Increasingly, we have received requests to provide transaction certificates for each organic coffee purchased from us.  Generally this occurs as the roaster is being inspected for organic certification, and usually after some kind of prompting from the organic inspector.  We understand each of your concerns regarding the desire to make that process go smoothly as we receive annual organic inspections of our transactions and our facilities as well.

Current USDA/NOP regulations (i.e. those laws and rules that govern the lawful status of organic products in the United States) do not require transaction certificates for each organic coffee.  Although some other importers routinely send transaction certificates out, this is an unnecessary expense passed which I would imagine is accounted for somewhere...  The USDA/NOP regulations only require that you provide to your inspector valid certification proving the company from which you purchased your organic product is certified organic and meets the USDA/NOP standards and requirements.  In other words, Vournas Coffee Trading's organic certificate, issued by CCOF, is sufficient to meet your inspection and recordkeeping needs as proscribed by the United States National Organic Program regulations.  While this might be news to you, it should not be news to your organic inspector.  Keep in mind, transaction certificates are an additional form of revenue for certifying agencies such as QAI and OCIA - that is why they ask for them.

Bottom line: I will gladly provide assistance to you and/or your inspector should either desire assistance.  I have spent many hours researching these specific issues with federal agencies, local and state organic inspection agencies and state health departments.  Our position is supported in writing from our USDA/NOP approved inspection agency, CCOF.  If you still wish to have transaction certificates despite the above info, we can gladly obtain these for you.  There is a fee associated with these certificates - please call for further information.

While organic certification issues may seem as clear as an espresso, please rest assured that all of us at Vournas Coffee Trading stand behind you and will work with you and your inspection agency to ensure your inspection proceeds without difficulty or delay.  Please do not hesitate to call our office and ask for me should you or your inspector wish to discuss this issue further. 

As of today, the C market closed for July 08 at 136.35.  Still above where we have been resting comfortably for the past years, but down a bit from the heights of the past month or two.  All speculation moves - nothing firm due to physical conditions which might affect coffee pricing.  Some holdouts amongst growers/exporters for outright price contracts on deliveries, but everyone is rolling with the flow. 

Due to current increased prices for oil, expect higher delivery costs, both ocean freight (which has doubled in less than 2 years) and commercial trucking freight fuel surcharges for movement from our warehouse to your shop. 

We are entering the Brazil frost season, although much of the coffee is currently grown North of where it could be damaged.  There is always, especially with our whacky weather these days, the possibility of a freak, damaging cold event.  One thing you can rest certain of: Anything close will result in the Brazilians getting the word out to cause or, shall I say help create, price fluctuations in their favor... 

This will be an interesting next several months/years as the investment funds have again become entrenched in commodities.  As always, we will keep you informed of changes in the market as they arise.  Happy Roasting.

In late July 2007, Andrew and Mike made a trip to New York City for business.  While there, we were able to visit the coffee trading floor at the New York Mercantile Exchange in lower Manhattan.  All coffee contracts traded at the outcry are traded here.  It was the second visit to the trading floor for Andrew, and the first for Mike.  Andrew had visited the NY "Merc," as it is called, when it was housed at the base of the World Trade Center prior to 9/11.  Destroyed by the collapse of the twin towers, all trading functions were moved off-site until this building was able to house the trading operations.  It was quite the scene to watch as contracts (such as those we trade) were executed through shouts, screams and hand gestures.  Talking with several floor traders reveals that the new electronic trading (ICE) may prove the death of outcry trading.  Both Andrew and I sincerely hope that is not the case as the contract traders add the much-needed human element to the trading system.   

POST SCRIPT:  As of several months ago, this contract outcry trading platform has been closed and replaced with the ICE electronic trading platform.   Another change that is sold as progress... We sincerely hope that all the traders land on their feet.  They are an intelligent, hard-working bunch.  We wish them the best.

Just exactly two weeks ago I published on this site a coffee market update.  In that update (which remains available on this site) I noted that the C market price was 1.44, and likely to move up.  Well, it didn't take long.  For those of you busy with other things, the C market has moved up considerably, and all indications point to higher prices and volatility.  For comparison to two weeks ago, today's C closed at 1.60.  Remember, this is the base C price without differentials, etc. 

Here is some news that may explain it for you.  Published today by the Dow Jones Newswires was an article indicating index funds and hedge funds have amassed and are holding a record 31% of the world's coffee supply.  Go ahead and read that sentence again.  To compare that and get a basis for what it means consider that in 2007, these funds held 15% of the world's supply of coffee, and in 2004, they held 5%.

