Higher Base Rates, Flatter Pay Structures: How Pangoa & Ocumal Are Doing Things Different

Tailoring Payment Structures to the Needs of a Group

As we’ve discussed in pretty much every one of our previous pieces about paying for coffee, different groups negotiate their pricing structures with different needs and priorities in mind, and our job is to work with them to create a pricing structure tailored to those needs. Two great examples of groups whose needs are taking our pricing structures in new directions are Pangoa in Peru’s Selva Central and Ocumal in Northern Peru’s Amazonas region. 

Since the beginning, a core of our focus has been that the prices we pay based on cupping scores are transparent from the outset, and the premise of those structures has always been that as scores go up, the price rises, with the base price for the lowest-scoring tier being a sound price that won’t leave behind producers whose crops are clean, sweet, and bright, but maybe not as nuanced in their flavors. While that’s still the main locus we move from, growing our work with Pangoa and Ocumal has led us into a flatter structure with a higher base price and, in Pangoa’s case, only one tier. 

How We Got There

Pangoa  

Of all the groups we work with, perhaps none embodies the values of cooperativism better than Pangoa, so it’s no surprise they were the ones to lead us into exploring flatter pay structures as a way to increase pay for the group as a whole. 

Some background on this group: led by first-ever woman coop leader in Peru Esperanza Dionisio, we’ve worked together since 2017. Although the group has been around and beautifully managed since 1977, they went through major upheaval through the 80s as a guerilla group called the Shining Path caused massive socio-political upheaval for over a decade, cutting membership by half as families fled to bigger cities. When the political situation stabilized after Shining Path leader Abimael Guzman’s capture in 1992, coop membership also stabilized, now ranging from 680-700 active members registered per year and representing a tightly woven community of farmers. Their core focus on cooperativism helped them protect membership throughout the Covid-19 pandemic, delivering groceries to producers during the lockdown months and continuing to make sure members are safe. Various programs have helped members practice biodynamic farming, grow their own food and medicine, and skill-share. Specific programs help women develop alternate revenue streams and valuable skills. The group also has Education and Health Funds for member families. 

Understanding Pangoa’s core focus on cooperativism, it’s easy to see how this group was the one to lead us to a flatter pay structure of one tier only for all coffee that meets our base quality standard. The idea came up in conversations with Pangoa leadership in 2019. We love the coffee we get from them, and the producers who meet the Red Fox quality standards love the higher prices they receive from us, but because Pangoa has other core buyers who pay decent prices for coffees scoring in the low 80s, we weren’t able to catch as much of their volume as we would have liked. Leadership also wanted to encourage more producers to make the Red Fox price and quality jump so they could increase their earnings, and we decided together to increase the base price for all producers meeting our minimum quality standard (which represents the bulk of the coffee we buy from Pangoa anyway) and eliminate higher pricing tiers for higher scores, except in the case of truly exceptional coffees. 

Because we only implemented this new system just before Covid hit, it’s not yet possible for us to know how it’s worked out. Last year’s harvest was complicated by Covid restrictions (the coop couldn’t offer their typical service of agronomists who go farm to farm supporting producer needs, detailing prices, and encouraging delivery) so we received less volume, and this year we don’t yet know what final volumes look like, but the elevated C market and increased competition for green coffee across South America will likely mean we don’t net substantially more volume from Pangoa this year either. We do feel confident that it’ll go up in the future, but regardless we’ve seen that exploring a flatter pay structure with this group who so deeply believes in the cooperative as a value system rather than just a way of doing business has been an enriching lesson. 

Ocumal

Ocumal’s situation was completely different: rather than coming from a place of relative stability and desired growth, they really needed a shift in how incentives were structured to get through the year. Some background on Ocumal: they’ve been around since 2016 and we’ve been working together since 2019, before which they sold all their coffee for much lower prices to a larger cooperative. Home to about 150 members high up in the Luya district of Peru’s densely forested Amazonas region, Ocumal was founded by Faimer Villar and Freddy Zuta Chavez with the goal of working communally to increase quality and build access to financially sound markets to help the community thrive. They offer dynamic support to members including training and technical assistance on organic production, Fair Trade criteria, harvest and post-harvest best practices, and marketing services. 

For Ocumal as a newer and less well-resourced group, they had sold their coffee at much lower prices before we started working together, so they were super happy with the two-tiered structure we had set out before this year. What changed this year was the incredible competitiveness of the green coffee landscape in Peru and the rest of South America with the C market jump and supply disruptions in Colombia and Brazil. In order to make it feasible for members to sell their coffee to Ocumal rather than to passing intermediaries representing multinationals (who arrive with cash in hand paying dramatically elevated prices compared to a normal year) Ocumal had to have extra incentive to offer members in order to make it possible for them to wait. Our goal with Ocumal wasn’t to reward or incentivize a particular type of differentiation, but just to help the group stay solvent through this tough year by raising their base price to a price on par with the high premiums for top scores in previous years and making sure that anyone who makes it to that base tier can stay loyal to the group through this year. While producers win when they can get a high price everywhere they turn, it’s still important to help cooperatives and associations remain solvent so that they can be there to support producers in years when the C market and local market prices are much lower, as we saw in the years leading up to 2020. 

The reason we place so much emphasis on high base prices no matter the surrounding circumstances is that in the case of every group, that’s the bulk of what they produce. Ocumal is no exception. Raising the base price and flattening out pricing nets the group more money as a whole. Next year if Ocumal wants to go back to a more tiered system, we will do that, and if this still works best for them, we can plan to do that. 

Pros & Cons on Both Sides

For producers, the obvious pro is that when base prices go up and premiums mostly go away for higher scoring tiers, the group makes more because most coffee producers, even in the specialty realm, produce the majority of their coffee in the 84/85 tier. Even if fewer dollars go toward premiums over this base, more money goes to more members, period. This is a pro for us too from an equity standpoint—we want to see more money go to producers.

Another pro for both us and associations is ease. Even though flatter pricing doesn’t change that we cup every individual lot rather than relying on type samples, it still allows us to focus on a simple pass/fail scoring system during the purchasing process. Those results are also easier for producer leaders to communicate outward within their organization and community and eases the confusion or resentment that can occur when a producer nets a premium one year but not the next based on quality (and often unrelated to how hard they worked in production). On our end, it also simplifies lot construction.    

On the one hand we have all those pros, but on the other hand, we have the question of whether one flat price for all Red Fox coffee levels would lead to producers not making the extra effort to get past the 84/85 point level, or to resentment from those who do work extra hard to produce higher scoring coffees. Coffees at 86+ level are a staple of specialty coffee, and we love them and want to incentivize their production where we can. 

While those pros and cons exist and factor into our thought processes, the main thing to acknowledge is that some groups want a flatter pricing structure, but some have no interest in one. In Oaxaca where we mostly work with small decentralized groups (often extended families or neighborhoods) without formal leadership structures, we’ve seen that as long as base prices are high enough to make coffee production a valuable trade, some love the friendly competition of getting premiums for higher cup scores, while some prefer for everyone in the group to make the same amount if their coffee meets our base quality standard. In these cases, our shared goals with Pangoa and Ocumal’s specific needs this year led us to a shift in how we pay for coffee with those groups. The key isn’t any one structure, it’s letting groups’ needs lead the way to an incentive structure they like and benefit from. 

Producer Groups’ Needs Should Lead the Way on Pricing Structures 

As pricing and competition dynamics shift and change from year to year, it’s important to approach producer groups with the energy of carrying over the dedication and investment from prior years but being sensitive to their changing needs. Just like we as people have different needs for the incentives that motivate us, and just like our working relationships work best when we have a say in how our needs are met, sourcing relationships should also be built and maintained in acknowledgement of producers’ and associations’ changing needs over time. As we continue to grow and develop relationships with a diverse array of producer associations and cooperatives, our work is to let their needs inform the shared incentives we create together. 

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

Colombia & Peru Update, August 2021

As promised, we’re coming to you today with another origin and shipment update with specific focus on the current and anticipated situation in Colombia and Peru, typically our two largest and most critical sources from the Southern Hemisphere. The C Market has been a rollercoaster ride for the past 60 days, the South American harvest is as volatile as we’ve seen it with the Brazilian frosts and competition for parchment in both Colombia and Peru, and the global shipping situation showing no signs of improvement as the 2021 finish line appears on the horizon.  

Fret not. We will be flush with Peruvian coffee on all three coasts come fall as well as preparing shipments for Korea, Japan, Australia, and Europe. Colombia, Ecuador, and Rwanda will follow suit from the Southern Hemisphere harvests. Our primary objective is to get fresh coffee into your roasteries as quickly as ever.

With that said, you may have noticed that the time we would usually have opened forward booking for Colombia has passed. As we’ll delve into below, the current harvest and shipment situation in Colombia will leave all green coffee sources competing at higher prices for much smaller volumes of quality Colombia coffee. Because of that, we strongly recommend forward booking the majority of your South America volume in Peru, rather than Colombia. We will not be able to offer a substantial amount of Colombia coffee to forward book this year and the quality we’re seeing out of Peru will absolutely meet the full scope of your menu needs. In order to give you the time to outfit your single origin and blend menu accordingly, we’re extending forward book pricing through September 15. To talk through your menu with us or make a commitment, get in touch. 

Supply, Demand & the C Market

The C Market price surged 30+% in July before backing off to the $1.80/lb zone. Three frosts in Brazil have been the driving force in conjunction with dwindling green coffee stocks across both the global north and the Brazilian reserves themselves. The current Brazil crop could be down as much as 10% (roughly four million bags). Long term damage assessment is still in process, though experts forecast even heavier losses in the 2022/23 season due to these three frosts and the horrible drought situation in 2020. The extent of the damage won’t be fully known until after the first rains trigger flowering in the months ahead. It is highly likely that another market spike is tethered to those fall reports.  

Colombia 

Along with a C Market in flux, the Colombia harvest outlook also appears bleak for the upper end specialty segment. Due to an overly wet harvest season and aggressive internal competition for parchment, clean, sweet, complex 85+ coffee is incredibly difficult to come by. We expect our own purchases to be down somewhere in the neighborhood of 50% from this first semester’s harvest versus 2020. Fabian is currently vetting weekly deliveries to the Asorcafe warehouse in Inzá, Cauca and will soon move on to cup through Nariño warehouse deliveries. Our supply will be extremely limited through year-end 2021. Expect pricing in excess of $4.50/lb ex-warehouse on all of our offerings this season.  

Peru 

We are knee deep in the Peru buying season with our first eight containers headed to dry mills in Piura and Lima. Coffees from across the north—Amazonas and Cajamarca—were first-in first-out of our Lima lab this year and will therefore hit the water first, along with Cusco coffees from our primary partners at Valle Inca. With vessels scheduled for September departure, we expect our first arrivals to land in October in both New Jersey and Houston, TX. Our first Incahuasi containers hit the water in September as well.

Our strongest cooperative partners remain competitive in their respective regions, both in quality and quantity. Due to Valle Inca’s location in Yanatile and Lares, they’ve faced the most competition for parchment, but Prudencio’s history with his producer members has proven stalwart. 

Shipping & Logistics

Transporting coffee remains the specialty segment’s most critical 2021 impasse. Container availability is bleak. Vessel availability is a crap shoot and tremendously expensive. Routes have been cut down, equating to longer transship times. Covid-related port restrictions have led to container ships sitting off the coasts of their destinations for potentially multiple months.  

We elected to address the worst situation, Port of Oakland, by landing a healthy dose of our South American offerings in Houston. We will store more coffee at Dupuy Houston than prior years and will also move coffee from Port of Houston directly into The Annex. All East African offerings will land in Port of New Jersey and be railed across the country. Ensuring fresh delivery is critical to us and we’re constantly evaluating and adjusting plans to get coffees to their destination as quickly as possible.

As always, as in all things, we’re here for you—so get in touch to ask us questions, talk, or anything else you need. 

Carina & Fabian of Red Fox Sourcing Talk History & the Future in Peru, Colombia, & Mexico

As we continue working to spotlight voices from producing countries, we were excited to interview Red Fox’s own Carina Barreda and Fabian Viveros Léon in the Foxhole. Fabian and Carina are linchpins of our sourcing program, helping with on-the-ground quality analysis, producer support, and relationship development, among many other things (more in their own words below). Both come from key coffee producing countries in which we’ve worked since the beginning (Fabian from Colombia and Carina from Peru) and have a ton of insight to offer into the current situation and long-term developments both within coffee production and the larger political situations that affect and underpin it. In this Q&A, Red Fox co-founder Aleco Chigounis and head of Red Fox Sourcing Co Ali Newcomb interview Carina and Fabian in Spanish; the interview has been translated and edited for clarity. 

Aleco: It is a great pleasure to have you both here. We want to talk about your work, your perspectives on the coffee industry, and your thoughts on the future. But let’s start with your roles. Fabian, can you share what you do with Red Fox?

Fabian: We do a little bit of everything. Here in Oaxaca, we meet and organize bringing on new coffee producers and relationships. I’m also in charge of quality control, all of the follow-up from the production through to the final shipment, managing the whole chain so that the entire relationship from the coffee producers to the final client becomes one and is fully transparent in our business.

Aleco: Nice, thank you! And Carina? 

Carina: I do similar work to Fabian. I am in charge of managing the labs, first in Peru and now also in Mexico this season. That means handling the logistics for the samples we receive, organizing the cupping sessions, organizing communication with certain cooperatives regarding their results, and most of all, quality control of the offer and preshipment samples we receive, making sure that the lots we buy meet the quality standards that we need them to meet in the dry mills. I also play a role in marketing. 

Ali: In all of our operations both in Peru and in Mexico, there are a really wide range of activities and responsibilities and you two are definitely do-it-all kind of people and you get involved in everything.

Aleco: With all the experience that you both have, in Mexico, in Peru, and also in Colombia (Fabian is Colombian for those who don’t know), how do you see the future of coffee production in those countries? Because a lot is changing fast. What is your perspective? 

Carina: I have more of a relationship with Peru because I spend more time working here, am from here, and I have been working in the coffee industry here for years. I think we need to look at the future of coffee production in Peru through an optimistic lens. We are in a very complicated political situation, coming out of a very unstable political situation. In one way or another that is going to affect the coffee production chain. We will probably see some effects this current harvest. But aside from this political panorama, I feel there’s still plenty of room to grow in terms of how much coffee is being produced, not only at the specialty coffee level, but at the commercial level as well. And in terms of quality, I feel like there has been tons of improvement if we look at the past, especially since the period of coffee leaf rust. Domestic consumption has also increased, which almost automatically leads to higher production and incentivizes it at a national level. So even though this season and coming years might be a little bit unstable because of the political situation, I think it’s worth it to see it with optimism. What do you think about Colombia?

Fabian: Colombia as you all know is a very developed country when it comes to coffee. They have progressed in many areas like quality control, transparency in production, and every day they are innovating in production and processing. They are very far ahead.

In regards to Peru, it reminds me of Colombia years back, in its massive production, and I see huge potential in Peru to develop great coffees, great volumes and great quality. More microlots, new regions. There is still much to explore in Peru. 

In Mexico, we are developing and searching for new regions and producers to work with, in all the areas in Veracruz, Chiapas, and Oaxaca, each one of them still has a lot hidden. There’s so much quality to continue to grow and develop, and we are searching for all this. The expectation in Mexico is growing a lot, because they are small producers, and very dedicated to coffee.

