Ukraine War Increases C Market Volatility, Worsens Supply Chain Crisis

Red Fox Coffee Merchants Q2 2022 Origin & Shipping Update

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As core issues from the last several quarters persist—snarled and effortful logistics, limited container availability, constrained shipping lines, domestic freight bottlenecks, elevated costs across the board, an elevated and extremely volatile C market, and the resulting global inflation hitting the most vulnerable the hardest—the Russian invasion of Ukraine has escalated all of those issues globally, adding more uncertainty, costs, and an increasingly unpredictable C market.

Combined with local shortages of coffee due to climate events, labor deficits, and cyclic down years for certain origins, price volatility has also created conflict between producers and larger traders as certain origins’ local market prices rise despite more recent C market drops. The market remains increasingly competitive as large players work to cover short positions, but our relationships are holding strong. We’re in the thick of Mexico season, final Peru shipments are almost here, first Rwanda and Kenya containers are here, and early Ethiopia shipments are on the water. As usual these days, the only constant is change, so stay flexible and read on to find out more. 

Logistics, Port, & Warehouse Updates 

The Russian invasion of Ukraine added new layers of complexity and volatility to global supply chains still reeling from pandemic disruptions, while another wave of Covid outbreaks in China threatens a cascade of new disruptions to the shipping industry. Port congestion and shipping delays remain an issue worldwide. Container shortages continue to cause delays and rolled and canceled bookings, especially in Brazil and East Africa. 

Congestion at West Coast ports has improved but remains seriously backlogged, while congestion at East and Gulf Coast ports has increased as shipping lines route cargo away from the West Coast. 

War in Ukraine and rising gas prices have caused spikes in bunker costs (charges added to steamships’ base ocean freight rates, protecting them from fuel cost increases). Those costs are passed on to shippers, increasing ocean freight rates across the board.

On land, domestic trucking capacity is still a bottleneck. Driver shortages continue causing delays transporting freight from ports to warehouses and hauling trailers from rail yards, while rising gas prices drive up trucking rates. Some freight lines have sold to larger companies to avoid folding, leading to fewer options. Less market competition allows for significant price hikes for LTL (less than truckload) freight.

Ongoing labor shortages across all sectors continue to hinder recovery from pandemic slowdowns. Trucking lines are particularly squeezed and are unable to invest time training new hires. Sheila at the Annex recommends that anyone relying on trucking companies for coffee delivery pay for the extra strap/wrap to protect the shipment from damage in transit. She also advises receiving freight with a camera ready—”take photos of pallets INSIDE the trailer before offload, and then again after the pallet is off the trailer. If there are any issues with the shipment, only sign documents to include acknowledgement of receipt with “requires further inspection” or “EXCEPTION/DAMAGE” noted on the paperwork.” She stresses that it’s not a good idea to refuse freight outright. “Freight lines respond better to a call asking for an inspection at the consignee location as part of a claim rather than a pallet sitting on their own dock.”

Supply, Demand, & The C Market 

Until the Russian invasion of Ukraine, the C market was headed towards $3/lb, hitting a high near $2.60/lb in early February with both supply and demand factors pushing the rise. The Brazilian real (currency) has strengthened against the USD since the beginning of the year, and while Red Fox doesn’t operate in Brazil, the origin is the largest supplier of coffee in the world and tips the scales whenever its factors affect price or supply. When the real strengthens, farmers’ motivation to export weakens. In Mexico, we felt this factor firsthand when the peso strengthened significantly during March, creating the same effect with Mexican domestic demand (among other supply factors) creating a highly competitive market for our sourcing team. Furthering demand woes and upward market pressure, the International Coffee Organization reduced its supply estimate to a deficit of over 3 million bags this season at the same time Minas Gerais in Brazil reported less than half its historical average production. All this comes after Colombia production and exports fell in February while US green inventories reported shrinkage in February.  

All those factors should underpin a bullish market, but on the day of the Ukraine invasion, the market dropped nearly 10c and continued to drop from around $2.50/lb to $2.10/lb over the course of two weeks. Institutional investors became bearish overnight, fearing a further stressed global logistics crisis and a derailed global economy. Analysts fear that consumer spending will shrink even though supply side economics suggest coffee prices should continue to strengthen. 

Our biggest uncertainty is not the coffee quality and consistency that Red Fox will source, but the unknown costs that will continue to add volatility and uncertainty. The price of oil will continue to put pressure on how we think about moving coffee. What will ocean freight and trucking costs look like over the course of the upcoming Mexico season? We can’t use historical costing data in answering this question and have had to become much more conservative as we look at forward booking, especially as almost all signs point to the cost of coffee increasing.

