriculture. 

In practice most everyone in the coffee sector, including producers, day laborers, those working for cooperatives and associations, local warehouses, and dry mill operators, has been abiding by the quarantine restrictions, even though they are exempt. In some cases this is because of their own interest in preventing the spread of the virus. Another factor is the “rondas campesinas,” local peasant patrol groups that began in the late 1970s in northern Peru to protect rural communities against theft and that continue to operate autonomously in many communities across the country. The rondas (in the areas where they operate), and other rural self defense committees across Peru with similar enforcement rights, are closing local roads and prohibiting non-residents from entering to keep the virus from spreading to their communities—most of which do not have access to medical services. 

What does this mean for the Red Fox Supply Chain?

While the harvest season has begun on lower altitude farms in the north of Peru and the Selva Central, the producers we purchase coffee from are still at least a month away from the harvest. 60% of Red Fox suppliers are in Southern Peru, where the harvest begins in June at the lower altitudes, and goes through October on the highest altitude farms. Even in the North, where the harvest came early this year, the majority of the farms we are sourcing from are located at over 1600 meters above sea level and the harvest is not expected to begin until the second half of May. 

There is some concern in Peru about labor for this harvest season. Many producers rely on migrant workers to help with the harvest, and most people suspect that the regional borders will be closed well past the end of the quarantine period. We do not expect our suppliers to be particularly affected by this. Red Fox does purchase coffee from some producers who hire migrant workers, but the vast majority are smallholders whose farms are family operated. In the South of Peru, the concept of “Ayni” is common. This Andean work system practiced by Quechua and Aymara cultures is founded on the principle of reciprocity, and community members take turns helping each other to harvest and perform other farming activities rather than hiring outside help.

March and April are usually the months when our suppliers renew their Fair Trade and Organic certifications, and all of the certifiers have suspended their audits for recertification. The producer organizations we work with have been in communication with their respective certifiers to reschedule their inspections and/or renew their certifications virtually, and anticipate they will have their certifications in place by the time we begin shipping coffee in September. 

We are in regular communication with all of our core suppliers in Peru, and they share the same concerns and feelings of uncertainty that many of us do. They worry about demand, prices, financing, and contracts. We are reiterating our commitment to work together, to purchase as much coffee as we can this coming season, and to continue to pay the highest prices possible for their coffees. 

While our operations in Peru have not very been affected by this pandemic thus far, our sourcing team and our suppliers will no doubt need to be agile and creative as we navigate this coming season. 

Click here to read specific updates from groups we work with.

Available lots:

We only have a handful of lots left in NJ, but these are some of the nicest Producer ID lots we saw all harvest, many of which are from the Valle Inca group in Calca. We have some stunning lots available left in the Annex and are offering a flat palletized rate country-wide out of that warehouse to support widening your selection process. We have lots available from Cajamarca to Puno and all our major producing partner groups: Coopbam, Santuario, Valle Inca, Aromas del Valle, Pangoa, Cecovasa, Huadquina, and more.  Please get in touch if you would like support in narrowing our selection and making recommendations.

Rwanda

Update from origin: 

The government in Rwanda instituted a nationwide lockdown on March 21st, one of the earliest in East Africa. International borders are closed, except to goods and cargo, and internal travel is not permitted. Only essential shops and markets are allowed to operate. Coffee is considered an essential commodity, and washing stations and dry mills are operational with strict social distancing and sanitation measures in place. The peak of the harvest is approaching and cherry picking continues, albeit at a slower pace. Farmers have delivered less than 15% of their cherry to date meaning May will be the peak of harvest. We hope to see the first samples from Kanzu in early June. 

Available lots:

With only a bag or two uncommitted, reach out to your rep if you have interest. We may be able to work some magic, especially if you’re open to pulling from the Annex.

Ecuador

Update from origin: 

The Ecuadorian government has put in place a strict nationwide quarantine. There is no financial help at this time, except for small loans. Agricultural production has been deemed essential businesses, but cargo loads have limited movement around the country. The borders have been closed, with only the exception being cargo trucks. 

This year’s harvest hasn’t begun yet, although it is expected to begin a little earlier this year. Harvest in the Pichincha area is estimated to start in May and peak in early July, about three weeks earlier than last year. It is difficult to predict the available labor once harvest begins, but with so many left unemployed from the crisis, local leader Arnaud Causse believes there won’t be a shortage of labor. He is reporting that farms are looking good and that projects on the land are continuing as planned. 

Available lots: 

We have just a few lots and a few bags left to offer from this season’s harvest but still have some nice offerings from core producers Hernan Zuniga, Arnaud Causse, and Gilda Carrascal. 

To get in touch, email us at info@redfoxcoffeemerchants.com. We are always here and happy to help and support you in any way we can. 