Carina: Yes, to add to what Fabian is saying, I had the opportunity to come to Mexico for the first time and to get to know coffee production in Mexico, and I agree that there is so much potential. There is still so much more to do and help grow and be a part of. Another way of putting it is that I think that Mexico has the ability to become a country that is recognized worldwide for its coffee quality. With a bit of organization.

Fabian: With a bit of organization.

Carina: And a bit of government support, which is something that all of Latin America is lacking.

Ali: It is very interesting not only to hear your perspectives but also your comparisons of the different countries. On the same subject, how do you see the transformation of commerce in these three countries?

Carina: Well, I honestly don’t have an experience as broad as you all have in terms of trading and coffee commerce. The experience I have is basically thanks to Red Fox and the 3 years I have been working with you, so I don’t have a comparative way to see the transformation of commerce in Peru. What I do think is prudent is to always stay up to date with the new trends of consumption in the market. To know what our clients want, what our clients are looking for. And, on the other hand, what the producers are able to produce. 

Fabian: In Colombia the transformation of the market has been enormous. The market conditions for the producer make it very easy to take their product and sell it on any corner and obtain good prices, and it’s very convenient. Everything is ready for the producer to decide where they want to sell their coffee. It is very easy in Colombia to find that kind of market. It is quick and safe. Peru is in the process of getting there. Their volume is huge, and it’s not that easy to find a market for that kind of volume so, the development is going very steadily with the cooperatives looking for markets and presenting the palette of their profiles and the good coffees that you can find in their respective areas.

Here in Mexico, the market is developing faster, because the national coffee shops go looking for their coffee at origin and that helps the producer know their market, know who they are selling their product to in what shops it is going to be sold. So you find a different mix here compared to the other countries, because the national market in Mexico consumes a lot of this coffee, and prices are very competitive with the national companies, and it’s highly coveted coffee inside the country and outside. For all the producers in a lot of areas, there’s a high and constant competition for their product.

Carina: I think it is interesting what Fabian is saying about the consumption culture in Mexico. It’s not as old in terms of specialty coffee as Peru, but I think it has taken off with a lot of force. One of the things that surprised me the most about coming to Oaxaca was to find this fervent culture of third wave coffee shops that want to get into the specialty market. And even though Peru started a few years back, before Mexico, you can’t find as many coffee shops in other regions outside of the capital. I think that’s another remarkable thing about the internal consumption in Mexico. 

Ali: I’m with you, the coffee culture impressed me a lot, and they are so proud of Mexican coffees, and that people are willing to pay a very good price that competes with the international markets. That’s something we don’t see in Peru, people are not willing to pay those prices. And the coffee is not as valued in the same way we have seen in Mexico.

Changing the subject, and I think this is a really broad question because we are in the middle of the protests in Colombia, we just came out of the elections in Peru, but I wanted to know your opinions. What can you tell us about the political situation in Peru?

Carina: How much time do you have? The political situation in the country is in a very complicated moment, as you said. We haven’t finished with the presidential election yet, an election that should have been finalized a few days ago that has gotten complicated due to fraud accusations.

On top of that we’re coming from 5 years of exhausting political instability. In the last 5 years, we’ve had 4 elected presidents, which has damaged a population that also had to deal with the pandemic. Through all of this political instability, aside from the emotional stress that the population has already been through, it has considerably affected the financial health of the country. The Sol (Peruvian currency) has devalued in comparison with the dollar, which has raised a lot of concern within the population as well. The scenario we are facing right now is a possible very conservative left socialist government. There is a general fear in the population, which Fabian and I were just talking about, which is the fear that the entire Latin American population has right now of falling into a socialist model of a dictatorship like the one in Venezuela.

It’s not a very pleasant scenario, but it is what we are facing, so we are trying to keep calm as much as possible, to avoid creating more panic, to avoid creating price hikes, to avoid creating more instability, no? It’s going to be interesting, to see how all this develops in the next 5 years. We have to pay attention as a company and see how this will affect the agronomic sector and what kind of policies in the agronomic sector will be implemented by this new government.

I would like to think optimistically that we are going to maintain the level of production, not only of coffee, but in our work specifically. That coffee production will be maintained, that the internal consumption will continue to be incentivized. I would like to think that the rights of the agronomic sector are going to be protected. But we still have a lot to see, because there is no clarity about what this government’s policies are going to be in regard to the economy and the agronomic sector. That’s a short summary.

Fabian: As far as Colombia, the Colombian people have been enduring the issues that are coming to a head now for a long time, and they’ve felt very vulnerable with the decisions that the current government has made. With the abandonment of the people’s needs and everything that the government has done, the Colombian people have reacted. Unfortunately, now with Covid, the resentment has been much more brutal.

Ali: Going back to your idea, these are issues that have been present for many years, and now everything is coming to light. These are not new issues, but rather years and years of resentment.

Aleco: It is like boiling water passing its limit, no?

Fabian: Yes! Yes, as Ali was saying, people’s resentment has exploded now, and because of the pandemic everything has gotten more complicated. The government has also been unwilling to listen to the people. There are many industries that have been left unprotected by the government. Now, during these times, they have gotten together to unify their voice, unify their shout, against the president, the government, because of their bad decisions. Commerce has been affected. In many instances they have cut gas, energy, water, access to food has been blocked for people who are far away, it has been very complicated. It’s the dissent of an entire population, everyone who has been mistreated by the system, and it’s affecting us all. The entire production chain, the health chain, and the entire system in Colombia has been … well, it has collapsed.

Carina: Do you have presidential elections soon?

Fabian: Yes, same, we have presidential elections soon, and that increases the internal conflict even more, and the conflict of interests. The instability.

Aleco: Thank you for this, we know that everything is changing daily in the two countries, and we are in front of the television, the radio, the internet, looking for any kind of news that we can find. Your perspectives are invaluable. 

Carina: I want to thank you for the space, for me and Fabian. I feel like we have to be paying very close attention to all changes, how they can possibly affect the coffee industry, and the possibilities of the producers.

Aleco: Thank you very much for your time, you are two of the most powerful ingredients in our recipe, our company. I thank you all for everything. And I will see you soon in Peru, or Colombia, Fabian.

Fabian: Thank you Aleco, see you! See you soon!

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

Red Fox Coffee Merchants Origin & Shipment Update: Q3 2021

Hello friends, coming to you as we enter the third quarter of 2021. We’ve put together a report on the current state of coffee affairs in the areas of the world in which we work. With the supply and shipping disruptions we’ve seen over the last year and which we know will echo into the future, we want to help keep your finger on the pulse of global coffee traffic and hopefully make your job a little easier. This report contains some details as well as some broad strokes—if anything here piques your interest or leads to more questions, we’re always here to talk, so get in touch

This quarter, we’re seeing many disruptions and complexities borne out of civil unrest, with the two most notable for our upcoming harvest and shipping season being Peru and Colombia. The other component that’s affecting global shipping operations on an extremely broad scale is the confluence of the global container shortage and widespread port and trucking slowdowns due to Covid-19. Much more on all of that below. 

Logistics, Port, & Warehouse Updates

We continue to see widespread disruptions in our supply chains as we enter the second half of 2021. Globally, ocean freight rates have skyrocketed. Routes between East Asia and the US West Coast have been the most impacted. Efforts to combat a Covid outbreak in Shenzhen, China in June caused the port of Yantian to vastly reduce its operating capacity for nearly a month, resulting in a huge backlog of shipments waiting to berth, soaring freight rates, and a further reduction in the supply of available containers for all shipping routes. There is ongoing uncertainty in bookings and volatility in transit times across the industry, and little indication that this will ease before 2022.

 Congestion at US ports has seen some mixed improvement, mostly on the East Coast where cargo is moving a little more fluidly through the NY/NJ ports. West Coast ports, which have seen a huge surge in imports this year, are still over capacity, with ongoing labor and equipment shortages contributing to congestion. The port of Oakland continues to see major delays, with boats sitting on the water waiting for a berth for up to 2-3 weeks after arrival. 

There is also a general state of congestion across the domestic trucking industry. LTL freight carriers (shipping services for relatively small loads) are dealing with massive shipping volumes alongside continuing shortages of drivers and equipment, and their networks are strained. Transit times and costs are increasing across the board. Carriers are capping the number of warehouse pickups and cutting locations out of their service maps to cope. Warehouses are struggling with inconsistent pickups, last minute cancellations, and a general backlog of shipments. We recommend that roasters plan ahead for longer transit times and higher freight costs, and encourage everyone to get their orders in the pipeline with time to spare.

On the warehouse front, we do have some positive news to share: Continental Terminals, Annex (formerly The Annex) has completed their move to a new facility in Alameda, CA. With the move complete, they are now returning to their 24 hour notice to process and ship orders, meaning pickups from the warehouse can happen a full day earlier than under their previous 48-hour turnaround. 

Supply, Demand, & The C Market 

Supply and demand have hit their most volatile moment in close to a decade, with dwindling stocks in the Global North, container shortages, reduced route availability by container carriers themselves, and a 2+ month long trade disruption in Colombia at the core of the issue.  The C market has risen sharply in the past 60 days, coming in just above $1.50/lb for the past couple weeks. While we don’t expect another rise in the immediate future, many in the trade suspect another spike later in the year around Q4. The situation is developing and no one here has a crystal ball, so we will take this as it comes (or doesn’t) down the line.

The immediate impact of the four aforementioned market dynamics has significantly affected parchment buying across South America, Colombia & Peru most acutely. The FNC, Nespresso, and other large buyers have entered producing regions with extremely high prices for ‘clean’ (sound, nondescript) coffee leading to the most competitive buying market we’ve entered ourselves in our 7+ years in business.  As the first semester harvest now enters its peak season we expect to be paying upwards of 50c/lb FOB for our offerings from Inzá & Nariño. Port closures in Buenaventura/Cartagena have trickled down to Peru in that the Colombian supply shortage has created chaotic buying across the country with prices for ‘rubbish’ (wet, unselected) parchment almost doubling from last year. At least one of the major Peruvian exporters has received US $2.6M in loans from the government helping them to incapacitate competition in certain areas of Cajamarca, San Martin, Cusco, and select other departments.  Red Fox expects to pay 20-30c/lb FOB more for certain relationships and maintain a level of price stability with others. More to come on the Peruvian state of the trade below as well as in our early August supplement.  

Peru 

On the political front, the country had a disputed presidential election, where two candidates with very different political positions clashed in June. Socialist candidate Pedro Castillo won the presidential election after clinging on to a narrow lead. On the other side, his rival Keiko Fujimori, who refused to concede, has challenged the results, claiming electoral fraud. The political situation has revealed deep gaps between voters, along economic and racial lines, as well as ideological ones. Because of the political instability and speculation regarding the new leftist government, the price of the dollar rose against the national currency during June. This only aggravated extant concerns about the country’s financial stability.

On the coffee front, harvest has already started. The price of coffee is up an estimated 85% over last year, regardless of quality and physical standards. According to comments from cooperative managers we work with, there’s an overall concern regarding what this means for coffee quality this year. The price rise stems from a combination of factors including the increase of the dollar against the national currency, the uncertainty generated by the lack of mobility of Colombian exports, the increase of the commodity price, and the instability of the political future of the country. 

Hugo Cahuapaza of Coopbam in Amazonas, Northern Peru, reports that the harvest in the lowest altitudes is already at 100%, while the middle sector has reached almost 80% and the highest zones are just getting started. The rainy season has been unusually prolonged, but producers are taking steps to achieve preset standards in coffee drying. Hugo also told us that the political and financial instability aren’t currently affecting the producers, who continue to carry out their daily activities, since they’re not used to depending on state support anyway.

Cajamarca-based Santuario manager Ismael Alarcon expects a higher production volume this season, approximately a 20% increase over last year. As in all of Peru, Cajamarca has also seen coffee prices rise, which, combined with the greater competition in the market, has led to an increase in labor costs. 

Albino Nuñez of Pangoa in Selva Central reports that business continues as usual and that harvest is at its peak right now. He and other members view the season with optimism since they’ve noticed an improvement in quality and expect an increase in the volume produced this year.  

Stay tuned for a Peru supplement in the coming months going into more detail as we get into the field and start the actual purchasing process—the situation here is developing and we’ll keep you on top of it. 

Available Lots: 

While Peru spot coffee continues to make its way into roasters and mugs, we do still have a number of solid lots from community to producer ID available on both coasts and in DuPuy Houston. We’re cupping all lots regularly and they’re still at the top of their game.

Colombia 

The political chaos surrounding tax reform that has mired the country for the past two months appears to be nearing its end, at least for the moment. Ports have reopened as of late June, though diminished availability/routes with container carriers and the ensuing backlog of coffee in dry mills across Colombia creates an outlook of slow shipments and deliveries into fall.  

COVID-19 appears to be hitting it’s peak in Colombia at the moment recently passing 100,000 deaths due to the virus.  A dearth of vaccine availability keeps the outlook bleak for the immediate future.  

From our dry mill/export partners in Popayan: 

“Things are getting back to a certain normality and coffee flow/purchases are decent. There is congestion at the ports which will take weeks to sort and freight rates are increasing. May shipments were 0.5m bags and June has shipped 0.2million bags so far (June 14th). Differentials [countries’ standard differentiated price for clean coffee in relation to the C market] are continuing to increase due to rains having an impact on the next mid crop. We might need to reduce our production expectations to around 12m bags.

Despite the strikes having ended and the road corridors to ports being reactivated, the situation has not improved much. Ports are facing high congestion due to the increased volume now coming through from different areas. 

  • Buenaventura has been operating since mid-June, but the main problem is low availability of vessels. During May, only two vessels were available in Buenaventura and as the operation just started to normalize, the combination of limited vessels, limited trucking routes, and the backlog of coffee in the dry mills means continued delays. 
  • Cartagena’s been highly congested since the end of May because of space limitations, low storage capacity, and lack of containers. Until mid-June, the trucks were taking eight days to enter port (literally waiting in a nearby parking slot, waiting to enter the port’s installation), which caused the loss of the vessels. It also led to carriers refusing to travel to this port unless a daily stand-by rate is set to include waiting times.
  • Santa Marta is facing the same situation as Cartagena with the difference that until this week (June 21st), entry to the port is taking 12 days.
  • For all ports, the main concern now is truck availability due to the increase of inland freights and because the preference goes to transportation of imported goods (often paying four times more than usual freight), followed by lack of space in the vessels.
  • As a final comment for the logistic side, we are 85% confident that the situation will smooth out for August.”

As far as the first semester harvest itself is concerned we are hearing consistent reports of heavy competition for parchment across the country. Whereas Red Fox leveled up farmgate pricing to producers from $1.35mill pesos/carga in 2020, the FNC (National Federation of Coffee Growers of Colombia) is opening at $1.6mill pesos/carga for clean coffee now. Expect a significant increase in your Colombian coffee costs this year regardless of your source.  

Inzá, Cauca has been pummeled by late season rains as peak harvest begins at altitude. Volume expectations for the fly crop are plummeting on a weekly basis. 

From Geovanny Liscano, Producer and Asorcafe President: 

“I can tell you that internal prices are very high at the moment. Nespresso is at 1.6mill pesos per carga.”