Mexico 

As you read this, our lab in the Oaxaca centro is at peak season and buzzing with activity. Harvest is nearly complete in our sourcing regions, we’re constantly cupping offers as more arrive, and deliveries are hitting the warehouse and dry mills. Our first shipment from Veracruz is almost afloat.

This harvest has brought particular challenges, some like those facing the rest of the coffee-producing world (rising cost of production, lower harvest, shipping and container issues/delays, inflation, etc.) and some unique to Mexico. 

Oaxaca is enduring a disruptive season of protest blockades in the city and surrounding areas, limiting mobility. A new tax law implemented this year and designed to reduce the informal economy and limit cash usage created new difficulties in how producers not yet registered in the tax system with a formal bank account receive payment, something not yet accessible to many smallholder farmers. In terms of productivity, Oaxaca’s harvest is looking to be about 50-60% of average production. As a region with heavy planting of Bourbon and Typica (which typically have a biannual cycle with a lower yield every other year), lower production was expected but not nearly to this degree, frustrating producers who finally see ultra-high C market prices coinciding directly with their harvest after so many years of a lower market. 

In Chiapas, much like Guatemala, labor shortages have severely affected picking, normally performed by migrant laborers who enter Chiapas through the Guatemala border on temporary work visas. The border is increasingly dangerous and effectively closed to legal crossing of people and goods. Without laborers to harvest it, cherry is drying on trees. 

Local cherry prices in Veracruz started the season near double last year’s price, setting off a country-wide scramble to acquire coffee by larger commercial buyers seeking to cover undelivered contracts from losses in Brazil and Colombia. Internal demand also continues to grow with national roasters looking to meet their needs and further pushing prices up. The competition for coffee is so extreme that it threatens to roll back years of quality recognition gains for the region as a whole, since most coffee is being purchased right in the field with no consideration for physical and cup quality. 

That said, we are genuinely seeing some of the best quality we’ve ever seen. We’ve opened up new supply chains in Chiapas with several new quality-focused producer organizations, and against long odds, we’ve also acquired the most volume we ever have in Chiapas. We expect to have several early shipments leaving in April and are working through shipping line headaches to get the fastest possible routing to the US. 

Ethiopia

In terms of our Ethiopia sourcing, we now have 5 FCL (full container loads) of Agaro G1 coffees from all of our usual partners (Nano Genji, Nano Challa, Kolla Bolcha, Duromina, Yukro, Gore Dako, etc.) afloat with ETAs into Port of New Jersey between 4/16-5/1 as well as 4 FCL of Agaro with ETAs into Port of Houston from 5/8-5/25. Our first Guji G1 containers from Gogogu Wate have current ETAs into New Jersey and Houston in late April, though we actually expect them to be May arrivals. We’ll also see the first of 3 FCL of G1 naturals from Guji Uraga hit the water this week. Updates on those to come. 

Generally, Ethiopian offerings continue to be volatile with rising prices in the face of a C market that’s dropped 30c/lb over the course of the two week period prior to writing. Even with Grade 2 prices climbing above $3.50/lb FOB (with certified organic G2 from $3.80) and Grade 1 prices now well above $4.00/lb, FOB demand appears relatively strong, especially for spot and afloat lots. The Ethiopian trade’s confidence in their differentials remains high as we hit peak shipment period.  

Exporters also continue to hoard parchment in hopes of the Ethiopian Government’s reversal of the Forex Retention Rule, which would let them retain a higher percentage of inbound dollars on green coffee exports.  

Dry mills are operating at full capacity even with limited overseas interest as larger roasters work to cover their positions short-term rather than taking positions in an expensive market (in some cases playing chicken with prices they don’t want to pay). In the trade at large, early season contracts are now somewhere between Addis and afloat en route to their destinations.   

Last quarter, we reported on how civil unrest pushed us into sourcing from just over the border. Now, a unilateral truce has been declared between the Ethiopian government and the TPLF as of March 25th. All hopes are that this leads to the end of the civil war.

Kenya 

Red Fox saw phenomenal quality out of Kenya this year. We’re finished contracting there for the year (Kenya’s main crop officially ended prior to Q2) and have 4 containers on the water, the first having just arrived into Port of NJ. We expect all of our Kenyan coffee stateside by May/June.

Outside of Red Fox, buying continues at an active pace into spring, especially on the top lot front. Larger buyers seem to be active in their own spot markets (eg. European roasters covering shorts from European spot markets) causing stocks in Kenya to remain strong and prices beginning to turn downwards. The fly crop has a strong outlook as long as rains arrive soon to activate cherry ripening.

Shipping woes continue to be a central theme with container availability very thin and shipping lines not offering much in terms of vessel bookings.  

