The main reality, I think, is why do these countries get compared in pricing to Brazil and Vietnam or other countries that have different realities in terms of the cost of production? In some instances, I think you could say the supply demand works in some levels for Brazil that dominate some market in terms of the volume of their getting out there so that, OK, when they have a low production, the C price goes up so that they can compensate for that. But the years that Honduras has low production, it was not at all tied to what's happening in C price. So it just doesn't work.
And there should be more of a conversation in relationship in producers who are saying, OK, what's going on this year? What are the costs, having producers drive pricing? And that has never really developed in that way. If you're a roaster, you've probably felt it.
It's getting harder and harder to find great quality coffee at volumes and prices that still make sense. One origin that's often been overlooked in the search is Honduras. For years, it's been treated as a conventional origin, even though there are producers quietly growing exceptional coffees that never make it into the specialty conversation. The Honduran Coffee Alliance is a social enterprise with a simple mission.
Connect those producers and buyers in a fair, sustainable, and commercially viable way. They work with organized producer groups across regions like El Paraiso, La Paz, Olancho, and Comoyagua, helping them evaluate quality, tell their farm stories, and move coffees that belong on specialty menus, not buried in anonymous blends. What that looks like for roasters is previously untapped lots that heat your flavor and quality targets, a minimum of just four bags to get started, transparency reports so everyone can see where every cent of the purchase goes, and turning that first buy into a long term trade relationship, not just a one off. If the idea of forming a long term relationship with producers in Honduras is of interest to you, reach out to the Honduran Coffee Alliance so that they can work to find you a fit for your 2026 menu.
Samples are gonna be ready soon. You'll find Sean Warner's WhatsApp and email in the show notes. Send him a message and tell him you heard about the Honduran Coffee Alliance here, and start exploring what these overlooked Honduran coffees could do for your menu today. Check the show notes for links.
Welcome to the Daily Coffee Pro by Map of Forward Friends. I'm your host Lee Safar, and this is episode two of a five part series with Sean Warner from the Honduran Coffee Alliance. We are talking about the way that coffee is priced. It had the way it's priced now, and the way it's gonna be priced into the future.
And in this episode, we're going to explore the complicated nature of that pricing. You would think that given that this is a highly traded commodity, and a highly consumed consumer product, that we would have our shit together as an industry about how to trade this thing right, Sean. Sorry, it's complicated. So for those who don't understand why it's complicated, help them understand what's complicated about it.
We did start touching on in the last episode, but let's go deeper. Yeah, it's complicated, and like we kind of were saying, the reality is that the reality of a brazil over senders are so different. And so, trying to unify that price and the price confrontations doesn't make sense, but yeah, we've tried to make that make sense. And I think that's one reason.
I think the spot model we touched on, the risk that often assumed by exports is by people that don't engage in relationship and aren't able to commit to the time in forecast in a big portion of it. I think there's also just a reality that we've got ourselves into using the C price, and it's hard to get out of it when that's become an expectation, and that's become the main reference price. And what I mean by that, my biggest, one of my biggest questions I've been asking is how do we leave depending on the C price? How do we do that?
And how do we stop referencing that so much? And the biggest question I've asked, this past year is complicated more in some ways than that. Okay, if I want to convince Rosh Hash producer to say, okay, this is a good price, let's lean on this and do this, but then producers have looked at what's happened to the market last year and this past year and said they would not want to enter into that type of commitment of fixed price because it's better price to do it because what happens if the C price is not enough? And I said, well, why are we leveraging the C price?
But the reality of how the rest of coffee is priced right now? I feel like our industry has been going through so much volatility over the past few decades, either the price has been really low or the price has been really high historically, right? And so now they don't want to commit to anything. They don't want to commit to something that's going to create stability.
It's kind of like the gamblers curse, right? Well, what if I could get more? It's like, okay, you can either live the gamblers highs and lows or you can live the calm life or you'll be able to sustainable business model with partners like what you guys are doing, right? You're looking to build long-term relationships where people understand the rules of engagement.
They understand the pricing structures. Now that's not as exciting and there's not a lot of wins that come from that if the price goes up and there's no real opportunity for manipulation there. But you have to choose, I guess. How do you want to participate?
Because with those really high highs, come a longer period of really low lows. Yeah, that's what we've seen over the last 60 years. There's been, you know, most years are just not good pricing producers. They're relatively good pricing for roasters.
There's been eight or so years in there. That event is awful pricing, where those lows are really long. And then there's usually typically a one-year jump back when there's Roy on the hit or Frost before. And so there's been like a few years of high prices that are good for producers.
And this year is even stranger than any other year. But- 2025, he means folks for reference. We are recording this on the 18th of December. Yes, we know you're listening to this in January, but just for reference, go ahead, John.
