We cannot comment on the effectiveness or otherwise of grower
support or marketing programmes.
However, your question is pertinent in that it is
entirely possible that higher returns in fact mask declining
fortunes vis-à-vis comparable origins. A general increase
in green coffee prices may lead to an assumption that a particular
initiative has been successful - "our prices have risen". But, in a
good market prices for comparable coffees from elsewhere rise as
well and so the real question is: "Did our price rise more? To the
same extent? Less?"
In a volatile market the timing of sales can greatly affect
results: sales may be made early or late in a year, for example due
to harvest patterns or strategic decisions. If country A marketed
most of its coffee in the first half of a year when international
prices were low, and country B sold most in the second half when
prices rose, then it is relatively meaningless to compare the two
as, most likely, B would have done better.
From a commercial perspective the simplest measurement
would appear to be the differential. See 01.04.02 for more
on this but: the differential is the difference, plus or minus,
between the price for a particular physical (green) coffee and a
given trading position on the futures markets of New York
(NYBOT - arabicas) or London (LIFFE - robustas).
Briefly, the differential takes into account (i)
differences between that coffee and the standard quality on which
the futures market is based, (ii) the physical availability of that
coffee (plentiful or tight), and (iii) the terms and conditions on
which it is offered for sale.
By combining the New York or London futures price and the
differential, one usually obtains the FOB (free on board) price for
a particular type of green coffee. This enables the market to
simply quote, for example, 'Quality X from Origin Y for October
shipment at New York December plus 5' (US cts/lb). Traders and
importers know the cost of shipping coffee from each origin to
Europe, the United States, Japan or wherever, and so can easily
transform 'plus 5' into a price 'landed final destination'.
Improved quality and marketing do lead to increased
demand for certain coffees. This in turn causes the differential
for such coffees to rise. But a word of caution: if the
improvements are accompanied by increasing supply, then the
differential by itself might in the end not always reflect the
impact of those measures.
Logically though, when the quality or the presentation
of a particular coffee improves markedly vis-à-vis competing
origins, then over time (a few years, a few seasons?) the
differential should reflect this. It could rise more than
the others or, conversely, fall to a lesser extent. Of course many
factors play a role, for example: differentials may be lower when
futures prices are high, and higher when futures are low although
this is not always so. Seasonality, availability and the global
supply-demand pattern also strongly influence differentials. But,
most regularly available coffees are subject to the same influences
and so over time the effects mostly tend to even out. However, for
some really expensive coffees, for example top Kenya AA etc, the
differential can be so high that it becomes meaningless.
Growers and others in producing countries should
constantly monitor differentials for their own and similar coffees,
i.e. a basket of comparable origins, and record them - in
the end patterns will emerge. Some trade houses regularly publish
differentials as do some daily market reports. Green coffee brokers
and importers are another source.
NB: In January 2007 The New York Board of Trade (NYBOT) merged
with InterContinental Exchange (ICE) - see ICE Futures US at
Posted 15 May 2005