Despite its differentiated quality and value proposition, specialty coffee is inherently tied to the C-market. Due to macroeconomic factors, weather, and market dynamics in major producing countries like Brazil, the C-market is highly volatile, which makes it very difficult to forecast costs and count on consistent supply. Thankfully, market instruments provide a means to minimize this risk.
For both producers and roasters, hedging contracts is a key way to ensure coffee will be delivered at the contract price regardless of what happens to the C-market price. On the producer side, hedging guarantees cooperative management that they will be able to purchase coffee from the co-op's members even if the C-market price rises above the contract price. This ensures the co-op will not default on the contract and will deliver it to the roaster at the agreed-upon price.
For roasters, hedging allows buyers to take advantage of low C-market prices even if the contract price is higher than the current C-market price. This is accomplished through price risk management insurance, which reimburses roasters for the difference between contract and market price should this scenario occur when the contract is executed.
We provide the expertise, tools and financial capacity to support both roasters and growers to navigate C-market volatility utilizing coffee fixed price and option contracts. For producers, it's essential to ensuring coffee delivery. For roasters, it's a great component of a growing coffee company's green-buying strategy, and something that our forward-booking customers can take advantage of. In both cases, price risk management is a win-win scenario for the entire supply chain, as price volatility is eliminated and chances of default are significantly reduced.
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