From Danilson Oidor, Producer and Asorcafe Member: 

“It’s a strange year, we’re harvesting very little. There are a lot of rains which has led to a lack of cherry maturation.”

From Raquel Lasso, Producer and President FUDAM

“Narino is now approaching its peak season harvest at altitude. The parchment market across the department is also at a competitive high. Climate change seems to be rearing its head in ways that are clear to anyone looking. While the flowering was solid, heavy rains during the fruits’ maturation cycle caused a lot of fruit to drop from the trees prematurely. There will be immediate repercussions in the season’s yield due to this.”  

From Gildardo Chincunque, Producer and Parchment Collector, Tablon de Gomez:

“The harvest has begun but the baseline price in the region is 13,000/kilo or 1.650.000 pesos/carga [for clean coffee*].” 

*This is compared to the 1.3mill pesos/carga we opened at last year for 85+ scoring coffee.  

Rwanda 

Harvest in Rwanda is coming to an end, with high-elevation Kanzu wrapping up about a month later than washing stations at lower elevations. Rainfall and conditions were favorable for quality and volume this year, with total production in the coffee sector expected to be up 10-15% over the prior season. Competition for coffee cherry was intense, and internal prices paid to farmers increased to almost double what they were last year. 

Logistics are expected to be challenging this season. Empty containers for export are scarce and difficult to secure. Landlocked Rwanda moves all cargo by truck to the ports in Mombasa, Kenya or Dar Es Salaam, Tanzania. Travel restrictions and Covid testing requirements for truck drivers crossing the borders are slowing down the movement of coffee to port, such that what might be a five day drive under normal circumstances can now take up to three weeks.

With outbreaks surging in neighboring Uganda and DR Congo, new cases of Covid-19 in Rwanda have risen exponentially in the past weeks. The country is now recording its highest number of daily cases since the beginning of the pandemic. Access to vaccines remains low, with just under 2% of the population fully vaccinated, and there are concerns that the highly contagious delta variant will soon be widespread in the region. The Rwandan government announced new restrictions for the capital Kigali and eight other districts that go into effect July 1st, including a 6pm curfew, and the closure of schools and universities, non-essential offices, and restaurants. Travel between districts is restricted to essential services.

Available Lots:

We are currently evaluating offer samples from the first Kanzu outturns and will push to get containers moving as early as possible, in light of the expected shipping challenges. We aim to have coffee on the water in July/August for Sept/Oct availability.

Ethiopia 

Civil unrest continues to be the central theme in Ethiopia with the Tigray conflict at its core.  Restrictions against the press have made honest, relevant news hard to come by. In the midst of all of this Ethiopia held its elections for Prime Minister with many challenging the election’s fitness. Final results have yet to be announced.

As shipping season is now on its backend the trade is scrambling and struggling to find empty containers and available vessel departures for remaining shipments. Exporters scramble to allocate their final washed G1 lots which often get sold as G2 in the twilight of the shipping season. We also hear chatter on the export side of major internal market disruption due to larger exporters hiking prices to meet their contractual obligations. Akrabis (coffee traders/wet mill owners/parchment collectors) have ignored certain agreements to sell at higher market levels.

Both Kedir Jebril and the Kata Muduga Union are completely finished for the season with stock shipments and look ahead to the coming crop.  

Available Lots:

We’re well stocked with fresh washed lots from Agaro and Guji on all three coasts as well as including DuPuy Houston. Naturals from Nansebo and Bensa arrive to both California and New Jersey later this month.  

Mexico 

With the harvest completed across Mexico, almost all volume has been sold or contracted with milling being finalized on remaining parchment and final shipments moving to port by early July. Limited direct shipping routes, container/ship space availability, and frequent rollovers from most or all shipping lines have continued to slow the export and import processes, but we’ve been working with shippers to get coffees out with more fluidity and success. Rainy season has settled in across the southern growing region. After a contentious and highly anticipated election season, the country continues to struggle with containing Covid and getting the population vaccinated in a timely manner. However, most businesses are operating at full capacity and the economically important tourism sector has picked up in recent months.  

Available Lots:

Mexico arrivals continue to fly off the shelves almost as fast as we can bring them in, but we do have an array of lots in Continental NJ, and DuPuy Houston. Newly arrived at Continental, we have Familia Garcia Lopez, from Casimiro and family in the Loxicha area of the Pluma region in Southern Oaxaca, with 29 bags available. We also have a new offering this year which just arrived with 18 bags available. Coming to us from a producer group in a remote part of the Mixteca region, Garra de Jaguar is dynamic and sweet with tons of dried fruit notes.

Ecuador

Due to excessive rainfall at the beginning of the year, producers we work with are expecting a decrease in production this year in Ecuador, and particularly the Pichincha region. Arnaud Causse of Las Tolas and Terrazas del Pisque in Pichincha tells us he’s expecting a 20% decrease in production this year and a delayed peak in production as well. He also said he’ll be focusing less on natural processed coffees this year due to the lack of sun and excess humidity. In other areas of the country, such as Napo, where high amounts of rainfall are normal, there are high expectations for a great year for production and processing. 

According to media sources, about 11% of the population are vaccinated. The country still requires masking and recommends residents to stay home as much as possible. There are mobility restrictions across the country which producers expect to impact this year’s harvest.

Kenya 

From our friend Kennedy Keya at C. Dorman:

“Kenya main crop sales in the auction market ended in April. About 420,000 bags (60kg) were traded. Farmers were a happy lot with many factories paying on average equivalent of $0.70 per kg of cherry. We have been on recess for two months. Auctions resume tomorrow with only 8,000 bags on offer. It has been chilly resulting in slow parchment drying. We estimate about 160,000 bags from the fly crop this year. Auctions will be held every two weeks until volumes stabilize. The next main crop to be harvested from October is expanding well. If weather patterns don’t cause any damage we expect decent volume of the main crop, about 25,000 metric tons. 

The Covid situation is stable with new infection rates ranging from 5% to 10% daily. But again, numbers of those tested are too low. Life is picking up though many sectors of the economy are struggling, for example the tourism and hotel industries.

The port is operating at a slow pace. A big challenge is getting empty containers. Imports have been low. However, we are able to meet the shipment schedule by placing vessel bookings in advance. Some shipping lines, for example Hapag, are not accepting bookings for nearby shipments. They say their vessels are fully booked.”

Available Lots:

We have a small handful of truly superb Kenyas available on both coasts. 

Guatemala

Guatemala continues to struggle with over 1500 new Covid-19 cases reported daily. Like many countries, the majority of cases are not reported due to lack of testing, especially in rural areas. Our source in Guatemala City tells us “Covid is pretty much the same here, not getting any better.” 

Harvest has wrapped up in Guatemala. Like just about everywhere we are sourcing, there have been shipping delays, mostly due to lack of available containers.

Available Lots:

We contracted two containers this year with one going to each coast. The east coast bound container had an ETA into NJ 6/28, and has just a few bags from Santa Barbara, Huehuetenango available plus a larger lot from San Jose Poaquil in Chimaltenango. We expect to see this stripping into Continental around the second week of July.

The west coast Guatemala container has an ETA to CA of 7/6. We are continuing to see delays with containers getting picked up and stripped into The Annex, so best guess is end of July availability for these coffees including a 20 bag single producer lot from Los Arroyos in Huehuetenango. 

Yemen 

Both the ongoing Civil War and Covid issues have decimated the coffee industry. Moving coffee to port internally, loading onto passing vessels, and the larger global shipment situation have led to shipment periods of upwards of 60 days. Thankfully, the coffees we purchased this year have already landed and we have an extremely limited quantity available. 

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

Casimiro García López of Pluma on Community Origins & Modern Challenges

We were excited to be able to interview Casimiro García López of Pluma de Oaxaca, as well as his son Omar, face-to-face in Oaxaca. A second generation coffee farmer, Casimiro and his wife Reyna Petronila Luna farm 20 hectares (an unusually large farm for the Pluma region) just outside San Agustin Loxicha en Aguacate, a community growing both coffee famous for its malic character and avocados. Casimiro’s older children support in both farm work and marketing, contributing agronomic knowledge learned in local courses. In the off-season, the family works as blacksmiths. He’s been one of the most consistent parts of our Oaxaca coffee community year over year. In this interview, translated from Spanish, Casimiro and Omar talk to us about the history of their family in Pluma, the origins of the unique Pluma Hidalgo variety, and the biggest challenges they face in the present. 

Adam: Mr Casimiro, thank you for coming. I would love for you to tell us a little bit about the story of how your grandfather started to produce coffee in Loxicha and how he managed the fields. I think this story is very interesting.

Casimiro: The origin of our coffee and our work here started about 70 to 80 years ago.The plants came from the community Pluma Hidalgo. We got them because the community here in Loxicha, where I am from, was very poor. The people didn’t have good quality of life, the most they had was two or three heads of cattle.

What happened was that a community member suggested that the community switch from cattle farming, which was very cost intensive and unprofitable, to coffee farming, from which they could make more money and improve their quality of life. That’s what led the grandparents of our community to go and bring coffee plants back from the community of Pluma Hidalgo. Back then, there was no transportation, there were no paved roads, there was no way to transport the plants, so they had to bring the plants on mules, however they could, even just carrying them in their hands; and that is how they started to sow.

From there, my father continued working, and so did my generation, and my children. Now, we are very thankful to be working with Red Fox.

Adam: And how many days did it take to bring the coffee from Pluma Hidalgo to Loxicha en Aguacate by mule?

Casimiro: Well, it was two days going there, and two days coming back.

Adam: Walking?

Casimiro: Yes, walking, cars didn’t exist. The big road from Miahuatlan to Pochutla had cars, but not like the cars we have today. We were ranchers, we couldn’t go by car, so the mules were the only transportation we had.

Adam: And this is the same variety that you still produce up to date?

Casimiro: That’s right, exactly. That is the variety “Pluma” that we have.

Adam: Can you explain to me how your communal system works? How many family members do you have around? Do they bring you cherry? How do you coordinate and work with your relatives and neighbors?

Casimiro: In our area, the vast majority of our relatives are coffee producers. Some neighbors too, they are a bit further away. Each person has their own plot, each plot has its own coffee. The harvest starts in December, around the 15th, the 20th, people start collecting their coffee. 

Our method is letting the coffee ripen well so the coffee can turn out well after processing. I saw that people in other communities would start collecting the coffee when the fruit was still yellow, and the coffee isn’t good like that, it has to be ripe. Then we harvest, and in the afternoon, we depulp together and leave the coffee to rest all night long and for part of the next day. Between 15 to 20 hours, give or take. Then we wash the coffee and take it to the drying patio, for six to seven days. We manage watch over the drying. And that’s it. 

Adam: What is the biggest challenge you face in producing high quality coffee, like the cost, finding employees, etc?

Casimiro: Well, in times of harvest, first of all, we need people. If we don’t have people, then we can’t work. So, for this, the most difficult part is to have money to be able to pay the pickers.  

Adam: But you have work all year round, no? Like now, it started raining, so you told me the coffee was starting to flower, so what happens in the season when there is no harvest? What is the work then?

Casimiro: After the harvest, the work that we have is to grow seedlings and prepare the farm. To plow the trees, to get coffee, and prepare the starts. And then in June, we start sowing, it is time to plant new seedlings. After that, we start cleaning (weeding and pruning),then cleaning. We start harvest after that. So, during all that time we spend, we manage money to invest. 

Adam: Omar, I am not sure if you want to comment, since you are Mr. Casimiro’s son, and you also have your own kids. What is your vision to keep producing coffee? What do you need to keep producing coffee and to make it profitable? To have a good life?

Omar: To continue in the coffee industry, I believe that the most important thing is to have passion for coffee, to keep moving forward, because today, we have many obstacles, mainly with the coffee leaf rust. But I believe the coffee industry is something beautiful. On a personal note, I would like to own my own farm in the near future so that I can continue working, continue innovating, and with time maybe adapting new processes to improve the quality of the coffee. When we improve the quality, there’s a bilateral benefit for both parties, it’s good for the consumer and for us as well. 

I would also like for my kids to continue with the beauty of being coffee producers, and for them to have their own plots, their own methods, for them to continue innovating, and to continue this beautiful life, and to continue well.

Adam: Do you drink your own coffee? Do you roast and drink your own coffee from the one you produce?

Omar: We do consume it, but in a very traditional way, I mean, in our case, my mother, when she prepares coffee, we have a manual coffee grinder. The way we roast it is in our traditional way, we have our clay pot, our stove, and my mother roasts the coffee there. The moment when she sees the coffee is ready, she grinds it in the manual grinder, then she brews it, it is a very traditional method. 

Adam: It is very interesting to be able to taste it in different roasting and brewing methods, right? To be able to understand the results based on the changes in the processes, in the harvests, and the effect that it has in the cup, no?

Omar: Yes, exactly, the different results would teach us things, to see the difference of a long drying time as opposed to a short drying time. In that aspect, it would be really interesting to do it.

Adam: Is it important for you that, the variety Pluma, that your great-grandfather brought, that it still has the recognition in the market? Is that something that motivates you? Or is it just what you have and what you continue producing?

Omar: Well, I would tell you that for the coffee Pluma, or even more so, before knowing you, the recognition was practically zero. Before, we only delivered the coffee, we got our payment, and no one would tell us anything. Throughout the years we met Red Fox, we met you, and you let us know that the quality of the coffee is very good. The Typica variety, and you have let us know that you found very nice notes in our coffee. Like chocolate notes, hazelnuts, and all notes that can be found in the Pluma coffee. And it is a huge satisfaction that this coffee is well known, not only in our state, but also in the USA where you are, if not the world. And that people recognize the quality of our product—it fills us with pride and satisfaction, and it motivates us to continue to work, to continue improving and to continue producing quality coffee.

Adam: That’s so great, it makes me really happy. Because we have clients that were buying specialty coffee in the ‘80s and ‘90s, and they always speak about Pluma Hidalgo, I believe it had a name back then and it had gotten lost in the last 20 years. So, for us, it is something interesting and also important for the new generation of roasters in the market that they can also know a very special coffee. Because Pluma Hidalgo, the Pluma variety, is different from the Typicas of other regions. It has a very unique flavor.

For us being able to meet you, and be able to build a relationship, and to know that this variety works for you is wonderful. We’ve seen your farm several times and the plants are very healthy, it is productive, it is well kept, To us, it is important to reflect that profile and carry it on in the market. It is interesting to be able to continue and recover a little bit of the history. To know that your great grandfather brought it from back in the day, and that it continues producing, for me it is an important part of the specialty coffee and to maintain the story. This is the link to the ancestors.

Is there anything that you want the consumers or the roasters to know about your work, or about the relationship we built between Red Fox and your family?

Omar: Yes. Four years ago, we met the company Red Fox, I believe before we met you all, the recognition that our coffee got before you was practically zero. Sometimes we received only the payment and that’s it. We wouldn’t hear from them until the next harvest. Then we met Red Fox. You recognize the work we do on the farm, all the coffee processes, the drying, the fermenting, the washing, and I think that you have recognized our work, I think you leave satisfied with all the processes we all do. And that relationship, in all areas, administrative and coffee production-related and financial, it is a good relationship, and to carry that on that is my father’s wish. Our wish and the wish for the farm. To continue working, to maintain the relationship, and to keep it for as many years as possible.

