How to Calculate the Price of Commercial Coffee
The formula to calculate the price of commercial coffee is as follows:
Price per Kg = (NYKC + Dif) * 2.204 / 100
Throughout this article, we will explain this formula in detail, not only to understand how the coffee price is determined but also to raise awareness about the quality of coffee consumed worldwide.
A Real Case: A Buyer’s Call from Spain
To illustrate the calculation, we share a real conversation we had with a Spanish businessman looking for a supplier at origin. This man, with over 25 years in the business and more than 6,000 clients in Andalusia, wanted to reduce costs by buying directly from producers in Colombia. However, when he mentioned that he needed the coffee delivered to his warehouses at €4.50 per kilogram, we explained that this was impossible.
For him, it was not obvious why coffee at origin was not cheaper than the one he purchased in Spain. The surprising thing was realizing that, despite his experience, he was unaware of fundamental aspects of the business and the quality of the coffee he was buying.
The Coffee Price and Its Components
We explained that the price of a pound of Arabica coffee is subject to the New York Coffee Exchange (NYKC in the formula) and that Colombian coffees typically carry a premium or differential (Dif), depending on their quality.
On the day of the call, the NYKC price was 245.67 cents per pound. Adding a differential of 53 cents resulted in a total price of 298.63 cents per pound.
Since one kilogram equals 2.204 pounds, we applied the formula:
(298.63 * 2.204) / 100 = 6.28 USD per Kg (FOB price at a Colombian port)
However, this price does not include transportation or import costs in the destination country, which can add between 30 and 50 cents per kilogram.
Why Is Coffee at Origin Not Cheaper?
There are two main reasons:
- The price of coffee at origin is the current market price, whereas coffee in consuming countries was purchased in the past when prices may have been lower.
- “Colombian coffee” in many markets is blended with cheaper coffees from other countries.
When Does It Make Sense to Buy at Origin?
Buying at origin can be beneficial when coffee prices are trending downward. However, the real value of buying directly from the producer lies in ensuring fresh coffee without blends of lower-quality beans.
For purchasing at origin to make sense, a minimum of 3 tons is ideal. We receive many inquiries from small roasters interested in batches of 500 kg or less, usually for specialty coffees. However, this is a different market from commercial coffee and will be covered in another article.
Feel free to contact us if you have any questions about how to calculate the price of commercial coffee or if you are looking for a supplier at origin that guarantees fresh, high-quality coffee.