These funds (paper and money investors with no physical need for green coffee) are LONG on over 4 BILLION pounds of green coffee!  By "long", I mean they are hedging their bets that the market will go UP.  Total global coffee production per year is approximately 15 billion pounds.  And, as if to defy logic, differentials are also moving up despite the C market moves up.

For many coffee roasters, this is the first time a significant move upwards has happened since they started in the business.  Quite a few started off in the "well under a dollar" market and these price increases are difficult to comprehend.  Just like we all used to pay .79 cents a gallon for gas, I believe those days are over.  Coffee is the second largest traded commodity in the WORLD and it is not immune to gyrations and volatility. 

Our advice:   Tread carefully at this time.  Be poised to act quickly.  Don't abandon your plan.  Be focused.  Know your needs.  Most importantly, remember that you need green coffee to roast.  By holding off ordering coffee you run the risk of then receiving a delayed shipment, and if you were more low than usual on inventory, you could be in for a big headache - much bigger than a few cents per pound is worth! 

As always, should you have any questions at this time, please feel free to call us.

This bi-annual article about the coffee commodity ("C") market has, at customer request, become a fixture on our website.  This fourth installment brings some interesting developments, a few new theories and yet more factors that could affect the stability of prices and the availability of fine specialty green coffee in the coming year.  These are our best estimations of the impact that physical and trade factors may have on the C market and related coffee issues - there is no guarantee of outcome implied by this article - just our best professional opinion, free for you to consider or disregard. 

I must start off by saying three critical words which comprise one concept that you must always keep in mind while thinking about coffee buying: supply and demand. 

As we have seen in the last six months, there has been no change in the market's potential for volatility, and there is no foreseeable change in that existing potential.   Commodity investment funds will likely continue to enter and exit the coffee market as they strike their investment return target.  This is one contributing factor to the market's volatility.  The continued influx into commodities of investment fund monies has provided an increased basis for volatility.  Commodity fund investment will continue to assert its presence in the C market as these investors attempt to repeat past profit-making investments.  Expect similar volatility levels this year. 

There is always a concern that weather in Brazil, either freezing temperatures and/or shortfalls in precipitation and moisture, can arise in our Spring and Summer.  These events should be anticipated and considered by the astute coffee buyer, and a plan of action considered beforehand.  Remember, the last frost of 1994 and the drought of 1996/97 caused the C market to rise to $2.64 and $3.18, respectively. These "above normal" prices were sustained for 19 months and 15 months, respectively!  I am not making these numbers up...and we all know that weather events appear to be more and more extreme...

Robusta coffee has continued its upward pressure, hitting 9 1/2 year highs just two weeks ago.  For the past 7+ years, robusta prices have risen steadily.  Prices are pushing close enough to low quality C arabica prices as to make it a close call whether to buy arabica instead of robusta.  This has the potential to tighten the supply of arabicas should buyers pass on buying robusta and choose arabicas instead (thus creating higher demand for arabicas and push the price up). 

In the last update I wrote about China and Eastern Europe's increasing appetite for specialty coffee.  To my eyes nothing has changed regarding that subject.  You hear it all the time how those countries are increasingly "Westernizing" and looking to replicate the middle-class lifestyles of the Western world.  What has changed in coffee growing regions to meet that new demand?  By our view, not much.  That means more pressure on a finite amount of coffee and higher prices.  

Six months later, and still unresolved, is the USDA-NOP (U.S. Dept of Agriculture-National Organic Program) issue regarding the interpretation of rules applicable to the actual inspection and certification of organic products.  It has created HUGE concerns for us (and other importers, roasters and consumers as well).  About 9 months ago, the USDA-NOP, which issues regulations regarding the use of "organic" certification in products imported and sold as "organic" in the USA, issued an interpretation that required all coffee growers (co-op or estate) to be inspected annually for compliance with USDA organic rules and regulations.  Many coffees are produced via cooperatives - i.e., groups of farmers who commingle their coffee crop with that of others for processing, sale and export.  So, for example, while there may be 500 growers in a co-op, previous USDA-NOP regulations allowed approximately 20% (or 100) of those co-op farmers to be physically inspected on an annual basis for compliance in order to renew the co-op's organic certification.  Now, with this new rule interpretation, all co-op members must be inspected annually!   This has huge ramifications:  First, increased costs for farmers.  As we all know, every inspection requires money.  Costs for the farm-based organic inspections include travel, time, meals, transportation and expenses for the inspectors in addition to the "inspection charge".  Second, matters of logistics.  Many, if not most, farms exist in remote and not easily accessible locations.  Often times, these farms are reachable only on foot, and boundaries, while known to the area residents and workers, are not clearly delineated.  The longer it takes to access and inspect the farms, the more expensive the process of obtaining organic certification becomes for already struggling farmers.  Third, time away from other farming duties.  Farmers cannot simply let inspectors fend for themselves in such remote regions.  They must take time from their farming duties to assist inspectors and provide them with the access necessary to inspect their farms.  Fourth, a difficult time understanding and implementing the ever-changing American organic rules.  These regulations are thicker than most books.  The fact that they keep changing (with no apparent relation to how they affect those who must implement them) doesn't help farmers who have limited access to education, difficult, unreliable or non-existent communications systems, and limited resources (see "First" above).  So, will we have a monumental crisis in organic coffee in the coming years?  We don't know because the USDA/NOP has pushed back meetings and further rulings on this indefinitely.  While organics have always carried a substantial premium, we may be looking back longingly at current organic prices, if you can believe that.