Adam: Thank you so much for coming, for talking to us and for always investing more and strengthening the commercial relationship that we have. We’re looking to come back again with the new harvest to be able to visit your ranch, and you know we have a house here; you are welcome whenever you would like to come.

Omar: Thank you! Thank you very much Mr Adam, you know you and everyone at Red Fox have a home at San Agustin Loxicha and in the community of El Aguacate. In San Agustin, in Pochutla, whenever you decide to visit us, it will be a pleasure, our honor to have you with us, you are all invited to our house, and we would love to have you all there next year. And during the harvest so you all can really see the work we do there.

Adam: Yes, thank you so much. It was very gratifying to take my kids, for them to get to know the farm, so they can also know a little bit about our work and have the experience of getting to know you. They are always talking about your son, and the time they spent there on the farm.

Omar: Yes, it is gratifying year after year, when you go, and not only the same people, but new people come over. Sometimes a roaster comes, sometimes another person that works for Red Fox comes, or families. During this harvest you brought your wife and your kids, and my son got really excited to have new friends. Now he says that he has friends from the USA, so we are all very happy, and we hope the relationship continues for a long time. And whenever you want, you have a home there.

Adam: Thank you, thank you very much.

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

Decentralization & Community in Oaxaca Coffee Sourcing

What makes Oaxaca unique? 

The Oaxaca sourcing landscape is uniquely decentralized, presenting both challenges and opportunities for us as a sourcing company and for the communities and families we work with. Our starting point in Mexico, it’s where we decided to build our Mexico HQ and expand our work to be on the ground year-round. Where our work in other key origins like Peru or Colombia involves the central supply chain links of producer associations acting as organizers of far-flung groups of smallholder producers, the sourcing landscape in Oaxaca is different, centering small communities or even individual families working together to put out superb coffee, leading us to take a larger role at the center of the supply chain. 

As we continue to deepen our work in Mexico, we look at why Oaxaca is so different. Why aren’t associations or cooperatives as integral of a structure there as they are in so many other parts of Latin America or even Mexico? What, if any, structures function in place of them? Are there any benefits to this decentralized sourcing structure? How does this change the work we do as a sourcing company?

2021: A perfect case study

The 2021 Mexico harvest and shipping has been an ideal showcase for the situation in Oaxaca: not just the immense quality of coffee they can produce, but also how the decentralized sourcing structures there change the nature of our work and escalate our workload. 

For a frame of reference, compare our most recent season out of Peru to our current Mexico season. Out of Mexico as a whole, we’re shipping about two-thirds as many bags as we did out of Peru in the most recent 2020 season. This Mexico volume is nearly double what we did last year, but it’s still substantially smaller than our latest Peru season. As far as groups go, in Peru last fall we worked with a total of 15 producer associations versus about nine, much smaller groups in Oaxaca this season.

So with a smaller volume and about half as many different groups in the mix, you might expect Oaxaca to be substantially less work than Peru—not so. Even though we’re processing less coffee, our workload is substantially larger. The difference is in the details: the sourcing steps that fall under our purview specifically in Oaxaca that are taken care of by producer associations in Peru. 

What’s the difference?

While our sourcing work is still very hands-on in Peru, there’s a ton of organizational work producer associations take care of before the coffee even reaches us. Prior to the coffee’s harvest, many associations help producers with agronomic assistance, including needs like seedlings and fertilizer. Once producers’ coffee is harvested, associations manage all the receiving and intake work, pulling samples, calculating yields based on delivered volume, and collating information about the producer, lot size, varieties, etc to hand off to sourcing companies. They also make advance payments to producers at that stage and take control of selling the coffee. By the time the coffee gets to us, the association has often done a prescreen as well as filtering out defects, prepping samples, and packaging them in a way that conveys all the information we need. Where we step in is cupping the coffee, making the selection, coordinating all the logistics of getting the coffee from the field to the dry mill, overseeing the milling and exporting, and then selling it. 

In Oaxaca, we step in much, much earlier in this process. Rather than associations or cooperatives, we work with producers in key communities who voluntarily act as point of contact for their community, coordinating details and acting as a go-between. For example, in San Pedro Yosotatu, Madelina López López takes the lead, or in Miramar, Cecilio Perez fills this role. Whereas in a coop or association this is usually a paid position in an official business organization, in the decentralized groups of Oaxaca it’s just someone with seniority and experience who wants the producers in their community to be able to access Red Fox prices (as opposed to coyote or local prices) without necessarily having the same level of experience. It’s far from the organizational structure of a formal association, although hopefully it will move in that direction over time as the communities build confidence in their product and supply chains. 

These leads communicate near-constantly with the Mexico sourcing team throughout the season. Through them, we figure out convenient times for producers to bring their coffee down to us, or when we can send a truck to pick it up. We then take full possession of the coffee in the way the association or cooperative would. We receive the coffee at the dry mill, something an association would usually do, and we weigh the coffee, peel the samples, project the yields, and work hard to keep track of all the producer information to guarantee total traceability. All of that detail, and the risk of taking the coffee into our possession at an earlier stage of the screening process, falls under our purview rather than that of an association. 

Once the coffee gets to the lab for intake, roasting, and cupping, we also see key differences in the workload each offer sample constitutes: while in Peru we receive many offer samples that represent very little volume (sometimes just one bag of parchment), we see this in Oaxaca on a even smaller scale. In these instances Oaxaca is even more work than Peru not just because the samples themselves represent less coffee, but also because we get a field sample (which the producer sends from their house to see if we are interested in the coffee), and then a second sample for the same coffee when it arrives at the warehouse in Oaxaca—meaning those offers are all processed into the lab, roasted, and cupped twice at the offer stage. 

We do have certain trade partners we work with for specific services including help coordinating transport, financing, and milling in certain regions. It’s very different than working with producer associations, because for the most part we pay for these services to be done on our behalf. But, moving forward, we plan to continue to work on a smaller scale and figure out these pieces ourselves. 

Financing is one of the most challenging parts of this system both for us and for producers. When working with associations in other parts of the world, they pay producers an advance when they deliver their coffee; when the coffee ships, we work with finance partners to pay the association the full sum and they send the difference to the producers. In Oaxaca, we’ve used specific trade partners to help with this part of the process where we can, and coordinated third party services where needed. In general, the gap between when we take possession of the coffee and when the coffee ships is about two to eight weeks, but many of Oaxaca’s producers have been mistreated in the past by larger organizations making promises that they would pay later (as we’ll get into below), and many don’t have the ability to wait that long, even once we’ve built that trust. This is a tricky piece of the puzzle, one which we’re still working to find the perfect solution. 

Why is Oaxaca like this?

The reason Oaxaca’s larger cooperative structures either dissolved or were abandoned by producers is primarily mismanagement on the part of the cooperatives there. What emerged from that dynamic was a push by producers to find trustworthy buyers directly, and eventually to find higher prices for their coffee within that model.  

Interestingly, the idea of coffee cooperatives organizing and selling under a certified model (using certifications like organic and Fair Trade to get higher prices) actually started in Oaxaca in the ‘80s. Over time, a small number of those coops grew to the point of overstretching, selling at prices only a tiny bit higher than what coyotes (coffee buyers who will pay on the spot, although typically around the C market rate—not the best rate a producer can get for high-quality coffee) were paying and not paying producers reliably, leaving little incentive for producers to sell to the cooperative rather than getting paid on the spot by coyotes. Mismanagement on the part of the coops has hit the trust of the producers, who prefer not to form cooperatives and don’t want to wait for results and pay in the future. Our first transactions with new producers will usually involve them offering us a small amount of coffee to establish the relationship and see if we’re trustworthy or not, trust we’re working hard to earn back over time. 

Our ever-expanding sourcing work in Oaxaca has been part of a large push by producers in the last five or six years to find buyers directly and get higher prices for their coffee. National quality competitions as well as regional competitions held by Red Fox have helped bring more attention to their coffee as a specialty product, as well as increased producer confidence that their coffee is valuable and should be treated as such. Mexico also has a very developed specialty cafe scene, which helped provide a local roasting market that was able to go out and buy coffee, which helped change the dynamic between producers and buyers. So all those factors led to producers looking for buyers like us: ones who would pay high prices for their coffee, pay exactly as we say we will, and provide consistency year after year. 

Rebuilding that broken trust has been the hardest part of our work. There have been so many buyers over the years making promises of high prices, but the issues have been in the delivery. That’s why financing is such an important piece of the puzzle: more than anywhere else, Oaxaca’s producers are incredibly sensitive to the idea of trusting buyers to pay them later. As we’ve lived up to our word year over year, we’re starting to see that trust increase, which is incredibly rewarding and has caused producers to bring their family, friends, and neighbors into the fold. That’s why we see the level of voluntary community organization we see: the communities we work with have been waiting for an honest buyer who treats their product properly, and we’ve worked hard to be that buyer. 

Are there any benefits to Oaxaca’s producers? What are the downsides?

While the associations we work with in Peru are the best of their kind, independence does have some upsides to it. Being part of an association or cooperative can mean that a portion of the money you make goes to the group or leadership rather than just you. Associations or coops can have corruption at the leadership level, and/or they can fail to pay or keep their promises, as we see in the reasons why these producers abandoned their local coops to begin with.  As free agents, producers we work with are 100% free to express their disagreements and seek solutions that feel appropriate to them, rather than needing to answer to a board or leadership structure. 

On the other hand, the positives of working with a well-run organization can’t be overstated: producers in these structures receive sales security, agronomic and technical assistance, state support to create new marketing chains, support from field technicians or engineers, purchase of low-cost fertilizers, revolving funds to benefit the plots, etc. In general, their risk is lower inside of an organizational structure.

Are there any benefits for Red Fox? What are the downsides?

While this system presents a lot of challenges for us, the greatest benefit for us is that it’s fully transparent. In other regions like Peru we have ways of verifying exactly how much producers are getting paid and we feel confident in those systems, but it’s not the same as literally doing every step of it ourselves. It’s also been a huge learning experience for us—there’s a huge value to learning and understanding exactly how much happens before we even get samples, and how much value that hard word adds. 

In terms of downsides, there’s obviously a lot of extra work that goes into every step of the process. Our risk, just like that of producers, is higher without the central structures of associations. One of the challenges of working with these small, informal groups is that they can easily disintegrate and put at risk the agreements that we have reached for the harvest season. One benefit of the people in the middle of the supply chain is that everyone’s good at something. Banks are great at providing financing, agronomists are great at agronomic consulting, etc. Everyone plays a valuable role. In the case of Mexico, many of these small, loose groups may eventually grow into more formal structures. Until then, we’re happy to be in the middle of it all, appreciating the work that goes into every step. 

 

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

Prudencio of Valle Inca, Peru on Building Trust & Community

Prudencio (Jose Prudencio Saenz Vargas) is the widely respected leader of Valle Inca in Cusco, Peru, one of our largest and most important relationships in the world. A Calca native, Prudencio grew up on a coffee farm, studied agronomy, and then went on to work as a bank loan officer before running Valle Inca—fiscal experience of critical importance to Valle Inca and the surrounding community, most of whom are smallholders averaging just 2-3 hectares each. His extreme quality focus has always been key to the group’s success. He helped Valle Inca producers move from drying coffee on plastic mats to raised beds, worked to improve drying, fermentation, and storage practices, and was the first producing partner of ours to implement GrainPro in storing parchment. He meets farmers where they are in the isolated reaches of Yanatile and Lares and works with them to produce the best coffee they possibly can for the best price they can get. What follows is a conversation with Prudencio, aired originally on the Foxhole and edited for clarity and brevity. 

Aleco: Hello and welcome to the Foxhole. Aleco Chigounis here with Ali Newcomb. Today we have one of our most special guests: our good friend José Prudencio Vargas Sáez, from Calca, Cusco. He is the leader of the Valle Inca group, which, while still being a relatively small and new group, has become the largest Red Fox sourcing partner by volume in the world. We have grown with Prudencio from 40 bags the first year, to almost 12 containers that were made last year and from there they will continue to grow. 

Welcome Prudencio! It’s a pleasure to have you here. 

Prudencio: Thank you.

Aleco: Can you tell us a little bit about how you started the Valle Inca group?

Prudencio: Yes. My name is José Prudencio Vargas Sáez, I am the son of a coffee producer, from the community Laco Llavero in the district of Yanatile, province of Calca, region of Cusco, Peru. I’ve been in the coffee industry my entire life. I was born on a coffee farm named Tomas Huato in Laco Llavero. Later I studied agriculture in a Salesian school. Coffee is my life. It’s my life, it’s my world, it’s what I do, and it makes me feel good. All of my family are coffee producers. There are coffee producers in my community that have really suffered from low prices in the past and been totally abandoned when prices were low. All of that is what inspired me to start Valle Inca.

Aleco: What year did you start the association? 

Prudencio: In the year 2015 and in our first year we sold just 20 quintals of coffee to Red Fox. It’s been six years since Valle Inca started taking form, but four since we had full legal status.

Aleco: How many producers did you start with?

Prudencio: We started with just five producers in the Yanatile Valley. Among them, we have Mr. Agustin Ccasa, Juan Jose, Eddy Robles, and other coffee producers that didn’t really believe in an organization like this at the beginning. Just like any other startup, there’s not much credibility early on. But by 2017, we were working with 50 coffee producers. In 2018, we worked with about 127 producers. And currently we are working with 260 coffee producers.

Aleco: That is incredible, Prudencio—congratulations!

Ali: How was the process for you, because you were a loan officer at Agrobanco (agrarian bank) before that, no?

Prudencio: Yes.

Ali: You were working with the coffee producers then but making agricultural loans. And from there, you went on to start Valle Inca.

Prudencio: Yes, that’s right. The thing is that I have been involved in agriculture my entire life. Beginning with where I was born, where I went to school, and leading up to the moment that I worked with Agrobanco making loans to coffee producers. It’s a different world and very helpful experience, and in parallel I was working with the organization that is now Valle Inca, but with a small amount of coffee. The financial experience has helped a lot. 

Ali: What have been some of the challenges? You started with only 20 quintals your first year and just five coffee producers, and now you have grown to a large organization, exporting a lot of coffee—more than 15 containers per year. What challenges have you faced in that process?

Prudencio: The main challenges are, paying a sustainable price to the coffee producer, obtaining high quality coffee, and being able to reach new coffee producers. And to fstablish equity so the producer, the intermediary, and the consumer are happy: that is the challenge that Valle Inca set out to achieve. 

But the biggest challenge in Peru is always getting fair prices for the producers. The next one, is the quality. That for us, is very important. The quality is very important, to look for, to research more. Find more producers, to understand the altitudes, the varieties, the genetics. Coffee is its own world, a world that millions of families depend on. All of that is the work we do. 

Ali: Regarding quality, I think we all recognize that you have been very successful, and just a moment before this meeting we drank a spectacular coffee from Combapata. 

Prudencio: I am drinking a coffee from Alto de Cedruyoc, from Emilio Gutierrez. It’s early coffee from the 2021 harvest.

Aleco: Very good.

Ali: Prudencio, I know Valle Inca plays a big role in the community, more than just buying coffee. Can you tell us a little bit about that role and how this has played a part in facing the pandemic?