Guatemala 

Guatemala harvest is in full swing and we’ve been cupping offers from both the San Jose Poaquil community in Chimaltenango and Finca Los Arroyos in Huehuetenango. Despite migrant labor shortages due to pandemic restrictions, quality is exceptional this year. Container shortages continue to be an issue. We expect first containers to go afloat in April with May arrivals to both NJ and TX. 

Peru 

We’ve concluded our current Peru shipment season with the last containers of the season arriving to US ports now.  

For next season, the coffee harvest has begun at lower altitudes, while the producers we purchase from are still a month away from the start of their harvest. While they wait for cherry to ripen, producers are preparing for the upcoming season: calibrating depulping machines, maintaining and upgrading wet milling and drying infrastructure, and participating in internal inspections conducted by producer groups to prepare for certification audits. Meanwhile, producer groups are meeting with banks and other lenders to line-up financing for the upcoming harvest and undergoing Fair Trade and organic certification audits. Many of the producer groups also held general assemblies in the month of March to review the prior year’s financial performance and accomplishments, receive their final payments and quality premiums, and elect new board members to replace those whose terms are up. 

Rwanda 

Our final Kanzu lots have arrived on the East Coast and we expect warehouse availability in the next couple weeks. Lots are also now available in the Annex for West Coast customers.

As for next season, this year’s harvest began in late January with peak cherry picking occurring in mid-to-late March. Cherry prices are high following the increased C market; competition is already intense. We expect to start seeing offer samples in late May/early June. 

Earlier this month, the Rwandan government fully reopened the country’s land borders two years after closing them in an effort to curb the spread of COVID-19. We’ll have to see how this impacts export logistics for the upcoming shipping season. Bookings for ocean freight routes from East African ports continue to be challenging. 

Colombia 

Expectations for an extended rainy season through the La Niña year persist, and with them expectation for reduced production for both 2022 harvests. Sufficient ripening come June/July requires extended periods of sunlight and warmth through spring.  

Differentials continue to rise as larger trade actors continue to cover their short positions through a lack of available coffee on the production side.  

Ports continue to see limited container availability and service from shipping lines. Buenaventura remains the most congested of the three ports while Cartagena faces the largest struggles finding efficient routes to Oakland and Charleston. Santa Marta shows increased container availability, but doesn’t have the infrastructure to handle a high volume of shipments.  

Primary Southern producing regions like Nariño, Cauca, Huila, and Tolima begin harvest in late April. We’ll have a much better sense of what to expect from the 1st Semester harvest from supply chain partners in Inzá and Tablon de Gomez as we get closer to summer.  

From Geovanny Liscano in Inzá: “The December 2021-January 2022 harvest was inconvenient due to heavy winter conditions/heavy rainfall. A lack of flowering creates concern for the harvest beginning May 2022. Prices remain high across Inzá for any parchment available.”

From Gildardo Chincunque in Tablon de Gomez: “The initial outlook for the coming season is weak due to heavy rainfall. We look forward to working together come July/August regardless.”

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

C Market Volatility, Complex Logistics & Ethiopia Civil Unrest Spill Over Into Q1 2022

Red Fox Coffee Merchants Origin & Shipment Update: Q1 2022

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As we sail into Q1 of a new year, a lot of the issues we dealt with through the third and fourth quarters of 2021 persist. Logistics are as tangled as ever on a global level and still require extensive planning and constant management, with ever-rising costs at every level of the supply chain. The C market price is ever more volatile and elevated, with new heights reached in the month of December. Civil unrest in Ethiopia has placed us in the region—but not in-country as we would usually be this week—cupping early offers and making commitments and firm plans, and we’re excited for the upcoming season. Despite logistical challenges, Peru’s shipping season saw early containers landing at the onset of Q4 and is now wrapping up. We’re on the ground in Mexico connecting with producers as the season peaks, and in Kenya tasting and approving offerings with first shipment already on the water. Despite the surrounding chaos, we’re managing details, landing coffees within our expected windows, and staying constantly connected with supply chain partners at all levels. More detail on all of this, in general and origin by origin, below. 

Logistics, Port, & Warehouse Updates 

The state of global shipping continues to be extremely challenging as we round the corner into 2022. Securing space on vessels is a daunting task. Even once bookings are secured, departures are repeatedly rolled, delayed, or outright canceled. Rates for all routes continue to increase and shipping lines are adding fees for port congestion on top of the already inflated rates. 

On the import side, trucking capacity is becoming a major issue. Shipments arriving to US ports are frequently sitting at port incurring demurrage fees (fees charged by shipping lines to importers when a full container is not moved out of the port/terminal within the allowed free days offered by the shipping line) and extra days of chassis (a special trailer that allows ocean containers to be moved via truck, required for shipments transitioning from sea to road) because of difficulty securing trucks to unload and move cargo to the warehouses. Costs continue to increase across the board. All services—trucking, rail, warehouses—continue to experience employee shortages (and the knowledge deficits that come with them), increased costs, Covid issues, and delays. Rail services are seeing particularly long delays. 