Paying for Coffee: Guadalupe Miramar

In our previous series, Paying for Coffee: It’s Complicated, we talked about the various factors that underpin how we as a sourcing company buy coffee, as well as how to discuss it. While that series looked at the larger picture and laid crucial groundwork for the discussion, this is something we feel we—and the industry at large—need to go deeper on. This series will take a closer look at the details that underpin how we buy coffee in our major supply chains, each of which is unique. 

Miramar and Red Fox

Guadalupe Miramar is where it all started for us: our sourcing in Mexico began here. One thing that’s special about this relationship is that it’s not one relationship with a cooperative or person, it’s with the whole community as individuals and families. There are other buyers who work in the region now, but our relationships and consistency have allowed us to maintain the trust we worked to build over the years in an area where many were jaded by past experiences with exploitative buyers and corrupt associations. 

Miramar is very different from other associations we’ve written about in previous Paying for Coffee pieces. An informal group of 15 to 20 farmers, we’ve worked with many of them for a few years through a different organization, but this past growing season they formed a new loose association around organizer Cecilio Perez Vasquez. Mexico Sourcing and Sales Lead Adam McClellan first met Cecilio in 2013 when he was acting president of another association in the region. They kept in touch and Adam continued visiting every year, so we were excited to deepen our sourcing in the communities of the Mixteca and Santa Maria Yucuhiti when Miramar formed. 

We’ve focused the Paying for Coffee series on a diverse array of our Latin American supply chains to illustrate how support and deep sourcing look different from place to place and group to group. Miramar is the newest association we’re writing about this way, and it’s also the least formal. Whereas other pieces have focused on the community support different organizations provide (and our role in that), the role Miramar plays as an organization is intrinsically different at this stage. That makes them a perfect place to look deeper at not just what we pay, but how we buy in Oaxaca—the location of our new HQ and a place where we see our future. 

The Place 

Geographically, Guadalupe Miramar is within the Santa Maria Yucuhiti municipality and sits high up on a south/western facing mountain slope. The town is at 1600 masl and farms are located above the town up to 1900 masl and below down to 1100 masl. The coffee we buy is from 1400 masl and above. Miramar is located within the Mixteca zone in the mountainous west of the state of Oaxaca. Mixteca is the name of both the primary indigenous group and the local primary language in Miramar and surrounding communities in Yucuhiti.

What We Pay

FOB and Farmgate Pricing

While the numbers of what we pay only make up a small piece of the larger sourcing puzzle, they’re still an essential component. As discussed in other Paying for Coffee pieces, the core of our sourcing strategy is setting clear, consistent standards for quality and pricing while creating price structures that incentivize quality production but never punish the more general quality tiers. Prices are a) never, ever connected to the C market price in any way, and b) they are very high to incentivize both quality production and sale to Red Fox over another potential buyer. We want producers who work with us to be able to produce great coffee and thrive from the relationship, and that’s what underpins our pricing. 

In the case of Miramar, we’re working with a lot of people who would generally otherwise be selling to coyotes, buyers who collect bulk coffee in parchment for a flat lower price rather than pricing based on quality (they then then sell it to exporters). Coffees we don’t buy either flow into this market or, more rarely, stay in country to be roasted, sold, and consumed locally, a market that continues to grow and provide more stability for farmers.  

The farmgate and FOB prices we pay to Miramar, as well as the local price farmers would have received from coyotes, are below. 

Ex-Warehouse Pricing

As discussed in prior Paying for Coffee pieces, we then price in the costs of import, warehousing, and the sales process. Since we typically take full ownership of the coffees and sell them out of the third-party warehouses we carry our coffee in, rather than shipping them directly to a storage facility of a customer’s choosing, we price the coffee ex-warehouse, meaning the price as it comes out of the warehouse. 

As part of that equation, we assume full risk for the coffees we buy, committing to their quality and honoring that commitment even if delivered quality is lower than expected. Because we do actually buy the coffees, store them, and sell them rather than simply coordinating sales between customers and vendors, we have to price in the potentially unpredictable costs of third-party warehousing (for instance, if a particular coffee doesn’t sell promptly, we will pay to carry it in the warehouse until it does sell). While that is both a risk and a cost, it’s well worth it in order to be able to support producers and smaller customers at a higher level, buying and selling in quantities that wouldn’t be possible if we didn’t make that commitment. We assume this risk in order to add value to the supply chain, expedite logistics, and strengthen producer relationships.

How We Buy

Cupping, Communication, and Lot Construction

Where many other groups we’ve worked with have internal systems for quality control and analysis, we handle these parts of the process with Miramar. After peak harvest, Cecilio collects samples from each farmer and sends them to the Red Fox office in Oaxaca city, the capital of the state. The farmers’ samples represent what they have in their house at the time including an estimated weight, and we prescreen based on these samples, cupping and scoring everything they send.

