A different kind of coffee break

Philippine coffee prices have been, at least for the last 20 years, higher than world market prices. World market price is what we see in the London and New York commodity markets and we could never relate to these prices as a local farmer or processor or café owner. Because we are priced out of the “market.”

Why?

The Philippines in 2002 (when we started our NGO) only based its prices on Nestlé buying prices, Nestlé being the country’s biggest buyer and the production being mostly Robusta, the variety Nestlé bought. I learned about  Nestlé Grade 1 and Grade 2, prices then being P70-80 per kilo of green coffee beans (GCB).

In the next few years, more Filipinos started to be conscious of local coffee and would buy roasted coffee from the Baguio market, Lipa public market and a host of cafés and coffee shop chains that started to mushroom in the major cities.
Freshly-roasted, brewed Kapeng Barako became the fashion, even if what the people were drinking was actually Robusta or Excelsa or a mixed bag of strong coffees.

As this demand for local coffee grew, production continued to dip as more farmers chose to sell their coffee lands due to industrialization and golf courses, specially in the nearby coffee towns of Batangas and Cavite, bringing production to all-time lows like 30,000 metric tons/year, down from 75,000 MT in the 80s.

At one point, demand rose to 130,000 MT green bean equivalent in terms of instant or soluble coffee and specialty coffee, while production did not move much from the 30,000 to 35,000 MT/ year levels. This made manufacturers turn to Vietnam and Indonesia to fill the demand gap, thus converting many drinkers to the convenient 3-in-1 packs of mostly sugar, non-dairy creamer and a bit of coffee. And with the ASEAN Free Trade Agreement (AFTA), coffee could be imported oh so easily, much to the chagrin of local farmers whose coffees found lesser markets…in the commodity sector. Specialty coffee like Fine Robusta became the standard. This gave farmers more bang for the buck, if he did his job well.

Meanwhile, there was renewed interest in specialty coffee, fancy tasting sessions, teaching farmers how to pick red ripe fruits. These lessons and training in value-adding through roasting were rolled out by Department of Trade and Industry (DTI), The Philippine Coffee Board Inc. (PCBI), ACDIVOCA and academic institutions. The country turned to niche marketing, promoting its rare varieties like the Barako or Caffea Liberica.

As demand for specialty coffee rose, the farmers benefitted through these trainings to pick coffee at the right time, process coffee in better ways and the market started to pay higher prices for better quality coffee of all varieties. Barako became more in demand at a higher price, and Robusta became Fine Robusta, teaching farmers that if you put in time and effort, you would be rewarded with a good price.

A coffee competition started in 2017 which awarded 10 best farmers in each category – Arabica and Robusta – and farmers kept their “titles” of being a finalist until the next harvest. Quite a good way to sell his whole lot with opportunities to export small or nano lots of green coffee.

Then export inquiries started to come in, brought about by the active participation of the DTI’s Export Management Bureau and the foreign trade posts – FTSC, the Foreign Trade Service Corps where commercial counsellors started to look for micro roasters in their own communities from Sweden to Los Angeles.

But we had a problem – our prices were crazy. Higher than world market. For perspective, while world market price was $1,010 per ton or $1 or P50 per kilo, our local Robusta could go for P120 to P190/ kilo.

Today, world market prices have doubled to $2000 per ton or $2 or P100 per kilo. The Filipino farmer has been getting more than this for the past five years.

We see our PH coffee now being almost at par…still quite a stretch but definitely not as “priced out of the market” as before. Robusta at world market is now just a tad higher. If we wish to export, this is the right time to export small specialty coffees in nano lots of 10-20 kilos.

So, will world market prices affect our farmers’ interest to plant more coffee? Definitely! Our microcosm of a coffee economy will still thrive if not even exceed expectations because we have already been paying our farmers well, even before this coffee crisis.

What will happen to our coffee imports from Vietnam? They may be priced higher now due to the COVID-19 restrictions on trade with their health crisis going crazy. And Brazil has a frost that will affect the world’s no. 1 producer. With these two volume producers challenged,  the Philippines may very well continue to keep prices stable, albeit high. Instant coffee may suddenly be more expensive and this may lead to brewing coffee at home. That’s good news for all coffee drinkers and coffee processors. And, most of all, it’s good news for Filipino coffee farmers.

For coffee advocates like myself, this supply crisis equalizes everything and gives the Philippines a leg up to keep Filipino coffee farmers on their toes and for us to continue promoting and bringing Philippine coffee to the world.

This may be the global crisis our coffee farmers hoped for so we can finally be able to export and not be embarrassed that our prices are out of this world. The new world prices just gave us this much-needed break – a different kind of coffee break.

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Chit U. Juan  is president of the Philippine Coffee Board Inc., a private sector-led group formed in 2002 with the purpose of promoting local coffee to the domestic and export markets.