The port of Oakland, though still experiencing delays and not operating at full capacity, has seen modest improvements in recent weeks. However, we do expect congestion in West Coast ports to persist well into 2022.

Warehouses are reporting a lot of LTL freight shipments to customers still being sorted out from the holidays. Freight carrier holiday closures and winter weather in some states has affected many freight deliveries—some shipments are still stranded at intermediate terminals while carriers sort through the backlog. Freight is moving, but slowly. 

Supply, Demand, & The C Market 

We continued to see a meteoric rise in the ever-volatile C market this past quarter, which spiked past 250 in early December. The days of 2-3 cent moves being considered “volatile” are behind us when 5 or more cent rises have become commonplace (we’ve seen an average daily change of 5.6 cents over the period between 9/21-12/20). Expectations of lower global supplies due to unfavorable weather and supply chain disruptions continue to prop up the price of arabica futures even though the market has settled closer back to around 230 at the time of writing. It’s been quite astonishing to watch the C market price rise to levels higher than what our baseline price for some qualities has been in prior years in Peru (as covered in the last quarterly update, we’ve of course adjusted our purchasing prices this season in Peru—producers deserve the benefit of elevated base prices in low C market years as well as in high C years). Reports anticipate the events of drought and frost in Brazil may curb growth potential for the country’s coffee crop for the next two years. USDA production estimates Brazil coffee exports to drop by over 15 million bags recently, also citing La Nina’s heavy rains in reducing Colombia export estimates. Supply chain disruptions continue to wreak havoc on transit times and port congestion continues. Bloomberg reports shipments out of Brazil are taking as long as 100 days where the old normal was 30. We’re fortunate to have exceeded our expectations on transit time out of Peru so far without much additional transit time from prior harvests.  

What does this mean for you? It certainly feels like the days of sub $2/lb C market are behind us for the foreseeable future and some analysts feel bullish that we could see the market rise closer to $3/lb. We’re thinking about this daily as we begin to enter Mexico acquisition season to ensure we continue to pay the highest prices and quality premiums to our partners. We are well positioned with the communities/producer groups we work with due to strong relationships developed over the years from our base in Oaxaca that we continue to grow year over year.

Mexico 

As Mexico enters peak harvest season, a number of challenges face producers and traders alike. Our team at origin has already been busy for a few months making pre-harvest visits to producing communities across the country and getting a sense of how the harvest will shake out this year. 

Harvest at lower and mid elevations began in mid December and peak harvest of higher altitude coffees will be mid to late January and into February. Late rains have delayed the start of harvest in some regions. In areas of heavy Bourbon and Typica production (like Oaxaca) the bi-annual cyclical nature of these varieties is in a down year, which should bode well for quality but less well for total yield from these already lower-yield varieties. Strong rains and gains in farm renovations in the offseason and past few years appear to have boosted the predicted crops from Veracruz and Chiapas. 

A high C price in the outset of the harvest has created very high local prices for lower elevation coffee in Veracruz and Chiapas and led to strip and underripe picking to get coffees into the mills and sold quickly. Milling and exports of top quality coffee are expected to begin the second half of March/first half of April with first arrivals to the US in late May/early June. As always, we’ll keep you informed of any changes on that front. Port congestion and container availability are expected to be challenges again this year, but we are developing strategies early to thwart significant delays. On the positive side, costs for ocean freight out of Mexico don’t seem to be increasing much over last year. 

Economically, inflation is hitting Mexico very hard and is at its highest level in 20+ years, with gas and other basic goods (mainly food) prices increasing exponentially. Coupled with a rise in the national minimum wage scheduled to go in effect in January, costs of production are necessarily much higher all around compared with the 2021 harvest. Coupled with the rising C market, prices for quality and specialty coffee will be significantly higher this season and we expect to continue to pay substantially higher prices than other buyers for the qualities we’ve been working closely with producers to develop. Pepe Arguello of Finca Santa Cruz and manager of Cafeco is reporting increases of at least around 40%-50% over last year for both labor and parchment prices in Chiapas, where much of the labor for picking cherry has historically come from Guatemalan temporary migrant workers, but the compounding border issues (including refugees coming from Haiti and Honduras, among other countries, being stuck at the Guatemala/Mexico border in Chiapas due to disastrous US policy), and lack of visa permits are preventing many from coming for work.  

