Coffee Growing At A Glance

There are four varieties of coffee – Arabica, Liberica (or Barako), Excelsa, and Robusta. Robusta is the primary variety used in instant coffee (~70% cheaper than Arabica), though other varieties are also blended in, in some cases.

Coffee CherriesCoffee cherries are produced 8-9 months after the tree flowers. The cherries are picked (strip picked or selectively picked) and then processed. All outer layers (skin, pulp, parchment or hull, etc.) are removed, leaving only the seed (or bean). This is then roasted and either ground before packing or packaged as roasted beans.

Coffee is traded globally (ticker KC or EKC for electronic trading), and in its green bean state. A notice of certification is required for contracts to ensure the quality or grade of the beans. Pricing is typically based on USD cents per pound with contract sizes of 37,500 pounds1. Coffee is the second largest traded commodity globally, next to crude oil.2

The supply chain involves growers (producers), traders, exporters & importers, roasters, and retailers before reaching the consumer. Middlemen purchase direct from small farmers, while large growers/plantations often export their harvests or have direct arrangements for processing (roasting, packaging, etc.) sales and distribution. Green coffee beans are purchased by importers from exporters or large growers/plantations. Importers or traders may hold inventory, which is sold gradually through smaller orders. Roasters typically have the highest margins in the supply chain.

Within the chain, BCC is a coffee grower, producing green coffee beans. We will sell directly to Rocky Mountain Arabica Coffee Company (RMACC), thereby cutting out the middlemen. RMACC will then roast, package, and distribute to the consumer.

 

1Source: http://www.investopedia.com/university/commodities/commodities2.asp
Latest pricing: multiple sources provided for comparison – http://www.indexmundi.com/commodities/?commodity=other-mild-arabicas-coffee, http://www.nasdaq.com/markets/coffee.aspx

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