Yeah, I'll still be healing from 2025 for a little while. I think we will be till 2027 bros. Yeah. Yeah, it was complicated year dealing with what happened.
I'm so exhausted. And I don't even do what you guys do. I just have a podcast and do a ton of consulting work. But gosh, I'm exhausted.
Yeah, those conversations come into the last harvest and about what is happening with pricing, how we manage it, or hard, yeah. Well, you know, you raised something really important there. The uncertainty is a part of the complication. It's a really major variable, right?
Yeah, I wish sometimes we could just restart and have it. But the reality of that, there's a extremely volatile state's price, and the uncertainty of that means that there are little huge channels there, and it's hard to just restart and find it a way, because the base reality that everyone's lived with and the producers know is a extremely volatile sea price. Yeah. And people at home might be thinking, like, well, then why does this structure exist?
And I want to be really clear about something. The sea market works very well for corporates. And the reason it works really well for corporates is because in the futures markets are built tools that allow them to use the money in the market to hedge. So hedging is a kind of insurance, right?
So they can use this futures market to buy contracts that allow them, that even if they lose money on the coffee that they're actually buying, they can offset any losses with contracts and, well, they call options on this market. But again, while those tools are available to people who play the futures markets and trade in those markets, the average person cannot afford to gain access to that. So that monstrosity, that is the sea market, works really well for the huge high volume folks. With the majority of the people in the world and not those huge folks.
Yeah, and I think one of the biggest questions running in my mind recently is, I feel like there's kind of two paths to improve how we, in this special copy industries, especially in this especially Blender category operate. And there's one that I think I've really learned a lot, listen to the carbon yarners and some of those, the tools that are available. We've started to use some of these tools that use the futures market for certain roasters. And so there's one path is, how do we as industry learn to use those tools better?
On the one hand, I love that idea. I think I want to lean into some of that. But I also am now using the tool that I think has led to. Come on, stop.
Yeah. Yeah. It's like hating gambling, but you're so desperate to make things work that you'll go and use some of these new platforms that allow you to bet. What do you, I don't know what they're poly, polycast or whatever they are.
It's crazy. Anyway, go ahead. Yeah, no, I'm not familiar with that. Yeah, not familiar with that.
But yeah, there's that path. And then there's also the path that we just can be ditched to the sea price and find a better way or more sensible way to understand price and have these conversations. And yet I don't know which path is correct. And I also don't fully know how to follow that second path because of the complications that can bring.
And a part of that complication, a deeper part of that complication is the fact that, as you alluded to in the last episode, every origin has its own ecosystem with the way that it does trade. And so many different elements of that are different. Can you talk a little bit more about the complexity of each, of why that plays into pricing and why it makes things so difficult? Yeah, I mean, Honduras is definitely a very much the reality I know.
I can tell you one more context of Honduras. Honduras, I think people don't even realize how large are pretty sure. I think it's very between fifth and sixth largest producer coffee, a Arabic, at least. And it has largely been stuck in the conventional world, for even though they don't necessarily completely understand.
But I think other countries just became more recognized for quality, Guatemalan, extracuristrica. And so it broke, just kind of settled into that. So it's still better because they have more recognized. And Honduras often got settled into more the conventional or the blender type of coffees.
But it is a huge portion of the economy of Honduras. And anecdote, I will often talk to people that people that were in my community that weren't even where I lived, had nothing to do with coffee that will reflect back on. Back in the 80s, when the coffee prices were relatively good for them when there were some times that, and the economy was booming at the time. In Honduras, and the poverty and the challenges that we see now in Honduras are, I wouldn't say, fully tied to coffee.
But it's also like you've seen how they also have walks together in that as the price for coffee that slowed down to producers has got more and more or there's been more and more challenges in Honduras. There's plenty of other reasons why there's poverty and challenges in political corruption and other things. But I do think it's interesting to see that reality and how people reflect on the prosperity that coffee did bring many years ago in Honduras, even in the conventional way of operating with that. But the pricing hasn't kept up.
Like, as a lot of people have said on these podcasts before, you know, people who are like fifth and sixth generation farmers now, the first, second and third generation were passing down wealth. The fourth, fifth and sixth generation have passed down debt. And that's why I've heard over and over against people that grew wealth and grew in coffee and largely conventional practices. And because the price was able at that time with the cost of production and cost living was a prosperous price.
But now, as you said, like the last several generations, it's very much been passing on debt. That is a huge challenge in perpetuating Honduras. I think that's one of the things that, no, it's unique in Honduras, but definitely one of the main challenges is the massive amount of debt and costs of debt in Honduras. To go back to your question was, okay, what is unique about Honduras or what is the difference is?