On the Covid side, Mexico is experiencing another surge in confirmed cases after a downturn last fall when the vaccine became widely available to adults and young adults across the country (children under 15 have not yet received vaccines, despite increases in pediatric hospitalizations). Only just over half of the population have received their vaccines, although they are widely accepted among adults and haven’t been politicized as in the US (for example, 95% of adults in Mexico City have received their first round of vaccines). The booster campaign just launched for senior citizens, teachers, medical workers, and other essential workers. The government has so far resisted any restrictions on foreign travelers or internal mandates.  

Ethiopia

We are wading into the great unknown this season in Ethiopia. The political situation, and contradictory reporting within the country, keeps us just over the border at the moment. While we would typically be on the ground in Addis by the beginning of January we are currently outside of the country, though in the region, working to execute our first half shipments from Agaro and Guji. As you read this we have our spoons in 15+ containers’ worth of offerings from Nano Challa, Nano Genji, Kolla Bolcha, Duromina and more from the Kata Muduga Union. We also expect to see our first G2 offerings and the first Uraga arrivals to Addis before we leave.  

Fortunately, our Ethiopian supply chain is older than Red Fox itself at this point. We have confidence in our small handful of trusted partners who are still working from the capital. While the global shipping crisis may keep us from our standard Feb/March arrivals in North America, we don’t expect delays past April at this point. More to come on that over the next few months.  

Price-wise, the state of the C market has pushed cherry prices upwards of twice their 2018/19 levels and 30-40% higher than last year. We are being quoted roughly 40-50c/lb FOB from last season’s levels. Top Ethiopia will be pricey in 2022.

From our trade partner in London, Scarlett Fishburn:

“In terms of updates, cherry prices continue to rise (now looking at 53/55 etb/kg) due to the higher NY and farmers’ speculation on the extent of the damage of extreme weather in Brazil last year. With little cash/tight liquidity, this is preventing big players coming to the market aggressively and so only really small guys are buying at these levels (which probably elevates the price outlook more than if the big players were factored in).

The National Bank announced last week that they are using their reserves to loan 12 billion birr to players in the coffee industry in an attempt to increase the amount of finance available during the harvest period.

Security seems to have improved since we last spoke. You will have seen that the US removed Ethiopia (and Mali and Guinea) from the AGOA program.”

In addition to Scarlett’s note, we are hearing that cherry in coveted producing areas of the south, specifically Uraga, are now upwards of 56 birr/kg as we head down the home stretch of the harvest. While the harvest is delayed in the south this season we do expect the first G1 stocklots to hit Addis by end January.  

Kenya 

As we wade into some unknowns with the Ethiopia season, things are off to a quicker start than ever in Kenya. Our first containers have left Mombasa and are now en route to New Jersey. We’ll be cupping through swaths of samples on the ground in Nairobi over the course of January to add reinforcements to our offerings.  

From our partner Kennedy Keya in Nairobi:

“Main crop cherry picking started earlier than usual. This was due to the early flowering that started in January 2021. Cherry picking usually starts at the end of October in areas near Nairobi (Kiambu and Thika)—but this season cherry picking for the main crop started at end of September and continued into December. Grade retention is fantastic and quality is great. We are seeing more bold beans with AA and AB grade making up 80 to 85% of outturns. We attribute this to proper use of farm inputs by farmers leading to well-fed trees and good weather conditions throughout from flowering to final fruit maturation.  

Prices have remained high and the high NY market is resulting in high historical prices for farmers.

Logistics remain slow. Shipping lines are constrained. Connecting vessels are full so bookings for nearby shipments are declined in most cases. Another struggle is getting empty containers. It takes a lot of advance planning to reduce the struggle to get empty containers.”

Guatemala 

The Guatemala harvest is underway in the lower elevations with picking of higher grown coffees just beginning. Overall, ANACAFE reported an expected 3% higher yield over last harvest, with regions such as Huehuetenango seeing slightly more gains than that. 

An anchor in Red Fox’s Guatemala sourcing for the past three years, Felipe Martinez of Finca Los Arroyos in La Libertad, Huehuetenango confirms early December pickings and expects to continue in earnest as the new year gets underway.

A trusted supply chain partner told us that despite the ongoing pandemic, he is expecting fewer disruptions this harvest and is already seeing an increase in their overall ability to collect and receive coffee, mainly through growth in projects in more remote areas such as Santa Barbara, Huehuetenango. We anticipate continued success in these investments, bringing in more volume from these small holders. 

Look for more updates as we get into the harvest. Currently we anticipate the usual May shipments for peak harvest Guatemalan coffees. 

Peru

The Peru shipping season is wrapping up with 17 containers currently en route to the US and the final handful of containers being milled to ship later this month. We will have warehouses in NJ, CA, and TX flush with fresh coffees soon and through spring.  

