M&M6

M&M Micromill from Costa Rica

People

Sounds sweet? It is! Managed by Coffee Veteran Roberto Mata and his son Michael, this Micro Mill draws on years of experience in producing specialty coffee. We have only been able to secure the Pura Vida Honey this year, since all other lots we received were already sold out. Even in this strange and insecure period, good coffee is on high demand!

The Mill works to process the coffee from several family members in the Dota area, one of the famous coffee places in the mountainous region of Tarrazu (correctly pronounced “Tar-rah-zoo”).

In February ’19 we had the chance to visit the Micro Mill at the end of the harvest period. The Coffee Quest  was welcomed warmly and we were pleasantly surprised by the amount of raised beds on the terrain of the Mill.

Product

cropster-1

Roberto and his family all work together to get everything done throughout the harvest season. All processes are measured, and efficiently organized, leaving nothing open to chance. At M&M they are keen on standardizing with the idea to re-produce their specialty lots. 

Just behind their processing facility they have a small cupping space and beautifully organized sample cabinet. All of the lots are processed on raised beds, focussing purely on honey and natural lots. The metal tables and shadow nets provide the cover needed during the hottest period of the day. To create perfection in humidity, they use mechanical dryers to lower the last percentages of humidity to the correct level for export.

Price

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.

Farmer’s perspective

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.

Miller’s perspective

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%.

Exporter’s perspective

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 perspective

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.

TCQ’s perspective

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.

Planet

M&M has our environment at heart and the family estate is working towards making their processes more environmentally kind.

Discover other stories from Costa Rica...

Hacienda Candelaria from Costa Rica

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.

Read More »