Prudencio: As you said, Valle Inca is not just an organization that buys and sells coffee. Our goal is to find a sustainable future for the community. We work to be calm and coordinated in our decision making, and that was key during the pandemic to maintain trust and support the community. At Valle Inca we keep our word. We fulfilled everything we committed to and focused our resources on producer needs. If someone needs a loan, we have to find a way to do it, whether we have the resources or not to support them in their hardest moments. Now we have to look after health issues, social effects. For example, right now we’re working to get psychologists for the producers, so they can improve their mental health and quality of life. We’re also responsible for finding a good price for them, to offer them that stability. In turn, they do the best work they can offer. 

That all helped us a lot through the pandemic. 2020 was a very difficult year, but as a collective I have to thank Red Fox, and your clients for the donation you made to us. It all adds up. Here in Peru, we were lucky to be able to look for help from the municipalities and NGOs to help all the producers: with staple goods, mainly to cover the food needs. At the moment, we are working full force disseminating information to gain the producers’ trust, and to improve their trust in the clients and the entire chain.

Aleco: What would you say have been the main achievements of the cooperative since you started?

Prudencio: Of course, when we started in 2015, Valle Inca sold 20 quintals, and never in our lives could we have imagined selling 5,000-6,000 quintals of coffee per year. Every year we set a goal, evaluating, analyzing, and measuring production factors and risks. The biggest achievements have been growing and selling more coffee, and selling coffee that was of a high quality, for the consumer, for everyone really. We want coffee we are all happy with. That’s the goal. We’re also proud of working on the social aspects, the collaborative association that we manage. To gain producers’ trust and always keep our word with them. 

Ali: That’s a great answer. Prudencio, I wanted to ask you this, because you are one of the people who does this the best. What is the key to having a good relationship and communication with the producers?

Prudencio: In summary: trust. The trust that exists between us and the producers. At the end of the day, we are a family, we are the Valle Inca family. That the workers at Valle Inca can feel at home, that they can feel that we are siblings, someone they can count on to share their weaknesses or their sad stories, everything: trust. A resounding trust like with Red Fox—just like we can trust Aleco not just to keep his word but to let us know if there’s a mistake we’re making, that’s part of trust with the producers as well, what mistakes are we making, and how we can improve, and all that. In that way we can all build  trust. That is the key to building an association. And of course, to keep our word.

Ali: Well, I love working with you. All of that work shows in how everything flows and you do an incredible job as a team, with the producers as well as with your employees, and with Red Fox, because you are always very direct, you are very transparent, and you make things flow very well.

Aleco: Yes, the communication has always been open and direct with you. That is fundamental, to be able to have a good relationship in this industry.

Prudencio: It’s very important. For example, in the beginning, we are very thankful to Red Fox because if Red Fox didn’t exist, Valle Inca wouldn’t exist either, and if there weren’t coffee producers, Red Fox wouldn’t exist either. Inca Valley is on the producer side, and all of us, we all fill a gap in this supply chain. What we have to do is improve every day, to increase the production area of ​​the producers, and continue to improve the genetics in the coffee in Peru. That is the main goal. We also have the goal of winning international competitions, national competitions, to continue being a transparent company, and to sell quality coffee.

Aleco: Excellent, Prudencio! Do you have any questions for us?

Prudencio: First of all, I want to thank Aleco for the trust, because when I started Valle Inca, we were very young. We were young and we didn’t know exactly what to do at every turn, and maybe we made mistakes, but we learned from that. Thanks to Red Fox for helping us out all these years. And for being an institution that we trust fully, because you’ve helped us grow, and have helped a lot of other businesses grow and organizations and cooperatives in Peru, in Puno, in Cusco, Cajamarca, and other places in the world. I would like to ask you if you are happy working with Valle Inca?

Aleco: Truly Prudencio, it is my pleasure completely … well, ours. We both made mistakes in the beginning. I wasn’t as young as you were. But just like you, learning to manage a business. It has been a great experience. There is a line, where you can see how much Valle Inca has grown, and how much Red Fox has grown. And they are parallel. And truly I feel like you and I, we have grown together in this, but it’s not only Aleco at Red Fox, as you know better than anyone, with Ali, with Carina, managing everything there. We both have very strong teams, and having this partnership has been a great pleasure for me. I am more than happy, let me tell you.

Prudencio: Thank you, thank you Aleco, for all your trust, I want to celebrate your team, it is exceptional, and it is very important, there you have Carina, Ali, Aleco, some others that I know, Jajaira, who helps us so much, with our exports and more. We have to keep going forward, continue supporting the producers. Everyone, keep drinking Valle Inca coffee, Cusco coffee, and Peruvian coffee. Thank you!

Aleco: To you!

Ali: Thank you very much Prudencio. It’s always a pleasure talking to you, and I am very thankful for your trust, and for being here, and being able to share with everyone.

Prudencio: Of course, thank you.

Aleco: Ok Prudencio, I’ll see you soon, in June for sure.

Prudencio: Thank you, thank you!

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

Global Shipping Challenges & Planning Ahead for the Balance of 2021

Greetings from the cockpit in Oaxaca. As I’m sure many of you are now aware, the world is in the throes of a global shipping quandary. The main culprits are a physical container shortage and congested, understaffed ports across the world leading to containers left sitting at port docks. Fewer ships are running on transit lines as well, and each of these issues is further compounding the others at every step of the transit process. 

In the case of the West Coast we are seeing availability for pick up at The Annex from arrival to port of Oakland up from roughly 10-12 days to closer to 20. Ports of New Jersey, Houston and Charleston are moving at a more efficient pace, though slightly slower than pre-pandemic times. New container construction costs themselves have risen as much as 60%, and containers already in circulation are also moving slower for all the above reasons: delays leaving port, passing through interim ports, and being emptied and sent back. All of that has pushed shipping rates to recent highs—highs that we unfortunately expect to last through the year and beyond. 

We continue to place large emphasis on the work we do in the logistical center of the supply chain. We’re well aware that a tremendous measure of our value to you, our clients, is in delivering fresh coffee in the timeliest manner. We’re only as good as our last arrival into port from each and every producing origin we work in. We want you to know that our logistics crew are constantly exploring the quickest avenues to each of the warehouses we currently allocate coffee to in North America and abroad. In many instances, we are rerouting containers through different ports, or, in the case of Mexico, moving coffee by land to avoid delays and ensure your coffee’s integrity on arrival. These changes are critical for us to deliver the freshest coffee possible. 

Please feel free to reach out to me or your Red Fox rep directly with any questions or for more details—we’re here to support you in any way we can. We’re happy to talk through what this means for you specifically or more generally. 

Cheers,

Aleco

 

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

Ernesto Perez of Coatepec on Veracruz History & Mexico’s New Generation

We were lucky to get a chance to talk with Coatepec Veracruz-based producer, wet mill manager and community leader Ernesto Perez. A younger farmer who took over the family farm and mill just three years back, he’s working to guide community production into high quality specialty, tweak processing, focus on microlots, and help those around him get the best prices their work. He expanded his own wet mill at Finca Fatima into APG Coffee, a micro wet mill for the community that also offers agronomic consulting for other farmers to help rebuild soils and increase quality. Below is our conversation, lightly edited for clarity.

Aleco: Greetings from Mexico! I’m in Mexico City at the moment, Adam is in Oaxaca, and our good friend Ernesto Perez is in Veracruz.

Ernesto is an amazing coffee producer and also leader of the group APG in Coatepec, Veracruz. He’s delivering some of the most exciting coffees we’ve seen over the last couple of years. 

Joining me in Oaxaca is Adam McClellan, who runs the Mexico operation for us. He’s been down there for a couple of months now with his family and will be through the season, as will I. Lots of good things in store for all of you throughout the season as we get into shipping season. But most importantly, let’s turn it over to Adam and Ernesto and see what’s happening in Veracruz. Welcome, guys.

Ernesto: Thank you.

Adam: Thanks Aleco and thank you Ernesto for joining us. Last year was our first year buying your coffees, Ernesto, and we had a really great response in the marketplace. A lot of roasters are eagerly anticipating more coffees from you this year and asking about them again. 

As you know, Veracruz is a newer region for us—I started traveling there about three years ago and we worked with another coop on the other side of Veracruz. Last year was my first year coming to Coatepec, and I was so impressed with your operation, your vision. To me, Veracruz is really interesting, very different from the other producing regions we work in in Mexico. I’m so excited to taste some of your coffees this year and I know that you’re wrapping up harvests now.

Would you be able to start by telling us a little bit about the history of Veracruz coffee production? 

Ernesto: Thank you, Adam. Let me start by saying what I know about the history of Veracruz coffee. As many people know, no one knows for sure which was the first state where coffee was produced in Mexico. Many say it was in Oaxaca and many say it was in Chiapas and Veracruz. But we’re definitely one of the first states that had coffee in Mexico, and right now we’re one of the three most important states in coffee production in Mexico as a country. I think we produce around 30% of the coffee from Mexico.

Being one of the leading states in coffee production in Mexico, there have been many ups and downs in our history of producing coffee. Lots of big companies have been involved in coffee in Veracruz for many, many years. We’ve always been known for having good coffees, but I think the specialty coffee culture in Veracruz, like the third wave of coffee, never really landed deeply in Veracruz. I think it was because there’s many, many big companies and the culture is not picking coffee correctly. And there’s a lot of things that were really hard for me to change when I started running the family farm and working with the community on quality.

So, that’s kind of an overview of Veracruz. As you know, Veracruz is one of the highest latitudes where coffee is produced on this side of the world. We are located right next to the Gulf of Mexico, so the weather is more humid and cold in Veracruz. I think the latitude and the side of the country where we are located really helps the quality, the weather and the microclimate create the flavor that’s unique to Coatepec. It’s always super cold and misty here during the harvest season, so that’s kind of why we can grow top specialty coffees at 1200 meters above sea level.

I’m really excited to be able to explain more about Veracruz coffee, so people can come, visit, and get engaged in our coffee culture. 

Adam: Can you tell us a little about your farm and your family? I know your family’s farm is Finca Fatima, and then you also run APG Coffee, but did your family start with just farming coffee before they moved into production and things?

Ernesto: So my great grandfather, he was from Spain. He came to Veracruz because he knew how to speak English very well, so he got hired by a company, called Arbuckle Brothers in the US, and he worked as an exporter and a cupper. His history goes back to the 19th century. So, he was in coffee many, many years ago. His name was Antonio Perez Galvan, so that’s why APG is called APG.

He was the first member of our family involved in coffee, so there’s a lot of history. My grandfather didn’t really export coffee, he was dedicated to producing machinery for coffee. He built a wet mill, and that is the wet mill that I’m currently using. It was where he took his clients to show the machinery, like his exhibition room.

Later, my father started exporting coffee in the 1990s. I think it was when SCAA was founded. So Ted Lingle, who was the founder of the SCAA, came to Veracruz a couple of times. My father got awarded first place a couple of times during the 1990s. Despite that, he decided to quit coffee because there was a lot of risk, because he was more into the commodity market. So many bad things happened in those years, and he decided that it was a lot of risk and he didn’t like the business.

So he rented the mill to another company and basically, no one was really using the mill correctly. That’s when I came in and I decided to make major changes. It was not many years ago really. I’ve been working in coffee for three years now. I went to college in the US. I worked in a company in the US for a couple of years, and I decided that my passion was not working in an office. So I decided to get deeply into coffee. I got my Q graders license. I traveled to El Salvador and I got my Q processing license with Emilio Lopez.

Then I traveled here in Mexico to visit Finca Chelin and Victor Lopez in Oaxaca to learn more about coffee processing, like fermentations and things like that. And then I came back to Veracruz with a really good perspective of what specialty coffee production looks like. I made some changes to the mill to modernize it so that I could use it to lead my company to what I saw as an opportunity, which was having full traceability of coffees, truly bringing that flavor of this region and developing the flavors correctly, the sweetness and all the fruit notes that we can find in coffees in Veracruz through processing coffee with longer periods of time, longer fermentations, longer drying times, and keeping everything fully traceable.

So that’s my approach and where I see the future of coffee. That’s the vision that I have currently in APG. I want to keep growing and positioning Veracruz coffee in many places of the world again. 

Adam: Awesome, thank you. I also want to mention for anybody listening that maybe didn’t realize, what I think is interesting and different about the production model in Veracruz compared to other states in Mexico or most of Latin America is that coffee cherries are traded to wet mills rather than coffee in parchment. You drive through the Veracruz coffee country and there’s really, really large cherry processing wet mills that are owned by many different companies. Maybe some of them are cooperatively owned. But, farmers will harvest and bring down their cherry daily. It’s unique to Oaxaca and Chiapas that are two main producing regions in Mexico, where farmers are individually processing on their farms and producing parchment and selling dry parchment to mills or coops, or directly.

Do you think that model helped you make big leaps in quality development pretty quickly, that you’re able to control processing from the point of cherry delivery? And I was also wondering, how do you select which farmers you’re going to be buying from? Do they approach you, or do you seek them out? How does that work?

Ernesto: Well, after all these years, we’re really excited about coffee, because when we started the prices were low and not many people were really investing in the farms. So there’s not many players left in farming here in Veracruz. We decided to invest in our farm, and it was not many years ago. I mean, it was just a property that used to have coffee many years ago, but my father renewed the farm with new varieties, with quality varietals. And that’s when I began to know other farmers, which we’re now more than just friends, we’re kind of like family. Like, for example, [name][13:09] from Finca Las Venturas, he’s a very good friend of my family. We work with other farmers that have that vision of producing high quality coffees. And their farms are located in the highest altitudes possible that have good varietals of coffee, that now don’t just have forgotten farms.

So that’s kind of how I select the farmers that I work with. I don’t call them my farmers, we’re really partners in this deal, because it wouldn’t be possible to do this without them. It’s really teamwork, what we’re doing in Veracruz.

And I think processing coffee from the cherry to the green bean, it really helps you control and standardize the quality of the product. Because many, many things can happen throughout the process that can affect quality.

We begin by knowing where the coffee comes from. We analyze the cherry and assess the quality of what we’re receiving at the mill, what percentage of ripes and unripes we have. We use technology to sort this coffee, to store it correctly, and to mill it and prepare it for export correctly. Our approach allows us to sell coffees that have a longer shelf-life. We’re also extending drying times a lot, more than most of the companies in Mexico do. We simulate drying temperature as if we were drying with the sun or under the shade. And fermentation for us is something that has existed in Veracruz for many years. We didn’t have the machines to remove mucilage before, so it would take 48 hours before to ferment coffees and get rid of the honey, the mucilage. Now, we still do the complete 48 hour fermentations, which I think creates more sweetness and a more balanced and round flavor in the cup. So, those are the factors we can control in the cherries, and I think it’s a good aggregate value for the product.

Adam: Can you talk more about your drying practices? Are you using mechanical dryers or raised beds? I know you mentioned the climate in Veracruz makes the drying one of the more challenging aspects of production there. I’d love to know more about how you’re managing all that. 

Ernesto: Well, one of the good things about Veracruz is that our seasonality is very predictable every year. The months of December, January, and February are usually extremely humid and cold. There’s always rain, and there’s always high humidity levels and high and low temperatures. So it’s really almost impossible to dry coffees with the sunlight during these months and we have to adapt to what we have.

