Coffee Buying in a High Market: 5 Strategies for Success

While it's easy to underestimate market complexities, their influence on specialty coffee is significant, impacting everyone from producers to roasters and stakeholders in between.

The recent unprecedented highs in the C market have forced us to confront reality. On December 10, 2024, the C market reached an all-time high of $3.48, a staggering increase of over $1.00 since the start of November and $1.51 since January 1, 2024. This urgent situation demands our immediate attention.

The primary factors driving this surge are the uncertainties in Brazil and Vietnam, the world's largest coffee producers. Historical droughts have disrupted harvest estimates, and the impending EUDR (ED Deforestation Regulation) is causing compliance-related logistical challenges. These factors are causing market swings and creating a significant level of concern, leading to destabilizing prices.

With prices reaching such unprecedented levels, even 'commercial' coffees now cost what we'd historically consider micro-lot prices. This upheaval in the market economics necessitates thoroughly reevaluating our purchasing strategies. If prices continue to soar, we must reconsider what, when, and how much we buy. In essence, when the market is high, our costs go up. For instance, if the delivered price for your central blender was $3/lb last spring, be prepared to shell out $4.50 (or more) for the same quality this year. Such a significant increase will force many of us to make tough decisions.

When confronted with this market dilemma, there are two paths to consider: either hike your prices or trim your costs. Determining whether to raise prices is a complex decision that this post cannot make for you. However, it can offer some strategies to reduce costs:

1. Don't buy coffee

A widespread tactic for spending less on coffee is to wait and see, hoping the market goes down. But this only works for so long. If the market doesn't drop quickly, you'll be in the same situation but have fewer options.

2. Buy cheaper coffee

This is the most obvious but can be achieved in several ways.

• Lower quality. By buying commercial-grade coffee, you can save 20 or more cents per pound, which can go directly to your bottom line or be reinvested into nicer micro lots. Either way, it won't hurt as much.
• Past crop coffees make a great addition to a lineup, primarily as a blend component, and are often found at significant discounts compared to their freshly arrived counterparts. I'd recommend tasting samples incorporated into your blend rather than alone on the cupping table to see how noticeable they are. Depending on the blend and roast profile, you might be surprised how much you can add before you can taste the difference.

3. Buy more coffee

This highly depends on your circumstances, but there are many ways to save money.

• Bulk discounts. StoneX Specialty offers discounts based on quantity (contact your sales executive for more info). If you have the space at your roastery to store them, taking more at a time can save you money.
• Shipping full pallets. The price per pound will drop as the pallet's size increases. Taking advantage of pallet size will drastically reduce the cost of shipping. (Additionally, shipping is free for over 800 lbs if ordering online!)
• Do it all yourself. If you have a warehouse account, you can buy Ex-warehouse, pay the warehouse directly for storage, and then arrange shipping through your preferred freight company. On the upside, this saves pass-through costs from StoneX Specialty but will depend on what pricing you can get from the freight companies.

4. Book Further Out

Giving us plenty of time to source your coffee lets us find what you are looking for and gives us more opportunities to save you money by planning shipments and deliveries over multiple months. If you only buy spot coffee, you're not only paying for the storage that has already been accrued for that coffee, but you're at risk of it running out and having fewer choices when making buying decisions.

5. Play the Market

Buying your coffee as a "price to be fixed" or PTBF is possible. This allows you to secure your bags rather than your price. You agree to buy it at a certain diff, but you get to decide when to "fix" that diff based on where the market lands. This may seem a bit like gambling, but there are only two realities to the market: It will always go up, and it will always go down. The gambling part lies in guessing how much it will go up or down. StoneX Specialty has various ways to help with this, and your Sales Executive would be happy to walk you through it.

These tactics can save on coffee costs no matter where the market is, but especially when it's at record highs, having multiple ways to save will help you make it through and continue to survive in this uncertain time.

Ultimately, there's no one-size-fits-all solution for navigating these challenging times – it's about finding what works best for your roasting business. Our team is here to support you every step of the way. Whether you're looking for tailored guidance, exploring your best options, or seeking deeper insights into the future of specialty coffee, we're ready to help. Let's work together to ensure your success!