STiR coffee and tea magazine

32 STiR coffee and tea | 2024 Issue 3 (June / July) W By Emily McIntyre e have better methods of price discovery than licking our fingers and thrust- ing them into the winds of change, and one of these, argues David Paparelli, is the specialty coffee auction. Yes, typically the coffee auction is relevant only for ultra-high specialty coffee, but there's more to the story upon inspection. Speaking recently at PRF (Producer Roaster Forum) in Guatemala, Paparelli, who is founder and CEO of London-based coffee tech company M-Cultivo, argued that the data gained through coffee auctions has far-reaching implications and can open a window to the future for the entire industry. "Why is price important when we're talking about market trends?" He asked. "Price is a good indication of the value of the attributes that go into coffee," he answered. For example, a Panamanian Geisha variety lot has a number of attributes which build into its price (including origin, variety, process, and cup score). The ultimate price which the market is willing to pay for it, especially over time, hints at whether it's simply a blip on the screen or might be a critical trend which will drive changes in the industry. Why Auctions Matter Specialty coffee auctions are commonly dismissed by the larger market as interesting, but irrelevant, outliers in the global industry. Paparelli argues convincingly that instead they should be viewed as critical sources of data. And, since M-Cultivo effectively hosts 95% of the specialty coffee auctions in the industry, including the famous Cup of Excellence competitions, the fact that the firm is forthcoming with the (anonymized) data is a benefit to all. Auction-Informed Green Coffee Price Discovery Data gathered from specialty coffee auctions provides vital insights that benefit the entire market. First, a quick acknowledgement that specialty auctions aren't the only ones taking place: in fact it could easily be ar- gued that the C Market is in itself a hyper- efficient auction with many inputs and players—and with an undeniable impact on pricing throughout the coffee supply chain. So dismissing the concept of auc- tions entirely is shortsighted. Accepting auctions as useful, we must also allow that price discovery is a func- tion of the characteristics of the product sold, another interesting benefit of auc- tion data. Beyond origin, the process, variety, cup score, and other descriptors influence the ultimate price, varying by buying region and allowing producers and green coffee sellers to better target their offerings. Paparelli advises, "You can't have a global approach to selling coffee. You have to have a targeted approach to selling coffee, and that will bring [you a] better price. It's market positioning more than anything else."

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