Price premiums
Importers increasingly recognize the significant costs for producing and exporting
certified Organic coffee. Nevertheless, evidence is mounting that premiums are
insufficient for typical high-yield farmers to be Organic since their yields inevitably
decline more than the average compensation of a premium. This is especially true for
small to medium operations that lack financing and technical know-how to weather the
transition. In some origins, as prices inch up for quality coffees, more farmers find it
difficult to justify their organic certification from a purely economic point of view. In
such cases - including areas of Central America and Mexico - a modest organic
premium when their coffees are selling at $1.30 to $1.80 barely compensates them for
the costs of maintaining an organic operation. One of the commercial challenges, as we
head into a higher base-price market, will be to keep the quality-oriented farmers in
Organic production.