Another segment of specialty coffee is Fair Trade Certified.  While we have heard roaster rumblings of growing dissatisfaction with Fair Trade and the manner in which reporting is handled as well as the cost to roasters in relation to the return of services from Fair Trade staff and the use of certification premiums (money) by FTC staff, sales of this certification continue to grow.  Continued issues arise regarding co-op certification and availablity, as well as pockets of concern regarding quality.  I will tell you that we will not carry any coffee unless we consider it to be a fine specialty coffee, regardless of certifications...  It will be revealing to see how well received the price differential paid for Fair Trade Certified coffees is in an up market like the one we are seeing as I write this!  The floor price for Fair Trade Certified coffees also was raised several months ago, by a sum of 10 to 15 cents. One must wonder, with the base price for an organic now sitting firmly at $1.51 p/pd, whether the initial desire to assist the farmers financially has been met?  Remember, when Fair Trade was launched the C market price was between 55 to 65 cents per pound, and the belief was the farmers needed at least $1.00 to $1.10 p/pd to be profitable, reinvest in their farms and grow more coffee.  Might a floor price under $1.25, plus a differential for quality, be a more competitive and market-linked answer to farmer well-being that would reward good farmers for good coffee?

Every year, Reuters polls coffee traders from large, commercial coffee groups around the world to get an outlook on the C-market.  The most recent poll on Jan. 23, 2008, was mixed and wide-ranging.  The forecasts for where the C market would end up by the end of March 2008 ranged from a low of 1.18, a median of 1.35, to a high of 1.75.  The same traders forecast a low of 1.05, a median of 1.30, and a high of 2.30 for the end of 2008.  Most all traders expressed the opinion that the ultimate size of the Brazil crop this year will be the main price guiding factor, with a larger crop expected to depress prices on the C.   Investment fund positions and investment in the C market continue to strengthen.  With this comes added volatility, and with their overwhelmingly long position (meaning they expect the C market to rise) of over 65,000 lots, I fully expect the market to move upwards.  Recent technical trading information also suggests that the C may rise to a 1.50 before beginning a possible move downward. 

CRYSTAL BALL:  I firmly believe the days of the "under a dollar" market are over, and Vournas Coffee Trading is hopeful that we are correct on this for the sake of all the farmers in specialty coffee.  Lower prices create short-term deals for roasters but a long term crisis for production, and inevitably higher costs in the future from short supply.  Put another way: the lower the price for coffee, the less farmers make.  The less farmers make, the more likely they will pull their trees and plant a more viable and profitable cash crop.  The more trees get pulled, the less coffee is available and the more coffee will cost.  So, your initial deal turns pretty sour in time...

There is a continuation of fixed (rather than differential) priced offers out of origin.  There is also a growing reluctance by producers to enter into long term contracts for delivery.  In these instances the cost of coffee becomes more fluid with each delivery.  This adds volatility.  It goes without saying, coffee roasters need coffee.  Every year there are an increasing number of roasters looking for specialty coffee beans in a finite and over-stressed world of available fine specialty coffee beans.  I would continue to advise that in the volatile world of coffee commodity trading you should plan ahead to determine your bean needs.  If you are able to book out/contract your needs, you should do so.  Locking in to a fixed price, or in some cases a fixed differential, ensures a smooth supply at palatable and profitable prices for you.  As of this writing, the current NYBOT "C" Market future for a March 2008 coffee contract is approximately 1.44* per pound. 

Please feel free to call or email any of us to discuss the market and how it could impact your needs.  These are our best  professional estimates of how we see the physical market in the days, weeks and months ahead...

Happy Roasting!