Peruvian ports, specifically Callao and Lima, have been some of the most affected during this global shipping crisis with general lack of container availability paired with shipments rolled on a weekly or monthly basis.  

Despite challenges with parchment competition in the early months of the harvest, container availability and the shipping crisis, we managed to increase our purchase volume almost 30% from 2019 and 2020. Our relationships across the country, though most specifically Cusco and Amazonas, continue to grow and be the backbone of Red Fox Sourcing Company Peru.   

Colombia 

Colombia has been the heart of the coffee sourcing struggle since entering the first semester harvest late spring 2021. Early pandemic lockdowns, violent political protests, prolonged port closures, the volatile C market, and intensive rains brought on by La Niña all equaled a massively decreased specialty coffee production. We brought in four containers from the peak summer season at FOB price levels near 50% above 2020 levels. As local prices continued to increase into the second semester harvest, producers across the country rushed to strip pick green fruit in order to deliver unselected parchment at exorbitant prices. Predictions for the coming summer crop also call for more intense rains as the ‘22 La Niña season peaks in the next 6-8 weeks. Availability for top quality Colombia may suffer until Q3 2022, but we’ll have a better assessment in our Q2 report come April.  

From our dry mill and export partner Frederic Boppe in Popayan:

“Production has decreased from last year, mostly due to excessive rains during the last semester. This affected flowering and maturation of the cherries, thus affecting quality and yields in certain areas. Drastic increase in price of fertilizers has also caused a serious impact in production, as producers tend to apply less. The harvest period was shorter than usual and production is over. Parchment is tight, with very few offerings from this area at this time.

This has been a very unusual year. Due to the drastic price increase of over 100%, several producers defaulted in their previous commitments on their deliveries to cooperatives and exporters. The spot market has ruled the trade, and most of the coffee which came out in the last semester was immediately purchased by companies who were short, driving the internal market even higher. All parchment was purchased for immediate delivery and paid to producers upon delivery at the mill. Future commitments are no longer being accepted and cash advances have become very unusual. Today, there is still very high demand with base prices around 2,250,000/carga for standard coffee, but exporters must pay a premium of at least 100,000/carga to secure decent quality. In the internal market, no transactions for future deliveries are taking place and all coffee is sold at the spot market. Longer-term offerings from exporters are very limited. The recent ICE market levels (reaching 2.50/lb) and record US/COL peso level transactions (breaching the 4,000 level), have undoubtedly generated a higher income for coffee producers, strengthening the coffee producing sector.

Logistics: Currently we expect that everything will be back to normal by Q3 2022. Shipping lines are calling off vessels and the lack of containers is dramatic. In general we expect an average delay of 45 days for upcoming contracts. The flow is normal for almost all destinations. In November, the US was the main destination for Colombian green coffee exports with a participation of 42%. Finally, we estimate freight costs have increased by 60% over the last year to the US.

Rwanda 

We’re eagerly awaiting the arrival of our Kanzu lots from Rwanda. Ocean freight routes from East Africa continue to be beset by delays in transhipment ports and lack of space on vessels, resulting in very long transit times. We currently expect US East Coast warehouse availability for Kanzu in the second half of February. 

Looking ahead to the upcoming harvest, the crop is developing well and weather conditions have been favorable. Cherry picking in lower altitudes is expected to begin in late January/early February with higher elevations ripening later in the season. Last season’s good prices are motivating farmers and the outlook for quality and volumes is good. 

Export logistics are expected to be challenging again this year. Landlocked Rwanda relies on its neighbors—Uganda and Kenya—for the transport of all imports and exports to and from ports. Covid testing requirements at border crossings have contributed to long trucking delays, sometimes as long as three weeks between Kigali and Mombasa. Low volumes of imports into the country have also made empty containers scarce. 

Ecuador 

After a few unexpected challenges, we have chosen to air freight all of our Ecuador coffee this year and it should be arriving in the states very soon. We’re expecting great lots from our long-term partners Hernán Zúñiga and Andrés Dávalos, Mateo Patino, and Gilda Carrascal from 1600 Estate. We’ll also have some stunners from newer producer partners Galo Davilos and Yesenia Murillo.  

On the Covid front, like much of the world, Covid cases are on the rise due to new variants. Fortunately, Ecuador has a high vaccination rate with over 77% of the population vaccinated. However, due to the rising case numbers, the government just put out a mandate that all eligible residents over the age of 5 get vaccinated.  

Get in Touch

As always, if you have any questions, concerns, or thoughts, let us know. We’re here to help.

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.

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.