So we use mainly mechanical dryers for the washed coffees that we process from December to February. And we always wait until March and April to process the natural and honey process coffees because we have a lot more sunlight and higher temperatures during those months. We even have to use shade to protect the coffees from the high temperatures in those months. The drastic change between the winter and spring months made us look at what we have and use technology to process all different types of coffees correctly for their needs.

Adam: Awesome, thank you. How many different producers are you working with in the region for your company, APG Coffees?

Ernesto: Of course we work with Finca Fatima, which is a farm. My neighbor, she won Cup of Excellence last year as well from her farm Finca Consolapan. We work with Jose Cienfuegos from Las Trincheras Farm. He won Cup of Excellence too. And we work with three or four other producers that are new, that we’re going to share samples with you this year. I think they have a lot to offer to the market.

So we’re currently a group of seven producers, and our approach for next year is to start growing our relationships with small farmers in higher altitude regions in order to have an economic impact on smallholder farmers. 

Aleco: That’s great. I’m just absolutely intrigued with the Mexican coffee industry right now, and specifically seeing the evolution of the industry, to see the coffee culture in the country. I think the cafe culture in Mexico City, and I’m sure elsewhere, is really bar none in producing countries. It’s really special to see what people are doing with roasting and coffee and just the general hospitality experience that they give to people.

 And there are folks like you, and we have other friends in other parts of producing regions in the country, younger generations that are kind of like the new face of the coffee industry here. Because as you said, the coffee industry was very commoditized for a long time, and also maybe an afterthought for the government in a lot of ways. But to see folks like you is really promising.

But it makes me wonder that there must be a whole new competitive landscape out there, even for you to buy cherry, to process coffees, to trade coffee locally. I’m curious what you’re seeing on that front, and what your take is in general?

Ernesto: Well, this year we had a 40% smaller harvest than last year in general, so coffee prices were super high this year compared to last year. It was much more competitive because there’s many companies that need coffee from Veracruz. But, since we work with committed partners, we didn’t have an issue with buying cherries, because, I mean, it was part of our shared plan. We are growing together, so it’s their investment. It’s not just an opportunity of the moment, we’re trying to truly build partnerships with companies like you, that you can find roasters that really appreciate the quality that we’re offering.

So as far as the cherry and the price, that’s what I don’t like about coffee — that some years we have a lot, some years we don’t have much, but it’s part of the agricultural business. That’s how it is.

Adam: What percentage of those coffees are you selling nationally? I think we’re both really interested in the national market in Mexico, and I think in some ways some of our biggest competitors here are our local roasters, which both of us think is super cool. We don’t see that in other origins. There is this whole young generation of Mexico that’s really excited about coffee because of the local roasters and the coffee bars and things like that all over the country. How does that play into your vision for selling coffee?

Ernesto: Well, that’s kind of the reason why our model has worked to improve the economic activities on the farm, because we provide immediate liquidity to the farmers. There’s a lot of people that are really into specialty coffee in Mexico, like a lot of specialty coffee bars. And there’s a lot of new, trendy things, many people getting into the specialty coffee market. But they all finance their own coffee production. They buy small quantities of coffee, and they don’t buy the inventories that they’re going to use throughout the year. So, basically the farmers have to finance these small coffee shops, and that doesn’t really work for them.

So, I really like that we’re growing, like our culture is growing, but I don’t like that the last priority of the market is to provide the financial liquidity for the farmers, which is where everything comes from. So it’s very delicate. That’s kind of my perspective of the market right now.

Adam: What would you want roasters, especially small ones who are just buying five to 15 bags of APG’s coffees, to know about how you produce coffee and the challenges you face? It must be exciting to see coffees with your name or Cienfuegos’s name on a bag in some of the top roasteries in the country? I mean, you’ve only been in this three years, and you’re already touching the top tier of the market, and we’re super excited to represent your coffees. So what are some things you want to communicate directly?

Ernesto: One thing I really want them to know is that although we don’t have many certifications, one of the things that make Veracruz coffee very special and very hard at the farm level is that we we really focus on conserving the forests that we have, all the ecosystems that we have.

I think this is something super special in Mexico. We, or most of our farms, produce all shade grown coffees. So this is a challenge of having a small production one year and a big production in the next year. But we are really aware of where we’re going in the future, and all this effort is to keep having healthy coffee production in the future, to preserve a stable environment and conserve our microclimates and stable weather. So whenever they buy a bag of coffee from us, I think they should feel that they’re really helping conserve the ecosystems here in Mexico.

Aleco: That’s fantastic. Adam and I were out in Pluma de Oaxaca, so a very different region. But I was really blown away at seeing how forested that area was and how healthy the trees were, too. I was a little surprised. I didn’t think that was necessarily how it was going to be, and really as good of shade as I’ve seen anywhere in Latin America. Very special.

Ernesto: Yeah. Sometimes it seems like you’re in Africa, in the forest. It’s incredible.

Aleco: Yeah, a little bit like Ethiopia.

Adam: Would you be able to talk a little bit about where you’re currently at in the harvest, and where the labor of the harvest comes from? Is it mostly local, or not necessarily?

Ernesto: It’s very interesting. Many people that live in Veracruz or used to live in Veracruz, they go to Mexico City for a part of the year and work in finding jobs in Mexico City. And throughout the harvest season they come back to Veracruz, and they love picking coffee. It’s a whole experience for them to come and pick coffee. But the good part of Mexico is that they have the chance to go work somewhere else throughout the rest of the year. It’s a good side of coffee production in Mexico.

About the harvest, we’re wrapping up the harvest now. I think most of our washed coffees are already done, and we’re working on the natural and special process lots, like all the crazy fermentations and honeys as well as the natural lots right now. I think these coffees that come at the end of the harvest are really special in flavor, because they went through all this time of cold weather. So I think they’re the most interesting coffees that come up.

Adam: We just have one more question. Lot separation and producer transparency is important to higher end roasters—is that something your mill is taking care of? Tell us a little bit more about how you separate lots and maintain traceability?

Ernesto: One of the major changes I’ve made in my mill is that before, producers just delivered the coffee and you would just throw the cherries into a place where everything gets mixed. Now, we’re separating every single entry of coffee by producer. We process, we ferment independently, and we dry independently, and we store the coffee independently. Every single lot has what variety it is, what time of the year it was harvested. And I think we’re doing a tremendous job at keeping traceability fully intact. It’s one of the things that is the most important for me, being traceable, fully traceable.

Adam: Excellent. Thank you so much. We, really, really value your partnership, and, for me, on a personal level, I think your vision and your execution is incredibly inspiring. I’m looking forward to tasting the coffees this year. I know that we have a lot of roasters excited for them. 

Aleco: Thank you, Ernesto. I echo Adam’s sentiments entirely. It’s a pleasure to work with you.

Ernesto: Thank you very much. And thanks to all the roasters that support this operation.

 

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

Ethiopia Supply Chain Partner Eden Kassahun On Managing Logistics Through Covid 19

 

Eden Kassahun is one of Red Fox’s most integral supply chain partners and has been since we opened in the business in 2014. Eden and Red Fox co-founder Aleco Chigounis’s history together goes back to her days at Technoserve where they first met in 2009. She helps us manage our Ethiopia supply partnerships with Kata Muduga, Kerchanshe, and Kedir Jebril. Her role couldn’t be more critical to our success in executing early shipments; she manages much of the internal transportation and logistics details within Ethiopia. We sat down with Eden in the Foxhole to discuss her history and unique position in the Ethiopian coffee world, her role in our many Ethiopian partnerships, and the impacts of Covid-19 on the past and upcoming harvest and shipping season. 

 

Aleco Chigounis: Hi everybody, welcome back to The Foxhole. We have one of the most special guests we could have, one of our most critical supply chain partners in all of the world. We’re broadcasting live from Addis Ababa, Ethiopia, today. Eden is in her office and I’m back in my hotel room. January is easily the biggest month on our coffee acquisition front in the entire calendar year. Part of what we do, part of the success of Red Fox is moving coffee from Ethiopia extremely quickly, something for which Eden’s work is key. We take pride in our ability to get coffee to market as fast or faster than anyone else in the trade. So in order to make that happen this year, I took all the precautions I could. Red Fox is learning how to travel anew all over again in 2021, and it’s a little bit stressful, I’m not going to lie, there’s a lot of concern—but this is what we do and we need to serve our client community, so we’ll be out here.

Now, for Eden. She and I have known each other for 12 years since her days back at Technoserve and she’s made an absolutely amazing career for herself since then. I often refer to her as the queen of Ethiopia for Red Fox. The role she plays in Red Fox’s supply chain is both behind the scenes and very much in the middle. That’s an important detail because there’s been a lot of talk over the years of middle men needing to be cut out or not playing the right role, and that’s really foolish and harmful. People play a critical role—from the producer all the way through to delivering that green coffee to the roastery and where it goes from there. Eden is a huge part of Red Fox’s success.

Eden Kassahun: Thank you Aleco, I’m happy to be here. 

Aleco: Could you give us a little bit of a background on how you got started in coffee and how your career has progressed? 

Eden: I joined coffee when I first started at Technoserve. My background education is computer science and software engineering, so I was supporting team Technoserve in IT. When I was working there, I was able to visit farms and learn more about growing coffee for the first time. The intention was for me to go and visit the office, which is up in the country, in Jimma. When I was there, I got the chance to see how the coffee farmers live, how they produce coffee, how they sell, which was not something I had imagined before that. I grew up in the city, and that was my first experience in the field. I saw how producers live and how that shaped their characters and the beautiful coffees they produce, and it was very attractive for me, and I wanted to go deeper into that side. I started to study the profiles, the terms, everything to do with coffee. Naturally I met very good people like you, Aleco, and that’s how I got started.

After a couple years getting closer and learning about coffee, including cupping, I started my small company operating in wholesale coffee. That’s how my business started 12 years ago. 

Aleco: I remember in 2009 when our mutual friend Chris Jordan told me about his project with Technoserve and the Gates Foundation in Limu, an area where a lot of us on the buying side were fairly certain that there wasn’t phenomenal coffee. Of course, you proved us to be incredibly wrong. Those coffees from Agaro, specifically the Nano Challas, the Durominas, the Yukros are just some of the most beautiful coffees in the world, undeniably.

I remember meeting you in the office when I would come in and cup and to see where you’ve gone from there is amazing. You’ve started your own company. You have your own crew there now.

How do you see your current role, responsibility, and objectives in the Ethiopian coffee industry now? How do you run the business?

Eden: Our company is responsible for filling the gaps between the supplier and the buyer, helping overcome the many barriers in that area. Technology is a barrier, language is a barrier, and even the culture, the culture of connecting producers and buyers. They very much need a bridge between them. On top of helping identify good coffees, we facilitate communication and shipment so that buyers get that good coffee on time and can deliver to their clients. It is a big role, and stressful sometimes, but it helps promote new coffees and growth for everyone involved.

Since we started working together, we’ve seen a lot of new coffees enter the field and develop better markets for their product. We’re able to identify and get top-quality coffees, which can bring a large amount of currency for us as a national entity. It also helps to get good coffees for good people, good coffee buyers.

Aleco: I think what you said about facilitating coffee moving quickly might be the understatement of the year. You’re a hero in that regard.

As I’ve mentioned before, Red Fox moving Ethiopian coffee quickly is really a big part of our success, and the role that Eden plays for us specifically in that is managing contact with all the producing groups over the course of the year, communicating with all of us. Once I arrive here—which is usually the end of December—she and I get into the warehouses immediately, like literally the day that I arrive in Ethiopia, and we start to bulk lots together and sample coffees. I roast the samples myself in my hotel room on an Ikawa and then cup them in Eden’s lab the next day. We make decisions really, really quickly. We try to get coffees into the mill as soon as possible which is very difficult in January because you have two very major holidays here in January: Ethiopian Christmas, which is usually the second week of January and then Timket, which is an even bigger holiday than Christmas. So to be able to operate in and around those moments is really tricky, and Eden is able to pull that off on a level I literally have yet to see anyone else be able to do here. It’s really a special thing.

Shifting gears a little bit Eden, can you talk to us a little bit about the pandemic and how COVID-19 has affected Ethiopia, how it’s affected the coffee industry over the last year?

Eden: The economic impact of the pandemic was very severe on the coffee trade in Ethiopia. The disease itself is not necessarily as bad as in many other countries, but it has affected a lot in the coffee trade and trade in general, especially during the lockdown when people were not able to move.

It’s now been three or four months where we can easily move without lockdown. But transport was limited—most of our people use public transport, and most of it was not operating or was operating at limited capacity. And there was little work, so it was really difficult for people to survive, especially in the big cities I think. Then when you go to the countryside, especially the coffee growing areas, there wasn’t much interest in the speciality side of the business, which brings relatively good money compared to commodity business. So that was a huge set of financial problems.

But if you ask about the awareness or people’s knowledge about that, I could say most of our people either don’t know or don’t really trust that there is a disease there. It was really rare for us to see people wearing masks properly, right Aleco?

Aleco: Yeah, especially outside of Addis.

Eden: Especially up in the field and the washing stations, people don’t care. Even people who are coughing—they go, it’s okay, I’m fine, I’m fine.

Aleco: It’s interesting to hear that the virus has been politicized in a different way but almost as heavily as it has in the US, that people think it’s more of a political thing and maybe it’s not actually real.

Eden: Initially when the pandemic broke out, people were in the middle of mass protests. Things were not politically stable last year during that time—of course, they aren’t stable most of the time, but this was bigger, so that every place was rallying for protests and gatherings. When they announced this state of emergency and told everyone to stay at home, not to gather and all this stuff, everyone thought that was to stop the protests. 

Aleco: Yeah, early on there was a heavier lockdown, right?

Eden: Yes, much, much heavier. We were all made to stay at home, schools, off the bus, the restaurants were closed. They were doing thousands of tests per day.

Aleco: How did the pandemic and lockdown itself affect the coffee industry? I know the lockdown happened in the middle of shipping season last year, and it affected interest from the global marketplace. Can you tell us a little bit about that?

Eden: It became much harder to manage the coffee. The coffee unions have a lot of management power, and at the time of the lockdown they were operating at just a quarter capacity in terms of labor. And it’s not only the quarter capacity, they also work just half the day. So we really couldn’t get the work done in the same amount of time. It took us more than a month to ship coffees post-processing. The logistics and the quality inspection parts were really terrible. And very little coffee was coming in. The national banks which do permitting were also operating at a quarter capacity, which slowed things down immensely for getting permits to export coffee. All the customs stuff, the truck movements. It’s one of the sectors most highly affected by the pandemic. Because most of the tasks are labor intensive—they require human intervention. 

Aleco: So, along with all of the myriad of issues that you just mentioned, I know that demand in the middle of the shipping season started to fall off. I heard about issues from Japan, from Korea, from North America, from Europe, buyers trying to wash contracts out of fear of what lay ahead for them in their own marketplaces and their own ability to sell coffee, which was a devastating moment here. I know a lot of folks were in trouble last year, and I hope that all of them were able to survive and come back online this year.

But  with that said, I’m curious what your expectations are for the market this year in terms of being able to regain momentum and sell levels of coffee like you had in 2019 in years past. Do you have any thoughts on that?

