Hacienda Candelaria lies about 50km in NorthWest of San Jose, near the town of Palmares in Alajuela, West Valley. The 60 hectare estate was established in 1965 by Otto Kloeti and still today is managed as a family business.
The Coffee Quest is happy to be working with Hacienda Candelaria for the last few years. The last decade has shown a large movement of farmers leaving the traditional way of delivering cherries to the local Cooperative, but instead process their own coffee to find export markets. Driving through the regions such as Tarrazu or West-Valley show many new micro-mills on the side of the road. Hacienda Candelaria seems to be an excellent example of successfully reaching this point, as a result of a step they took some time ago. The family and estate are very involved in the local community and have sponsored a school and soccer field, among other contributions.
The family Estate Hacienda Candelaria is moving towards high quality processing. They are able to receive cherries, wash and dry the coffee in their own Mill. Through their own controlled process they are able to provide a very consistent cup. We chose the farm’s High Density Caturra lot, as our main Classic from Costa Rica. The density selection adds both to the sweetness, but also the much needed shelf life for fixed assortment lots. Moreover, this year, we added a Semi-washed microlot which boasts an extra fruity cup!
The family has a high drive to produce high quality coffee at a larger scale, introducing the Honey process and trying out new varieties, such as: Hybrid Centroamericano and Geisha. The soil in the region is enriched with volcanic ash and organic matter which promote good distribution of the root systems and soil moisture retention.
The combination of generations of coffee craftsmanship and an excellent location produce excellent balanced coffees. More than 70 percent of annual production is harvested from the highlands, at altitudes between 1300-1700 m.a.s.l., with average temperatures that fluctuate between 17-23C. Sunlight is stable and rainfall is optimal, providing the ideal environmental conditions.
The washed Estate lot from Candelaria is a perfect example of the Classic segment. Balanced and stable profile, with a quality price/point that becomes harder to find in Costa Rica. Overall we see the country’s production lowering, resulting in higher prices and even the specialty grades following this effect. The cherry has been pulped and fermented in pools for around 36 hours, before fully washing off the coffee pulp. The result after drying (combination of patio and drying machines) a traditional clean washed coffee, but with an interesting fruity touch to the cup profile. The lot comes from a good altitude and falls under the Strictly Hard Bean (SHB with European Prep.). Candelaria has started to produce Honey processed coffee and even small quantities of Geisha, a good sign that they keep innovating.
This season, we took a dive into the economics behind the bean, in our Quest for radical price transparency. Our origin researcher, Marian Osigna, set out to interview producers, millers and authorities, and led the way into how The Coffee Quest sees price transparency in Costa Rica.
Costa Rica has a “coffee law – law 2762”, which stands at the core of a unique governing system which provides price transparency and fair practice for all Costa Ricans. ICAFE is the sector organisation meant to implement the law, and acts as police and development authority in the coffee sector. Through law 2762, ICAFE regulates transactions between farmers and millers, miller and exporters, and guarantees that the returns from coffee are fairly distributed between all stakeholders.
Fair distribution of coffee returns in Costa Rica, starts with an export price. It is only when coffee is exported, that all stakeholder in the chain know it’s final value. Then they start counting backwards to determine what slice of the pie goes to who.
The farmer tends to the land, and grows coffee. He sells his red coffee cherry to a miller, and pays pickers and other staff that help him on his farm. When a farmer delivers cherry to a miller, the cherry is measured in Fanega, which is a measurement of volume (opposite to for example kg, which is a measurement of weight). The farmer then gets an advance for the cherry delivered, and has to wait for the closing of the export season, to see what the eventual value of his cherry was, after the miller has made green coffee, and the exporter has found a buyer that wants to pay a particular price. Eventually, the farmer will get around 80% of the export price (FOB) of the coffee.
The Miller, buys cherries from farmers and processes these into green coffee ready for export. They then export themselves, or sell to an exporter for consolidation with other micro mill lots. All producers on our list fall into this category. Miller registers amounts of cherry purchased, a declaration of production costs and sales proceeds to exporters with ICAFE. A miller can make a maximum profit of 9%.
The exporter buys coffee from a miller, and sells it to an importer like The Coffee Quest. The exporter consolidated shipments, does paperwork, and plans logistical movements. They make costs in order to complete the export, and declare export costs and revenues with ICAFE. Exporters can make a maximum 2,3% profit on the export price.
ICAFE’s role in the chain is very interwoven with all stakeholders. They help the farmer on various developmental theme’s, like: Agricultural production, quality, sustainability and economics. In collaboration with the farmers, they do soil analysis, suggest fertilizator schedules, they help plant shade trees and do research in new varieties and agricultural best practices. Through FONECAFE, it also maintains a security fund, in case coffee prices fall below the cost of production for individual farmers. Inorder to fund their activities, ICAFE charges a tax or contribution on coffee business, which amounts to 1,47% of the export price.
At the end of the season, ICAFE will calculate a “Final Liquidation Price” from the revenues of all Costa Rica coffee exports, and the costs declared to make that revenue. Thereby they determine nationwide, how large the coffee pie actually was this year. A financial settlement then takes place among all coffee chain stakeholders, including the producers.
Price transparency is a complex promise to make. It’s result depends heavily on the structure of the sector, the amount of data available and the amount of time a company has to research and provide it. If you buy coffee from a producer, who also processes, mills and exports, it’s more straightforward but this isn’t always the case.
In the Costa Rica context, it’s easy to get an FOB price which is paid to the exporter, or maybe even to the exporting miller. But that still doesn’t say anything about the price the farmer who grows the cherry actually gets.
The cherry farmer delivering to one of our micromill suppliers, will get 1 average price for his cherry as a result of the whole coffee season. The FOB price, The Coffee Quest pays to the exporter, will negatively or positively affect this average. We set out transparency ambition high at The Coffee Quest, and therefore that is exactly what we aspire to know.
Transparency is regulated by law in Costa Rica, and all internal prices and volumes as well as export prices and the final liquidation price per miller are published on ICAFE’s website. This means that we have been able to setup a calculation which derives the contribution of The Coffee Quest purchases in Costa Rica, to the final liquidation price to the farmer delivering cherry to the micromill. To be able to share this makes us incredibly happy!
The method we use is based on data on our suppliers in ICAFE publications of coffee commercialization, which can be found here; ICAFE/coffee sector/final settlement benefit, and ICAFE/coffee sector/commercialization/sales per zone. The calculation results are validated, and costs are adapted according to interviews with millers and exporters. The result is a farm gate cherry price in Colones per Fanega, which we have translated for you, into a price in Euro per kilo, in green coffee equivalent.
People visiting Costa Rica are often happily surprised with the abundance of nature and respect for animal life. Many farms, such as Hacienda Candelaria are committed to cultivating high quality coffee in a sustainable manner. The farm has a large presence of secondary rain forest, large trees that provide shade and limiting the amount of direct sun hours to the coffee plants.