We send Cecilio results and he brings everything that scored 84+ down to the warehouse in Oaxaca city, a six hour drive from Miramar. Once we have the full lot in the warehouse, we pull another sample to confirm that water activity and moisture meet our specifications and that the cup quality is consistent. We haven’t yet had situations where the coffee passed the prescreening and didn’t ultimately get purchased, but it’s important for us to make sure.

Even though Miramar’s farmers are smallholders averaging just two hectares each, we cup each individual producer’s coffee separately via signal detection cupping so that we can a) pay up for additional quality and b) carefully build lots that best represent the producers’ individual labor even when their coffees aren’t being sold as single farmer lots. We buy as much of their coffee as possible to support their work at all tiers and help build up and maintain quality standards and best practices over time. The vast majority of their coffees cup out at around 84-85 points and we carefully arrange them into community lots that represent each farmer’s work as best as possible.

We typically meet with Miramar’s farmers at least two times before the samples are delivered to us. Usually, we plan to meet face-to-face to discuss cupping results, but this year that conversation coincided with the pandemic and stay-at-home order, so we had to manage all communication over phone, text, and email.

Payment and Financing 

Liquidity is something many smallholder farmers lack, so being transparent and flexible with payment schedules and offering customizable options can make a big difference. We work with one of our local exporter/dry mill partners to provide financing (delivering a first payment for parchment upon collection) and parchment transport to the dry mill. The group can decide if they want to use this option and receive slightly less money on the second and final payment, or organize their own transport and wait to get paid the whole amount once the coffee ships.

Support

As we said before, support looks different with this new and informal group than in many of our other relationships—they’re still determining what their organization looks like and what kind of help would be most effective for them, and as always, we’re taking their lead. 

The central type of support we offer in Miramar, as in every origin we work in, is in paying the highest possible prices and letting this group lead their own development projects. We honor the fact that producers are the ones who know their business best by communicating clear quality standards, living by those standards, and then paying the money they earn directly to them for their chosen expenditures, rather than paying slightly less and offering auxiliary services. Many studies in the nonprofit sector validate this approach.

As far as meeting other needs as this group develops, our team offers experience and support where we can. We discussed drying and processing techniques with Miramar members in order to increase awareness of moisture and water activity parameters and cup quality. When a lot of the farmers needed to replant recently, they asked our opinions on which varieties might be a good fit for their operations, and we helped advise them. We also coordinate with the dry mill and exporter when to send a truck to help the farmers bring down their coffee and see if any pre-payments or financing are needed. 

Logistics and Shipping

Once the warehouse samples have been approved, the Red Fox logistics and quality control teams work with the exporter to secure a shipping date and get the coffees milled to spec. Once the coffee is milled and bagged in Oaxaca, it travels about five to six more hours to the port of Veracruz or eight to ten hours to Manzanillo.

Paying for Coffee—It’s Complicated

Each supply chain is unique, facing a singular combination of production costs, climate challenges, transit barriers, political issues, and scale factors. That’s why we feel it’s important to go deeper than looking at price alone: all of these factors matter when looking at the strength of a supply chain. 

Guadalupe Miramar is a great place to look because they’re so small and new. Their needs and support systems are so different than their slightly larger counterparts in other subregions. We hope to be there as part of the structure helping them grow organically over time, and we expect great things from them as they do.

Interested in sourcing coffee with us? Reach out at info@redfoxcoffeemerchants.com

To learn more about our work, check out our journal and follow us on Instagram @redfoxcoffeemerchants, Twitter @redfoxcoffeeSpotify, and YouTube.  

The Foxhole

Join us in the Foxhole Friday June 12th at 11am PT: we’ll be taking some time with a new group of innovative cafe owners exploring the current and future retail landscape and the challenges it presents, as well as what reopening looks like. We hope to see you there!

Scroll down to see what you’ve missed!

 

In episode 7 we talk with special guest Menachem Gancz of Quentin Cafe in Mexico City and discussing how the Mexico season went down, what changes COVID-19 brought to this supply chain, lessons we learned, and what we expect the supply to look like over the next few months.

In episode 6 we explore the current and future retail landscape and the challenges it presents, as well as what reopening could look like, with some of the most innovative cafe owners from around the country including Eileen Rinaldi of Ritual Coffee Roasters, Erica Escalante of Café Reina (formerly The Arrow Coffeehouse), Mark Capriotti of ReAnimator Coffee Roasters, and Kyle Glanville of G&B and GGET.

In episode 5, we explore the limitations of FOB pricing as a benchmark, discuss how we pay for coffee, and talk through any questions you have around coffee pricing.

In episode 4, we hang out while some special guests share their funniest roasting stories.

In episode 3, we hang out while some of our most intrepid buyers and friends share their favorite travel stories.

In our second Foxhole session, Aleco, Adam, Joel, Ali, and Zach focus on Pluma de Oaxaca and swap stories with George Howell and Ric Rhinehart.

For our inaugural hangout, Aleco, Zach, and Gabby swap a few travel stories and bring in surprise guest Ryan Brown from the audience.