Eden: I think the impacts will continue affecting especially the high-end coffees, because still, globally we see that demand is still lower. On the other hand, we’ve seen that demand for low grade coffee is higher than it was pre-pandemic. Of course, the season is just starting, but when we see the buyers’ interest and what they ask for, I think the demand will go to the low end coffees instead of the higher side. 

Last year there were a large amount of washouts, especially for high-end coffees, which discouraged most of the people who produce those, especially at the dry mill or washing station level. They ended up having to sell their high-end coffee in the commodity market, even if the coffee had a high value. So it’s discouraged some producers from pursuing high-end coffee, and they’re also dealing with financial constraints as a result. I expect to have less interest from the people who produce special coffee. There’s still that demand for low grade coffee, which shows that a lot of people are drinking coffee at home. That’s how I see it.

Aleco: I can tell you from our perspective, last year we were terrified in March, in April, in May. We’re still a little bit terrified about what lies ahead for us in the marketplace, and concerns about what types of coffee will be of interest to roasters around the globe, and what you said confirmed some of our thinking there.

But I have to say, I feel like we are in a very fortunate industry. I feel like there is a whole lot of resilience in coffee, that people aren’t going to stop drinking coffee anytime soon, and that there’s still a lot of hope and a lot of opportunity for the folks that are able to muster enough moxie to get through this period and come out alive on the other side, alive in the business sense.

So we’re hedging our bets on what we think the market needs. We think that there still is a whole lot of room to sell top caliber coffees at appropriate price levels, at those higher price levels. But I think in general, yes, I agree that there will be a little regression in terms of what people are willing to pay for the moment so that they do get to the other side of this.

I know many farms around the globe are facing a pandemic-induced shortage of coffee pickers. Is this an issue in Ethiopia?

Eden: Not really. Again, you’ve seen that people are not really aware that there is a pandemic, especially at this point post-lockdown. Of course last year there was an issue because of the lockdown shutting down transport, preventing workers from traveling to jobs. But this year, no, it doesn’t really affect us.

Aleco: Eden, thank you so much. We’re going to let you go, unless you have a message or anything you’d like to share before we go. It’s been such a pleasure having you on.

Eden: Yes, thank you very much. Once again, I’m really happy to have met you and been part of this friendship, and I hope it will continue like this. I’m really looking forward to sending over the great coffees. Thank you.

Aleco: I can’t tell you how much we appreciate you and your efforts. Thank you so much. Talk to you tomorrow morning.

Eden: Yes, as usual. On with your roasting, so that you can cup tomorrow.

 

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

 

Red Fox Coffee Merchants Origin & Shipment Update: Q2 2021

Hello friends, coming to you in the second quarter of 2021. We’ve put together a report on the current state of coffee affairs in the areas of the world in which we work. Buying coffee, while never easy or uncomplicated, has become more complex than ever, and we want you to feel included, supported, and looped in as we navigate that process together. With the supply and shipping disruptions we’ve seen over the last year and which we know will echo into the future, every link in every supply chain needs to be managed more carefully than ever. We want to help keep your finger on that pulse and hopefully make your job a little easier. This report contains some details as well as some broad strokes—if anything here piques your interest or leads to more questions, we’re always here to talk, so get in touch

Logistics & Port Updates 

We continue to feel the impacts of the widespread disruptions in trade and cargo shipping brought on by the pandemic and magnified recently by the container ship the Ever Given blocking traffic through the Suez Canal. For Red Fox, the global shortage of shipping containers has made it challenging to find bookings for the fastest, most direct ocean cargo routes that we prioritize. We’ve seen higher shipping costs, more rolled and cancelled bookings across the board on all shipping lines, and big bottlenecks at US ports, particularly on the west coast, that result in delays in getting our coffees unloaded, through customs, and stocked into warehouses. Ports, warehouses, and trucking companies are facing staffing shortages due to Covid-19, causing further logistical challenges and delays. 

We push to get our Ethiopia shipments afloat as early as possible every year, and are especially glad to report that, with the majority of our containers already on the water or arriving on the east coast, Suez Canal-specific delays have only affected a couple of our later shipments from Ethiopia, some of which we have chosen to hold in Addis until bookings can be confirmed, rather than have them sit at port in Djibouti. We know that long shipping times and warehouse delays are frustrating for everyone and we will continue to bring you as much information as possible regarding ETAs, arrival times, and coffee availability as these challenging conditions continue. 

Supply, Demand, & The C Market 

After a near 2 year high of around $1.40/lb towards the end of February, the C market seems to have settled in the mid-$1.20s/lb at the time of writing (approximate 3 month moving average). As Red Fox does not trade or hedge using the C market, there was little direct effect on our US operations. However, as the C market price continued to rise during Mexico sourcing discussions, we kept that $1.40 price in mind while determining what competitive quality premiums look like right now.  While global shipping lines work to renew vessel schedules across the world’s ports, warehouse stocks of green coffee across the global north continue to dwindle per various market reports. This has led to grumblings around increased C Market volatility though we’ve yet to see any major movement to date.   

Mexico 

About 75%-80% of the harvest is currently processed and collected in the central warehouses for bulking and dry milling. The Pluma/Sierra Sur and Mixteca regions are closer to 90%, while some regions in Northern Oaxaca will continue their final round of picking/processing through the first half of April. Chiapas and Veracruz are almost 100% finished with harvest. Our lab in Oaxaca has seen the heaviest 2 week period in our Mexico sourcing history at the end of March and samples continue to arrive from producers and family clusters from new and established relationships. We’re busy cupping offers as well as early preships, bulking coffees, monitoring the dry mill, and making sure coffees are ready to make their way onto the water. April is the primary month for milling across all three states in Mexico where Red Fox sources. Our first container is milled and expected to go afloat this week and four other containers will be milled this week and next.  First arrivals will be primarily community lots from the Pluma/Sierra Sur region of Oaxaca.

There is more competition for container availability this year due to the global container shortage but the big advantage Mexico has for shipping to other North American ports is the frequency of vessels arriving and sailing (most steamship lines call to port of Veracruz every 3 days). We also plan to continue to use the port of Manzanillo on the Pacific Coast for West Coast shipments where transit time is 5 days on the water port to port. We still expect these coffees to arrive in May through June. 

Covid-19 case counts continue to be a problem across Mexico and while a vaccination program has recently begun by the government, the rollout is slow and disorganized. More wealthy Mexicans with travel visas are going to the US to get vaccinations. The government recently released data showing more accurate cases and death counts than was previously being released and were 30% higher than previously reported. Another surge in cases is expected  after the Semana Santa (Easter) holiday where many people travelled and family gatherings are very common. Most businesses are fully open, and while mask wearing is very widespread in public and on the streets, it’s less common in family social gatherings. 

Smaller, more vulnerable communities continue to publicize information and precautionary measures, but many of these precautions unfortunately aren’t up to date and don’t prevent spread effectively. Where the latest science overwhelmingly points to aerosols in gatherings in poorly ventilated areas without masks as the primary method of spread, the smaller towns still focus on hand sanitizer and spraying down the outside of clothes and cars with bleach as the way to prevent more cases entering. We hope to see better information and  realtime science reach these communities quicker in the future.   

Available Lots: Peñas Negras makes its return to the offerings of community lots out of the Pluma/Sierra Sur region, near Juquila not far from the Pacific coast, just straight up the mountain. This community is one of the first to start and finish harvest in Oaxaca and this year’s lot is very balanced and sweetness driven, showing notes of Honeycrisp apple, chocolate syrup, and fresh butter. This and other Pluma community lots in the first shipment arrive to Continental, NJ the first week of May and 2nd week of May to Annex, CA. We’ll also have coffees available by the end of May in Dupuy, Houston and Seaforth, Vancouver this year.  

Ethiopia

Harvest has officially concluded for the season, Addis warehouses are full of parchment and peak shipping period is now underway. Vertical Integration, which allows for producers to establish a price agreement with an exporter prior to the harvest season, continues to play an emerging role in the specialty sector with more direct business concluded than year’s prior. The ECX continues to receive and trade less coffee.  

The Suez Canal incident and rising fuel costs for trucks making the Addis to Djibouti run have caused massive delays for vessels leaving port.  

Covid-19 cases are increasing at extreme levels according to our network on the ground in Addis, though accurate reporting remains difficult to find. Ethiopia received 2+ million doses of AstraZeneca in March per the WHO’s initiative.  

Available Lots: We were fortunate enough to move our first dozen containers, split between Agaro & Guji, prior to the Suez debacle. Fresh crop has arrived to Port of NJ as of 3/30. We expect availability in Continental Terminals NJ in the coming week or so of both Guji and Agaro coffees. ETA’s for coffees coming into both The Annex CA and Dupuy Houston range from to mid-to-late April.  

Kenya 

Kenya is now also in peak shipping season as the main crop has now concluded. 320,000+ bags have been purchased through the auction system and direct purchases since January 1. The fly crop (Kenya’s second, smaller crop) begins later this month and will conclude late May/early June.  

Shipments are delayed per the Suez debacle with lines still unable to communicate new schedules. Some fear a backlog into or even through May. Food grade containers are also at a premium.  

Nairobi is currently in lockdown as cases are now on the rise. Our trade partners are only in their offices on a rotating, need-to-be basis. The first round of 1,000,000+ AstraZeneca vaccines arrived in Kenya early March. The government expects 3,500,000+ vaccines to be distributed across the 2021 calendar year.  

Available Lots: Our first shipment arrived to Port of NJ late February and has now been sold out.  Our 2nd shipment destined to CA maintains a mid-April ETD from Mombassa.  

Guatemala

We are hearing reports of another month of harvest in Huehuetenango. Early offers have been outstanding and we’ll see more volume this year from producers from the Santa Barbara municipality. Look for Guatemalan coffees clearing on both coasts in mid to late May.

While travel has opened up between departments, public transportation remains extremely limited. This has exacerbated the shortage of migrant pickers and harvesting continues to be a struggle in most regions.

In vaccine news, Guatemala became the third country in Latin America to start vaccinating its population through the COVAX initiative, which uses the AstraZeneca vaccine. Guatemala expects to receive a total 6.6 million doses this year to reach its goal of immunizing 20% of the population.

Available Lots: We’re currently finalizing selections for an initial container to go afloat later this month/early May.

Peru 

Even though in January 2021 the national economy showed a drop of 0.98%, Peru’s agricultural sector remained afloat and growing. For its part, the Junta Nacional de Café (National Coffee Board) hopes that this year will be strong for coffee production. They expect production to rise 18% compared to last season, and the Cajamarca, Cusco, Amazonas, and Pasco regions will benefit from it.

In mid-January, the Peruvian government declared the arrival of the second wave of Covid-19. The government established different risk levels for the country’s regions and implemented restrictions for each level. One measure ensured that people taking domestic flights from extreme risk regions must present a negative Covid test from within 72 hours before the flight, as well as foreigners entering the country. 

Added to the general political instability of 2020 was a national scandal called “vacunagate”, where it was discovered that influential figures including the former president and the health minister had secretly received free vaccines from Sinopharm months before negotiations were finalized and doses were available to the population. The news aggravated the feeling of disappointment with political leaders. Currently, a limited number of vaccines are available and the vaccination process has begun. The Peruvian government presented a National Vaccination Plan that has three phases that extend until the second half of the year. The country is also preparing to face presidential elections during April.

Available Lots: A broad range of all regions and qualities available on all three coasts (Continental NJ, Annex CA, DuPuy Houston). A rep from our team would be happy to walk you through our offerings from Peru and make recommendations.

Colombia 

Heavy rains have stunted both flowering for Colombia’s second semester harvest and maturation for the imminent mitaca fly crop across Southern Colombia. Ports from Cartagena to Buenaventura are dealing with congestion due to limited availability with primary shipping lines. Port Strikes in Brazil and Covid-19 are the main culprits. Container availability is not currently an issue.  

Geovanny Liscano reports that Asorcafe is business as usual with producers focused on maintenance in the current between-crops season.  First picking at altitude in Inzá should begin by the second half of June. 

Covid-19 cases are back on the rise. The government has put in place new travel restrictions for those traveling internally within Colombia. The first vaccines arrived in Colombia mid-February with the government maintaining their plan for 20,000,000 doses to be distributed in the 2021 calendar year.  

Available Lots: Red Fox’s North American stock is dwindling as we prepare for inbound Mexican coffee late spring. Expect fresh crop coffee from the mitaca to begin shipping late summer/early fall.  

Rwanda 

Cherry picking in Rwanda is underway, with peak harvest towards the end of March. Reports of weather and rainfall have been promising, and we are expecting good quality and volume this season. We should see offer samples in our lab in late May/early June.

Rwanda has imposed some of Africa’s toughest anti-coronavirus measures since the pandemic began, including one of the first full lockdowns on the continent in March 2020. More recently, Kigali went back into lockdown for 2 weeks in January 2021, after an increase in the number of Covid cases. Case numbers have since fallen and restrictions have been eased in the capital, though concern about new variants remains high.

Rwanda received its first Covid-19 vaccines in February of this year and has been rolling out a wider vaccination campaign in March, with doses of the Pfizer and AstraZeneca vaccines supplied through the WHO’s COVAX initiative. The government’s goal is to vaccinate 30% of its population of 12 million people this year and 60% by the end of 2022.

Available Lots: Lot selection late May/early June with a container to both East and West Coasts likely to go afloat before the end of June.

Ecuador

Ecuador’s rainfall eclipsed the summer season and there continues to be excess rainfall. It seems that summer weather is finally approaching, which could bring the harvest a bit early. The October-November flowering was abundant, but there was minimal fruit. Producers have let us know that they are optimistic about what is to come this harvest season.

Ecuador received its first Covid-19 vaccines in January 2021, but has been rolling them out slower than anticipated. The country has contracts with Covax, Pfizer, and AstraZeneca. There have been a high number of cases and deaths in the country with a majority near the large coastal city of Guayaquil. The country’s goal is to have phase 1, vaccinating 2 million people completed by the end of April 2021 and begin phase 2. For reference, there are over 17.3 million people total in the country. 

Available Lots: With only a few lingering lots left uncommitted, get in touch with your rep if you have interest in sampling any lots still on the offerlist. Sidra, Typica and Bourbon Tekisic variety separations still available.

 

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

 

Jean Bosco & Longin of Dormans Rwanda on Kanzu Coffee, 2020, & Covid-19

We were able to connect with Jean Bosco Seminega and Longin Muhizi of C. Dormans Rwanda in the Foxhole and talk all things Rwanda, Covid, and the 2020 and 2021 harvest and shipping seasons. Host and Red Fox founder Aleco Chigounis has known both Jean Bosco and Longin for over a decade, well before Red Fox was formed and before the 2 of them joined Dormans. He is joined by co-host and co-founder and director of business operations Julia Fariss, who among many other things has managed our Rwanda operations since the beginning. Both Jean Bosco and Longin bring with them incredible histories and insight on Rwanda coffee production past and present.

Aleco Chigounis: Hello everyone, welcome back to the Foxhole. We have another special episode today. I am joined by my co-host Julia Faris. Julia has been helping me run the business since day one as our director of business operations but also as our coffee buyer in Rwanda. We also have 2 very special guests from Rwanda, from C. Dormans in Rwanda, Jean Bosco Seminega and Longin Muhizi. Welcome to the show, both of you! It’s great to have you here.

Jean Bosco: Thank you Aleco. We are happy to be here with you tonight.