Red Fox’s Fabian Viveros León Talks QC, Mexico, & Covid-19

A third generation coffee worker, Red Fox’s Fabian Viveros León learned about coffee cultivation, quality control, and trading from his father in Huila, Colombia, starting at a young age. Currently living in Oaxaca, he manages quality control for Red Fox Sourcing Company, running the lab, overseeing dry mill operations, and spending time in the field managing producer relationships. He also plays a key QC role in Peru and Colombia during sampling and shipping seasons. In fact, he’s in Colombia right now doing just that. 

We talked with Fabian about growing up in coffee, what it’s like working in quality control, the challenges he saw as Covid-19 ramped up in Mexico this year, and what he sees for the future. Since Fabian speaks Spanish, this interview has been translated into English by Red Fox’s Carina Barreda. 

RJ Joseph: Can you tell us a little bit about growing up with coffee?

Fabian Viveros León: My experience starts at home. I am the third generation that has been dedicated to working with coffee in Colombia. Growing up with coffee gave me the opportunity to learn all about coffee trees, processing, and trading. In 2014, I started learning about cup quality control, purchasing, parchment storage logistics, and in 2016 I began working formally as a purchasing and logistics analyst.

RJ: How did you end up working in quality control?

Fabian: A question was generated within me. I wanted to know how the process of evaluating coffee worked. So, I came across coffee cupping and its derivatives. From there I began to enter this new world of coffee, which I did not know previously, and that now has become my life and passion.

RJ: What are some of the biggest challenges you’ve seen for producers regarding quality in Mexico?

Fabian: The biggest challenge that I encountered within Mexico was the lack of knowledge about the crop and how to work it properly. Also, gaining the trust of people who have been scammed previously. Another challenge has been dealing with the non-acceptance of new knowledge and practices of processing coffee to improve their product. Coffee is not a primary economy for the Mexican smallholders, so there is a lack of interest in developing new and better practices.

RJ: If coffee isn’t the primary economy of the producers we work with in Mexico, what is? What is their incentive to produce quality coffee?

Fabian: According to what I have observed, the primary livelihood for Mexican smallholders in the coffee-growing regions is divided between agricultural activities (planting corn, beans, vegetables, among others), sale of typical clothing from the region, and wooden crafts. The incentive to produce quality coffee is to diversify income sources since there is national and international market demand. Producers have seen a possibility to improve their livelihood with this crop.

RJ: What were some of the biggest successes over the past season?

Fabian: We strengthened business relationships with small producers. We have been able to form trusting relationships and provide producers with a sense of security that we want to work with them in the next harvests. Another success is that we were able to have a broader presence within the area and create a meeting point in Oaxaca for small producers. 

RJ: How does it feel to have the job of assessing quality and, in certain cases, telling producers if their coffee passed or failed as someone who’s been in a multi-generational coffee-growing family?

Fabian: It is a very big responsibility because you have to give the producers security and confidence to speak directly and explain the reasons for the approval or rejection of their product. In addition, you have to try to motivate them to keep improving and keep working with us to follow up on their successes and failures. The important thing is to speak to them from personal experience, to relate better, and to have compassion.

RJ: What do you think are the biggest challenges for you working in QC in specialty coffee?

Fabian: The biggest challenges are communicating the client’s needs, changing the way producers think and their understanding of how to manage their crop, and also all the follow-up for the additional work we’re doing. So basically, it’s communicating that knowledge, communicating that need, and starting to do the work. It’s a challenge for all producers in any part of the world.

It’s a chain, and when you get the producer to understand the whole process, the follow-through, the feedback, seeing the final result is really gratifying for me as the person doing the quality control, and also for the producer because they understand that it’s not just producing coffee, it’s putting your heart into it, investing passion—that is the most important for producing good coffee.

RJ: Which specific challenges do you think the pandemic will highlight for producers?

Fabian: To be able to transport their products to sell, that implies that they could expose their safety in order to be able to make an income and survive. Most producers are already at high risk for this disease, they are elderly people (average 60, 80 years of age). This will be a challenge for them and the leaders in their communities to establish control of entry and exit of people and limit exposure.

RJ: What was it like finishing the last season with the pandemic beginning to shut things down? What has it been like in Oaxaca since then?

Fabian: It was a tense moment for everyone. We had to start communicating with the producers so they could transport their coffee from their communities as quickly as possible. We had to find solutions and facilitate their transportation to the drying mill and thus avoid production delays, shipments, and other difficulties.

Oaxaca since then has been coupled with Covid-19 control measures. For a month, only essential services were open, and over time other types of non-essential services were available, with the necessary control measurements to adapt to the “new normal.” Now, there are already 75% to 85% of commercial activities operating for the national and foreign populations. 

RJ: One last question: are you feeling optimistic about next year in Mexico and the seasons that are happening now in Peru and Colombia?