The main reality, I think, is why do these countries get compared in pricing to Brazil and Vietnam or other countries that have different realities in terms of the cost of production? In some instances, I think you could say, like the supply demand works in some levels for Brazil, that dominates the market in terms of the volume that they're getting out there. So that, okay, when they have a low production, the seed price goes up so that they can compensate for that. But the years that Honduras has low production, it's not at all tied to what's happening in seed price.
So it just doesn't work. And there should be more of a conversation in relationship in producers who are saying, what's going on this year? What do the costs have in producers drive pricing? And that has never really developed in that way.
And there is no one way to do trade in coffee. Like that's another part that adds to the complication of it. Like some coffee, when it's delivered through Seamarket contracts, quality has nothing to do with it. That's another part of the conversation is quality is a complicated element that determines the price.
But when you're sending coffee directly to the Seamarket, the person who's gonna be on the receiving end of that may be getting who knows what from wherever, right? And then the more you go into adding different elements of it, some people wanna know that it's from a particular region and in a particular origin with particular quality, cup quality, particular production quality, all of these things are adding layers of complication. And then you look at the logistics of a different country and from that country to America is different from that country to Australia. And that changes the price again.
Go on, you're gonna start. I think the fascinating thing that's really interesting is as you were saying, the way coffee is traded in terms of quality, in terms of expectations from roasters, in terms of graceability or what's seen from the consumer side, so many differences. Yeah, really how it's traded, how it's priced, often doesn't change all that much. Maybe there's an extra plus 10 differential for this coffee, but it's still completely tracked by the sea price in the huge, huge majority of cases.
So it's a strange dynamic that there's so many differences of how this, what is this coffee, which would mean it should be a commodity. It might even mean that everything is the same. Yeah, that's just not true between origin, between quality levels, showing how much information is shared. Those are differentiators, yet we still use in the huge majority of cases, the sea price as the base to the price of those copies.
You know, as you're speaking, I'm thinking about the fact that the way that we price coffee in the vast majority of cases, really doesn't show any value for the product itself, except in a very small percentage of instances where there is direct trade, which is still a very, very small percentage of the market, but we really are treating this thing like it's a commodity and it doesn't matter the quality or the effort that's gone to grow or anything like that. It's not a product that we're just sucking it out of the ground folks like oil, right? It's not that. It can be grown so many different ways with so many different varietals, with so many different methods for picking, whether mechanized or personal, like by people specialty versus commercial grades of picking, it's just so, so complicated.
And we don't have a pricing mechanism. We've spent all of this fucking effort to score the cup, the cup score. We've got all of that effort, but we don't have the same effort into how do we make sure that this thing is traded properly. Yeah, yeah, I'd love to see if there's a way to, hey, spend all this money on how coffee should be rated, but can that actually lead to better pricing?
There's no connection to how do we actually use that in leverage and say, okay, yeah, this 84 point coffee is different than the 78 point coffee that's going to the large barfits. Like, there should be more connection there and yet there's not, and there's not really effort to really talk about and find a way to price these coffees. And you know, what I have found is that there is a deep desire, as you were saying in the last episode, there is a deep desire from a lot of roses that would love to be able to find a better way to make sure that they're paying a fair price for that coffee. And it keeps, in our monthly discussion group, we kept coming back to this one question, didn't it, like, cost of production?
Like, if we're not going to tie things to the same market, we need to tie it to another base of something. Like, something needs to anchor this price. And shout out to Nadia, because Nadia told us a story where she was like, we want to pay the producer a fair price, we're going to start that conversation with what's your cost of production, like what's above the cost of your production? And then a lot of other people started saying the same thing that they keep trying to get the cost of production from their producing partners, so that they can make sure they're always paying above that.
They're always paying a much fair price then. But the conversation halts because it's difficult for the farmer to calculate their cost of production. Can you tell people why? Yeah, and I'll say two things on that.
One aside note. I think it's difficult for people to calculate the cost of production. Also, this is a tough time to have that conversation in that. What do you do if, okay, we know we're cost of production, but that would mean it means a producer telling you a price that I could lower than I might be to get through conventional pricing.
Depending on the country, there's a huge variation of cost of production, but I know in Honduras, the lower cost of living, and so cost of production is less than other areas. And so that could mean staying, okay, they're this price, but that might be lower than what they could get through conventional. So this is a hard time to kind of say, let's do that. It almost makes more sense to base.
I don't just make sure we're above local pricing now. Now in the future, and maybe this is the perfect time to be talking about this, when the C price is, that is the perfect time to say, okay, let's figure out now better way to do things. Not after years and years of super low pricing, and then when the price is high, let me find a way to bring it lower. Right.
Yeah, and to circle back on your question, why is cost of production, I have long wanted to be able to dive more into cost of production. I've talked to quite a few producers that know their cost of production well and can tell me price references, but the huge majority of the small orders we work with can similarly maybe give you an estimate or idea, but don't really, the way they calculate it or the way they reference it is such a varied way of doing of that. And I don't think there's much unified. Here's the inputs we need to put to calculate the cost of production.
