Digital Coffee Future explores the effect of price dynamics

Digital Coffee Future explores how coffee price dynamics have an impact not only on coffee stakeholders but on the industry as a whole.

The conversation about coffee prices in the global coffee industry is as common as small talk about the weather, but knowledge hub Digital Coffee Future (DCF) says it rarely includes discussion on how – and if – technology can play a role in mitigating the challenges that arise from coffee pricing instability and unsustainability.

To address why, DCF hosted the Coffee Prices and Technology Summit: Trends, Margins and Pay Gap from 25 to 26 October. The online event – sponsored by M-Cultivo, Algrano, Fairtrade International, the International Trade Center and German Society for International Cooperation – brought together speakers from around the globe and every node of the coffee value stream.

“Weather events, yield projections, global inflation, and interest rates are only some of the factors exacerbating market price fluctuations. Economic value is also distributed unevenly among actors, contributing to increased disparities and concerns for the sustainability of coffee production,” says DCF Founder and CEO Elisa Criscione.

“Even if the topic of price has been highly discussed in the past few years in the industry, the conversation on whether technology can play a role in tackling coffee price challenges is still largely unexplored.”

In the virtual event, panellists and participants highlighted topics that impact the industry and explored with a critical eye the role that digital tools can play in overcoming price-related challenges.

Global organisation Fairtrade International shares a mission which is founded upon producer empowerment and poverty alleviation. Senior Coffee Advisor at Fairtrade International, Monika Firl, believes digital technologies can support real-time reporting while fulfilling the growing demands by industry actors and coffee consumers for greater traceability and transparency about where coffee comes from, and how it was traded.

“This combined data provides a global portrait of coffee trading practices, and it can serve as a powerful leverage for keeping everyone honest in regard to the actual pricing and production practices of coffee producer organisations. The net result of this is a clearer illustration of what we should understand as a fair price for the hard work of sustainable coffee production,” she says.

Fairtrade International says this kind of open forum allows coffee stakeholders to share knowledge and learn from other’s perspectives. Firl says it’s an opportunity to level the playing field on access to market intelligence, and as a prerequisite for a sustainable future in coffee.

“Any initiative that gives farmers access to specific insights on how to track, trace and make better price negotiating decisions based on the true value of their coffee, is of enormous importance given current market conditions,” Firl says.

“We are always eager to learn about real-life practices that can help the industry see and acknowledge the glaring gaps in resource distribution across the value chain and to envision a more equitable coffee future for all.”

Firl is optimistic that the industry will continue to undergo significant and promising changes.

“Many influential actors are making important commitments towards sustainable sourcing and in articulating their concerns for coffee-farmer livelihoods,” she says.

“But anyone with real experience in the field knows that selected project work can never replace the empowering impact of industry pricing that covers a farmer’s cost of sustainable production. We hope that events such as this can provide a more honest discussion about the fundamental role that fair pricing plays in both alleviating poverty in coffee-producing regions, and in limiting supply-risk for the market at large.”

Head of Content at green coffee marketplace Algrano, Luiza Pereira Furquim, says the forum offered a lot of value on how coffee producers can discover tools to use day-to-day and improve their prices, manage risk, and monitor quality through technology.

“Price transparency has been core to Algrano’s model from day one. We believe that coffee professionals need a better understanding of pricing mechanisms and trends so that we, as an industry, can create innovative solutions for our historical challenges,” says Furquim.
“It’s also impossible to talk about price without touching on power dynamics. This event offered an opportunity to generate more awareness about this topic, which Algrano has always been championing for.”

According to Furquim, value-adding strategies in the coffee value chain have limited success due to power imbalances between buyers and sellers. He says for Algrano, enabling producers to price their own coffees is a critical part of shifting power dynamics.

“An e-commerce set-up where offers are managed by producers is an important part of the solution to this problem. It also facilitates the dissemination of offers among a wider pool of potential buyers. Having a diverse pool of buyers helps producers dilute risk and offers them the opportunity to develop trading relationships on equal footing,” says Furquim.

“The beauty of technology is that it takes the discussion about coffee pricing from an intellectual arena to the real world. Companies are developing features to support producers in real day-to-day tasks and testing the efficacy of different solutions.”

Sarah Charles, Communications Officer for the International Trade Centre (ITC)’s sustainable agribusiness initiative, Alliances for Action, and co-author of its Coffee Guide (4th Edition) says the Summit builds on its efforts to support smallholder farmer livelihoods through market access and digitalisation.

“ITC is the only multilateral UN agency dedicated to supporting the competitiveness and internationalisation of micro, small- and medium-sized enterprises,” says Charles.

She says digital technology can bolster the competitiveness of coffee actors upstream of the value chain, and enhances transparency, traceability, and trust across the sector.

“It opens up new funding opportunities, such as impact investment, which seeks social or environmental gains as well as profits,” Charles says.

“Technology also presents an opportunity to use information to build a fairer industry in terms of price-taking and price-making. We can leverage technology to collect and analyse data to achieve a more equitable and rewarding business environment for coffee producers.”

Charles adds that events like the Summit are a great opportunity to get the attention of policymakers, donors, investors, and industry stakeholders on the intersection between coffee prices and technology, and associated risks and opportunities.

“We hope that it provides a platform for not only important conversations, but also concrete action,” she says.

M-Cultivo Founder and CEO David Paparelli says the ethos of the platform provider is built on the foundation that technology can be used for a more dynamic flow of price information.

“Our mission is to help small-to-medium-sized specialty coffee producers grow their businesses, and we do this by providing access to technology, financing, and new markets. I think increasing the flow and visibility of pricing data enhances trust across stakeholders and therefore helps tackle coffee price challenges,” says Paparelli.

“If price related data is out in the open, it tends to encourage conversations like those had at the Digital Coffee Future event around what is equitable distribution of price and value across the supply chain.”

Paparelli says M-Cultivo’s valuable insights come from on-the-ground sources who see the most pressing industry issues on a daily basis.

“It’s important to remember that technology is a tool, not the answer to all problems. If we aren’t involved in events like this (DCF Summit), we’re forfeiting the chance to discover real solutions to these problems, which are generally instituted by the people who participate as stakeholders in the supply chain. Without them, nothing will happen. We think it’s important to engage with the community to find these solutions together,” Paparelli says.