* Remember, the "C" market price is before the addition of differentials for quality which affect every specialty arabica coffee, as well as additional price premiums added for various certifications (Fair Trade, Organic, Rainforest Alliance, etc.) which may or may not apply.

Most of you are familiar with the Cup of Excellence.  I just returned from participating on the International Jury for the Nicaragua CoE, held in Ocotal, Nicaragua.  What a great experience!  Not only was the opportunity to cup fabulous Nicaraguan coffees a unique and concentrated one, but meeting the participating farmers and visiting many of their farms in our "off" time truly gave full perspective to the Nicaraguan coffee experience.  

I am reminded that only by visting source countries can one capture the true uniqueness of our industry.  In the US we play a huge role in the greater world of coffee.  Every decision we make, every step we take to request increased quality, and every bag we ultimately buy makes an impact in the lives and finances of the farmers and their families.   The CoE is one of the best programs going in specialty coffee that rewards growers for superior quality.   It is enlightening to sit and talk with growers, in this case from Nicaragua, as they ask real and pointed questions regarding the coffee market in the United States. 

Is CoE perfect?  I think they have moved in the market in the right direction by getting a premium price in exchange for premium coffee.  In a global marketplace, there is increasing pressure to deliver products and services for an increasingly reduced price.  We simply cannot sustain this direction in the coffee world.  Especially in a world of increasing demand for quality coffee.  Farmers will plant something more lucrative and pull their coffee trees.  This will leave us in a crisis beyond any seen in the coffee market before.  Therefore, programs which reward for quality - not just give people money to reduce guilt - are the sustainable ones.  The coffee world truly wins when farmers get paid more for a superior product, as it will move more farmers into such production and reward them financially for their efforts.

We look forward to the CoE Nicaragua auction on June 6, 2007, and hope to be the highest bidder on several lots we are interested in offering to our customers by the bag.  We think there is real, sustainable quality in this program and encourage you to learn more about it at www.cupofexcellence.org.  

Vournas Coffee Trading proudly displays photos, coffee descriptions, coffee information, newsworthy stories and articles, and other coffee tidbits and stuff on its website.  We place these items on our website to assist our customers and other interested parties in learning about the coffee world and the coffees we carry.  We gladly  share our information and will allow it to be used in furtherance of the trade.  In fact, many of the articles are meant to assist our customers in developing their own marketing information.  All we ask in return is advance notice of its use so we don't get surprised....

Andrew and I sincerely thank you for all your support on this.

     This feels very odd and not at all comfortable for me to write this, but I am very excited; honored in fact.

     In mid-September of this year the Pacific Coast Coffee Association (PCCA) held its 75th Anniversary celebration and convention at The Lodge at Pebble Beach, and over 180 people from the wide world of coffee were in attendance.  It was a fantastic convention and a fitting tribute to a wonderful coffee association.  As we all sat in the banquet room on the final night, Doug Welsh, President of the PCCA and Chief Buyer for Peet's Coffee and Tea, prepared to announce the winner of the PCCA's 6th Annual Pete McLaughlin Cupping Competition.  This competition, held annually in the Spring, honors the great contributions made by the late Pete McLaughlin to the specialty coffee industry and to the PCCA.  He was quite the energetic contributor to the PCCA and to all things coffee.  Although I unfortunately never had the pleasure of meeting Pete as his passing predates my entry into coffee, everyone I know who met or worked with him speaks very honorably of him as a person and as a contributor to specialty coffee.  The winner of this competition is held a secret until the annual convention.

     I competed in three of these annual cupping competitions, including the recent 2006 event which involved 10 different Ethiopian coffees.  Well, to cut to the chase, as I was sitting there at dinner I was shocked to hear Doug announce "Michael Vournas" as the winner!  To be honest, I thought I was hearing things.  I stood up and walked to accept the award in front of a house full of coffee professionals - people whom I respect immensely and who continue, via the PCCA and through their sincere love of specialty coffee, to teach me about coffee every day.  To say I am honored to be awarded the PCCA Cupper of the Year is the understatement of the year. 

     I hope that many of you can attend future PCCA events, including the annual cupping competition.  The people who comprise the PCCA are one of the greatest groups of coffee professionals on the planet, and I owe many of them sincere thanks for teaching me.  I also owe a huge "thank you" to my little brother and business partner, Andrew, who has taught me firsthand how to cup coffees.  Hanging in our cupping room is the beautiful plaque I received from the PCCA.  It will remind me every day of how important and valued cupping is in our industry, keep me focused on the lifelong process of cupping skill development, and reinforce my belief that the contributions each one of us makes to others in coffee furthers the uniqueness of our trade.