And let's go bring that to producers and have the conversation producers. And so that there's more producers can talk and unify the way about cost of production. I think there's a huge opportunity there in terms of the development world. I've always had a mixed relationship with the development world, NGO world, and came from that and worked on it for a while, but I've always seen like that that's an opportunity for us to be able to unify something that has some conversations.
I'd like to do more and bring that to some of my producers and say, okay, here's some ways we can unify the conversation about cost of production, but up till now, it's not a unified conversation. It is complicated. Even if you have a spreadsheet. We're not pretending.
Yeah, and there's a ton of factors of what whether we can say the cost of production is this, but then whether comes and destroys half your harvest, and then you say, well, now my cost of production changed. So there's a lot of complications, but I do think there's an opportunity to better understand that and to work with producers to better understand that. I want to give people an example that's going to shift in real time over the next couple of years to give them an understanding of like how complicated this is based on one origin. So I want to talk about India for a second.
Have you do you know much about India's coffee landscape? Well, I want to tell people that work with India a little bit much now. Right. India was the second origin that I had ever gone to, and most of the shout out to South India coffee co-coma land, Akshay, they have these beautiful forests that are on their land, that they grow coffee in.
And you know, like elephants have roamed through there and tigers and all that kind of, it's incredibly magical, right? And it's all grown with these huge shade trees. And I had spoken, so they have made a commitment to agroforestry that way. I had spoken to other coffee producers also in around Chikmunglor, the south of India.
And they had said, look, I'm seventh generation coffee farmer. I've had to sell off a lot of land. The other option is, I'm cutting off the shade trees. Because I've found, if I get rid of the shade trees, I can double my harvest very quickly.
And this is catching fire. This idea of doubling the harvest or significantly increasing the yield of the harvest by simply removing the shade trees has the potential to move India into the third largest producer of the world from like seventh. What would it do to the negative effects of that cost of you? And this is where the complicated element of it is, right?
In a situation like that, folks, this is like the definition of stealing from your future. Because what you're doing there is you are tipping the entire ecosystem out of balance and you are rushing the nutrients out of that soil. You are eating up the future in nutrients. You are putting the whole ecosystem out of balance and you are taking all of the future harvest in half the time.
So yes, you are going to be making much more money. And all you've done to increase the yield is cut down some shade trees. And that's what you think that now I've been able to make more money out of the same, everything else. But it's complicated, right?
Because now you've got to figure out how do I spend more money after I'm not getting those yields to end up replenishing the nutrients into the soil and growing those shade trees back so that I can actually have more coffee. This is what's complicated about it. Go ahead, John. Absolutely.
I think when I look at like the larger global challenges of what's happening in the coffee industry and the challenges of what's happening in coffee can survive and such, I think the two biggest kind of categories of challenges are what you were talking about there, the climate challenges and all the things happening at the farm in terms of is this going to be a viable way of farming in the future tied to as well that the climate challenges that are based on the producers that need to be reacted to? How do we figure out how to grow coffee using regenerative more ever for those categories? And then there's this other category of how we change how we price coffee. I think there's two categories.
They're like, if we can figure out better ways to understand them, those two challenges, there's a good future for coffee. That's too much of a good control. The thing is, we don't need everybody to participate. We just need a large group of people to participate because the reality of the matter is, whether we care to admit it or not, the climate is shifting.
It's going to get more expensive to grow coffee and farmers are going to have to make a decision. Are the pricing structures set up so that it makes sense for me to continue to do this? Yes or no? It will get to that and we're not far off it.
Eventually, that is what is going to happen. Look what's going on in Indonesia at the time of the, you know, in December, we're just coming off the back of massive floods in Indonesia. For them to have to rebuild, they have no guarantees if this is going to happen again next year. We have to give farmers a reason by paying them an adequate and adequate price for the risk that they're taking to grow this.
And if we don't do that, it will mean that there will be less coffee, not just because of the weather but because farmers are going to turn around and say, look, you had the opportunity for me to stay in business. You wouldn't pay me a fair price, so I'm out. And that's what we're looking at. Now, there is a layer of this conversation that we think is very important that we haven't spoken about yet but most people don't talk about this.
And it came up in the WhatsApp group for our monthly Patreon group about this subject. And it's not just the price of coffee being important but the price of coffee and the timing that you pay your producers. So that's what we're going to talk about in the next episode because that, all of that amounts to risk. So that's what we're going to explore in the next episode.
So join us for that. Peace, love and peanut butter, have an amazing rest of your day. If you enjoyed this episode, consider supporting Mapa Forward, our guests and advertisers on social media. Subscribe, hit the like button, leave a comment and share this episode with a friend.
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