Fabian: Yes! For next year we expect to see even higher coffee production, strengthen our commercial relationships, and look for new strategies to find new farmers. This year was very difficult for coffee farmers, and they will need the next seasons to overcome this 2020 crisis. I feel very optimistic about what we’ll see in the 2021 harvest.

 

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

 

Ernesto Perez & Coatepec Community Do Things Differently

 

One thing we love about growing our work in Mexico is how different the subregions are, whole origins unto themselves. We’re excited to bring some new offerings from Veracruz, an origin unique in several ways. First, a major distinction from much of Latin America: instead of buying and selling parchment, Veracruz producers buy and sell cherry, processing centrally at mills. Ernesto Perez’s Finca Fatima is both a farm and a mill, and all three of the Veracruz lots we bought this year were processed there, including of course Ernesto’s own.

 

Producing in tiny subregion Coatepec, Ernesto’s coffee, and that of his community, is special. Coatepec has some of the highest latitude coffee on the globe: just like high elevations yield slow cherry maturation due to cooler weather, Coatepec pushes the northern edge of the tropics, where cooler, slightly wetter weather and long, cool nights during the harvest slow down cherry ripening, creating an incredible density of flavor. Combined with varieties like Typica, Garnica, Marsellesa, and Caturra and meticulous processing, these coffees have notes of Meyer lemon, apricot, lush red berry, cherry, and lemongrass. 

 

A younger farmer taking over the family farm and mill, Ernesto wants to help move his community production into high quality specialty, tweak processing, focus on microlots, and help those around him make a little more money on their work. Ernesto’s coffee placed super high in 2018 and 2019 COE and was used by the 2019 Mexico barista champion. This year, he decided to expand his own wet mill into APG Coffee, a micro wet mill that other smaller farmers in Coatepec could use. APG also offers agronomic consulting for other farmers to help rebuild soils, increase quality, and overall help the community of Coatepec do their best work and make as much money as possible. This year, Ernesto’s coffee brings malic tartness of green apple, sweet spice, and rich honey. 

 

The other producers we’re featuring from Coatepec are Enrique Toss and Jose Cienfuegos. Enrique’s coffees have a super saturated dry fruit sweetness like raisin and date as well as substantial sugar browning like chocolate, candied pecan, and heavy caramel. Jose’s bring bright, juicy complexity like raspberry jam, dried strawberry, lime zest, and amber honey.

 

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

Pluma de Oaxaca: An Origin Reborn

The deeper we get into the world of Mexican coffee, the more excited we get, and those of you who have tasted the coffees or met some of our producing partners know why. Right now, we’re looking at Pluma, a subregion of Oaxaca that brings with it an incredible history along with incredible coffees. Boasting the singular Pluma Hidalgo variety, an offshoot of Typica, at elevations as high as 2200 masl, Pluma coffees bring with them a wide range of flavors: distinct dried fruit notes like raisin and prune, saturated sweetness like brown sugar, richness like drinking chocolate, complex malic acidity like green apples, and even florals like amber honey and peach blossom. Even though many of these coffees are still on the water, they’re going fast—if you’re interested in picking some up, get in touch now.

Over the last few decades, Pluma’s coffee production has evolved dramatically, shifting from the hands of large estates into the hands of local smallholder farmers. Nowadays, Pluma is almost exclusively the province of smallholders with farms averaging just 1-2 hectares, but going back 80 to 100 years, the coffee production landscape looked completely different. Huge, lower-middle elevation coffee plantations ruled the territory, buying the higher-grown smallholder coffees and blending them into their own bulk, undifferentiated despite their superior quality. In the late 80s and early 90s, Pluma gained a widespread reputation for producing quality coffee. However, a combination of factors including low market pricing and coffee leaf rust (known as Roya), saw estate holders abandoning their farms and moving on to more lucrative ventures.

Once the estates were decimated, local smallholder farmers continued farming—mostly out of necessity, though their operations were no more fiscally sound than the estates had been. Pluma’s smallholders struggled to make enough to thrive and reinvest in their farms, and many have lived on the brink of giving up and following in the footsteps of the estate holders before them. Without access to a differentiated market where customers are willing to pay viable prices, there hasn’t always been a real value proposition for Pluma’s producers to keep growing coffee.

Over the last couple years, we’ve seen this start to shift. Being able to introduce these coffees to a group of buyers willing and ready to purchase them at a viable price has started to build trust in this region and reinvigorate local farmers, who are beginning to understand that their coffee is worth more than they’ve always been told. They are ready to be able to dictate their own futures and gain access to new pathways to finance and reinvest in their own success.

We could not be more excited about the future of Pluma. This year, we’ve more than doubled the amount of coffee we’re bringing in from Oaxaca, and still, almost all of it was sold out before it even made it to the States. If you’re interested in putting these coffees on your menu, get in touch now, because they’re going fast.