Aleco Chigounis: I’m very happy to see you both. It’s been far too long. Both of these fine gentlemen here are our representatives of C. Dormans Rwanda, particularly the Kanzu washing station which is the one and only coffee that Red Fox procures from Rwanda. It’s one of my all-time favorite coffees and possibly our most popular coffee of all. Most of our clients, top to bottom, are buying Kanzu in some capacity because it really is a jewel of Nyamasheke. 

Quick background: Nyamasheke is the growing region where Kanzu’s coffee comes from on South Central Lake Kivu. It’s high up in the mountains around 2000 meters and has really green, lush, forested mountainside. Kanzu was built in the mid-aughts by Alphonce Kayijuka, who eventually sold the washing station to C. Dormans. I’ve been involved with Kanzu since 2007 when the Cup Of Excellence did a precursor event in Rwanda called The Golden Cup. Kanzu took third place, and at the time I was at Stumptown and split that lot with Geoff Watts of Intelligentsia coffee. I really fell in love with the profile and started to buy the coffee year after year from there. With that out of the way, I’d like to turn this over to Julia and we’ll get started with the interview and hear from these two guys. Enough from me!

Julia Fariss: Thanks, Aleco. Jean Bosco and Longin—if you would introduce yourself and start by telling us a little bit about your coffee career?

Jean Bosco: Thank you, Julia. My name is Jean Bosco Seminega and I’m the country
manager for C. Dormans Rwanda. I joined C. Dormans Rwanda in 2015 but I’ve been in coffee for the last 20 years. I started as a consultant, became a coffee business owner, then later I joined C. Dormans in 2015 as a country manager. 

Longin Muhizi: My name is Longin Muhizi, I have 13 years’ experience in the coffee industry here in Rwanda. I started my coffee career in 2007 in a USA project called Spread, where we were helping producers initiate and develop cooperatives, get financing, and connect with overseas buyers. After Spread I continued working with a number of cooperatives as a quality controller and cooperative development officer.  In 2010, I joined Technoserve, which was a project funded by the Bill and the Melinda Gates Foundation in order to provide a solution for poverty. After Technoserve, I joined C. Dormans Rwanda in 2012 as operation manager and logistics coordinator, where I work now. 

Aleco Chigounis: Great history Longin. That’s where I first met you, working for the Spread project. Really amazing project, for any of the listeners who aren’t fully aware. There was actually a project prior to Spread called Pearl, which morphed into Spread after different financing came in through USAID. It was a recovery project for the coffee sector post-genocide, and really boosted the ability to produce and differentiate specialty coffee in the international marketplace. Coffee producers’ prices have risen exponentially since the advent of that project. 

Jean Bosco: That was actually in the earlier 2000s, when the Pearl project started. There was another project supporting private companies called ADR that I was a consultant on for 4 years. I remember, we met in 2010, I don’t know if you remember.

Aleco Chigounis: I remember—you were working with Alphonce directly.

Jean Bosco: Yes, I showed you some coffees from Kanzu. So much time has passed since then!

Aleco Chigounis: Now we’re veterans in the coffee industry.

Jean Bosco: I’m thinking about retiring someday.

Aleco Chigounis: I’m not. I can’t even fathom yet but maybe, maybe.

Jean Bosco: Some people never retire from coffee, you know? It’s very hard to leave the coffee industry.

Aleco Chigounis: I’ve seen people try to leave before and they always come back. It bounces back into you and doesn’t let you go.

Julia Fariss: Jean Bosco, can you tell us a little more about C. Dorman’s history in Rwanda, when Dormans bought Kanzu, and what other washing stations Dormans operates now in the country?

Jean Bosco: C. Dormans Rwanda started operations in Rwanda in 2012. We started leasing washing stations, 5 washing stations in the western province. We were leasing at that time and in 2013 we started buying washing stations that we had been leasing. Our operations were concentrated in the western province, mainly in Nyamasheke district where we really feel that the best coffee from Rwanda is coming from. 

Since 2015 we continued buying washing stations and now, we own 9 washing stations. Aside from what we own, we also sometimes work with some small outside washing stations owned by small local companies where we pre-finance and help market that coffee. We currently have around 6,000 farmers registered that are linked to those different washing stations where we provide some services from farming to training, support, certification process, and more.

Julia Fariss: Longin, could you tell us a little about what makes Nyamasheke a special growing region for coffee and a little bit about Kanzu washing station?

Longin Muhizi: As Dormans Rwanda, we have chosen to be present in Nyamasheke district alone, because of the quality of coffee in that particular area. Bordering Congo in the west, it has a range of altitudes from 1495 all the way up to 2200 and above. It also has the natural forest called Nyungwe, with rainfall in that particular area ranging between 1300 to 1400 millimeters per year. The soil is volcanic as well. The quality coming from those factors was what pushed Dormans to buy the Kanzu washing station in the Nyamasheke area.

As Jean Bosco mentioned, we bought and started operating in Kanzu in 2012. Kanzu washing station is located at 1836 meters above sea level with great access to the hills covered with coffee and excellent agricultural practices. It is highly visible. Kanzu is able to produce 4 to 6 containers of exportable grade high quality. Because of the quality produced in that particular region, we always face competition from other trading companies. Our advantage depends on our relationships with farmers, so we build really strong partnerships, which makes Kanzu the best washing station to work with. To date, Kanzu is working with 535 farmers and those farmers are also registered under certification programs like Rainforest Alliance and trained in best practices to help them continue producing the best possible coffee. If you look at Kanzu’s last season, we were able to produce 4 containers of exportable grade coffee, and because of competition for cherry the price was very high. 

Aleco Chigounis: I’m very curious about the competition there and how it works. I’m sure it’s a battle for the coffee as it is every year. That is such a special area. You told us a little bit about how the harvest shook out in terms of competition and volume. How did you see it quality-wise compared to years past?

Jean Bosco: Kanzu has special quality all the time, so we always deal with competition. That means we always have to pay the highest price, and we know the quality is worth it. We thank you for the price you have been paying us so that we can pay a good price to the farmers we work with in Kanzu. We also keep close track of small lots of coffee for quality control because we know, when we focus on quality we need to really, on a daily basis, track the coffee we are getting. We are very grateful for the support to manage the quality down to a lot by lot scale for our top clients.

Aleco Chigounis: I have to say I regret not buying more coffee this year. The coffee was so good. We were as buyers, maybe you’ve seen this from other buyers as well, a little timid with the Covid-19 situation. Unsure of how things would shake out economically here in North America with our own clients and how they would be living through this situation, but in retrospect we should have bought another container. Next year we’ll be back strong with the full volumes again. When do you see the next harvest starting and how do you think it will shake out in terms of volume and quality?

Jean Bosco: In Kanzu, because of the higher altitude, we’ll see the next season start a bit late compared to others. Around the end of February, early March. This year, we’ll still be getting cherries into July, which is great. The late maturation gives time for concentration and the quality gets better over the course of the harvest. We expect a good crop, because the rain is what we want to see so far. We applied fertilizer already, and we’re expecting at least the same volume or more than what we bought in 2020. We’ll definitely have the volume you want, especially since you make such fast decisions. 

Aleco Chigounis: Thank you. That’s the mantra for us, to make quick decisions and move quickly. Be a strong partner.

Jean Bosco: That quick decision helps us so much.

Julia Fariss: And I wanted to say, regarding quality, all our work this year was done from our lab in Berkeley. No one was traveling and it’s always such a pleasure to cup those Kanzu offers, they’re so good. This year, they were just the highlight of cupping for me personally. I haven’t been cupping as much because I’m mostly working from home, so it’s just such a beautiful coffee and this year was definitely no exception.

Aleco Chigounis: So beautiful. It also seems like, and correct me if I’m wrong, that the potato issue obviously still exists but it’s much better controlled than it used to be. To give a very brief synopsis on what potato defect is to anyone who might not know, a specific kind of insect bores into the beans, leaving bacteria that create a raw potato flavor in the coffee. Really interesting, and unfortunately undesirable—it’s a problem that has hurt Rwandan coffee producers, which is why folks like Jean Bosco and Longin have taken great measures to try to eliminate it as much as possible. Thinking about the Kanzu coffees and the amount of times we’ve kept them this year across the different lots that we’re buying, we have a very low incidence of finding potato cups. Is there a special program or a special way that you approach the quality control of that now at Dorman?

Jean Bosco: There’s a lot of strict control and tracking of small lots. We cup every small bunch of coffee on a regular basis and whatever we get any potato taste, we keep it aside, we recup until we get all lots potato-free. We do a lot of hand-picking and we have very good cuppers at our office. We have 2 Q graders now and we work hard really on getting the best quality we can. Especially for regular buyers and committed buyers. The potato taste is still there we can’t say a hundred percent, you know? It’s very hard to control these potato tastes, but we try to track as much as we can to get the potato-free reloads.

Aleco Chigounis: I think you’ve done a very good job, thank you for that.

Longin Muhizi: Also going back to the farms’ practices, a lot has been done. We have a program designed for farmers. We deliver training on good agricultural practices and with those practices, you see there is really an improvement on how farmers are treating their coffee crops. That’s had an impact on reducing the potato. Pruning is really very important. The bugs that cause potato taste like to hide in coffee farms where the foliage is bushy, but when you clear the farm and carefully apply fertilizer, some pesticides when possible, and be consistent at pruning, the severity of the potato is really reduced. 

At the washing station where we sort the cherries, we also make sure that anything that has been bitten by any insect is removed during flotation. When you put coffee or in water, cherries that have been damaged by insects float and can be removed. Then, after coffee is pulped, we also do sorting in the pre-drying area. We call that phase skin drying, where we pre-dry the skin of coffee so that when you put the coffee under natural sun it cannot be cracked by the sun, allowing other issues to arise. During skin drying you can also easily pick out any defective coffee beans. Just to highlight that we do a lot of controls at every stage to be sure that the coffee we are going to produce is of quality desired by the client.

Aleco Chigounis: It’s great to hear about all the steps you’re taking. 

Julia Fariss: Could you two tell us a little about what the year has been like in Rwanda, what the impacts of Covid 19 have been both on operations for Dorman, for farmers, and also just on a human level?

Jean Bosco: 2020 has been very hard for everyone worldwide, and Rwanda was no exception. We had our first positive case on February 14th, and from then on positive cases kept increasing and Rwanda took major serious measures, starting in early March. We went into complete lockdown. By the time we started harvesting, the whole country was on lockdown. Farmers and the agricultural sector were allowed to continue operations, but with little movement allowed. Everything slowed down, it was very hard for us to keep the same level and speed of work in the field.

For example, in order to leave Kigali we needed a special authorization to leave. Fortunately we have washing station supervision at the regional level—our washing station managers were living at the washing station during harvest. We managed to get there ourselves during the harvest, but it was not easy to get in and out. 

Otherwise, Rwanda took serious measures. Now it’s mandatory to wear masks everywhere. Anyone in Rwanda leaving their home needs to wear a mask; social distancing is controlled as is testing. We, Rwanda, started testing in March because we were not prepared. The pandemic came as a surprise to everyone but over time Rwanda got more equipment to do testing. Now we have 5500 positive cases tested since that time with more than 90% recovered, fortunately and around 50 deaths. In June, the country started reopening slowly. Now schools are back. 

The country is slowly recovering, but we are still under serious control. We need to keep social distancing, some pubs are still closed, hotels are opening and all travelers need to get tested. Whoever enters Rwanda needs to be quarantined for 24 hours and tested. We took serious measures, and we are lucky now we can say it’s a bit under control, when you compare with the other countries. 

During the farming season, the risk was a bit high for us to keep financing, sending money to the field when we couldn’t go there on a regular basis, but we managed to anyway. We were lucky to have a good team and then we managed to get production and pay farmers and in the end it went well. 

One of the biggest negative impacts is still with us: the cost of living is becoming very high. Rwanda is a country that imports a lot of things including food and imports prices are very high due to transport issues at the borders. It’s really not easy; there’s a very negative impact on everyone including our farmers. Their cost of living is rising, and buying anything they need is more expensive. 

Julia Fariss: Yeah, in the US right now having a really big surge of cases and, it’s been a hard year here too. I’m glad that the measures in Rwanda have been successful at controlling Covid and that schools are back. Are you able to travel to the field now? Do you still need to get special authorization?

Jean Bosco: Now we can travel in the field. The western province was under lockdown for a longer period than the rest of the country because it’s at the border of DRC, but now it’s reopened so we can travel within the country without any problem for the moment. Only people going out of the country need to be tested first and when they come back.

Julia Fariss: How do you see things looking forward to the upcoming season? What are the plans in place for next year for coping with any more Covid-related obstacles?

Jean Bosco: We have hope that the vaccine will help and that Rwanda would probably be included in the first countries to get the vaccine. The pandemic was taken very seriously here in Rwanda because our country relies on tourism and has a service-based economy. So, that’s why in Rwanda this problem was taken seriously from the beginning. Now we have hope because worldwide if the pandemic can get under control with the help of vaccination then things will be much better next year.

On the farming level we are as ready as possible. We have applied fertilizer, but it wasn’t ideal. We used to have fertilizer from expert contributions and the government gave us additional support. Now the government wasn’t able to get that support so we probably won’t have enough, and this this year will be already reduced to what we have, but whatever we had was already applied on time. The rainfall has been good, so we hope that the production will be good. Farmers are in a hard situation, but we are in touch with the farmers, we are trying to work with them. Some of them are looking for some small loan for their production, and we try to help them to access some finance to pay their family expenses. 

We’re also struggling with training. With social distancing measures in place, we can’t gather people for trainings. It’s a bitter challenge but we hope to be able to do training as we can in respect of the committed measures.

Longon Muhizi: To add to that, we are working to increase the involvement of women in coffee farming, so we’re planning for when things get back to normal. We’re planning to create 4 groups of women in Kanzu, where we will be able to train them on different topics aside from coffee practices like basic business skills and financial literacy, so that in the off season they can have some activities that can generate income to support the household. After the training we help them to develop their business ideas, and also spread them to the other women surrounding the Kanzu region. 

We also plan to maintain certification which is good for farmers and helps them get higher premiums. And, we’re planning to contribute to production by raising seedlings which will be given to farmers for free—our plan is to distribute in 40,000 new seedlings in 2021 which will help us assure that in 3-4 years the productivity won’t drop off. That is also an assurance to Red Fox, that any volume they will have in the future as the company is growing, we will be able to supply.

Aleco Chigounis: That’s great news! Which varieties are you giving them as seedlings?

Longin Muhazi: There’s a new released variety called Rap C15; it was tested by Randall Clutch and released in 2015. It’s resistant to coffee bean disease and the quality and productivity are good.

Julia Fariss: It’s such a pleasure to see you and to hear how the year has gone for you. We so appreciate working with you and all the work that you do. We love that coffee from Kanzu and the work that Dormans does so, thank you so much for being with us.

Aleco Chigounis: Thank you both. It’s great to see both of you. Two of my oldest friends in
Rwanda.

Longin Muhizi: Thank you, thank you, Aleco.

Jean Bosco: It was a pleasure meeting you here. It has been a long time since we’ve seen each other. We hope you guys will continue buying Kanzu and it will be really a pleasure to work with you.

Aleco Chigounis: We’ll always be there—as long as Kanzu is producing coffee, we will be there. 

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