Transparency Explained.
Transparency Explained.
What is FOB pricing?
Freight on Board pricing includes all of the money which is returning to the country of origin. It is true that this is not simply the amount of money going to the farmer but to all involved in this end of the supply chain. This includes the in-country milling, warehousing, transportation and intermediary fees.
Our ideal would be to get farmgate pricing on our coffees, which is an exact value of what goes to the farmer, however at our current size we don’t always have access to such information as we rely on our partnership with trusted importers to build our coffee offering.
What we can say is that typically between 60-80% of the FOB price will go to the farmer. It is by no means an ideal metric and one that we want to improve significantly, but it provides a strong base for opening the conversation about the sustainability of our supply chains.
One of our partners Nordic Approach, shows in general that 74% of that FOB price listed goes direct to the farmer, while the rest goes to all the other associated costs within the chart.
Link: https://nordicapproach.no/2019/12/connecting-the-dots-from-farm-gate-to-sale-price/
What is FarmGate Price?
Generally speaking, this is how much the farmer was paid at the point of sale. However, as we know, things are rarely this simple… Even with registered farmgate prices we can observe significant discrepancies in prices. The key to a true farmgate price is knowing at exactly what point the farmer sells their product. This can vary from farm to farm, as some will process (dry) their own coffee others will sell prior to this costly stage.
Next Steps for WH Transparency?
We are working with our importers to secure farm gate pricing more often. One of our partners, Caravela, is already providing us with this number for all coffees sourced. For example, with our El Poste AA from Nicaragua we can say that the farmer received $X/kg.
As we continue to grow, we will be hoping to open up our ability to make direct trade links ourselves without the need for an intermediary, a lofty ambition but one that we want to achieve by 2022.
Commodity/Fair Trade Price -
The commodity Price (C-Price) is best compared to FOB pricing which means all of our coffees show a direct and appropriate comparison against this global norm.
The commodity price listed on any of our coffees is as the market was at the time of our purchase. The Fair Trade price given is then marked as 125% of this value as per fair trade minimum standards.
Shipping/Transport -
These are average costs which will vary depending on importers internal overheads/margins which understandably we don’t have total transparent access to. We will therefore have a differing cost based on the supplier as they may or may not have included a number of overheads.
Import & Duties -
This will again vary somewhat depending on the importer/exporter, and where the coffee is arriving from, but we have access to numbers which give a general overview/average of importing and duties for a given supplier and therefore the specific coffee.