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How Producers Finance Microlots

Getting that unique, exotic and seasonal microlot is amazing when you get to share these magical beans with your clients. However, for a producer it’s a great challenge to make it happen.

Producing quality-based coffee not only requires good varieties, weather conditions, and infrastructure, it is definitely a financial game that producers need to play in order to finance the production of high quality microlots.

Teodoro Engelhardt is truly a passionate coffee grower who started with the production of high quality coffees 20 years ago. His experience is valuable and worth sharing as he has been for many years working on the best formula to produce in the most efficient way great coffees that he could offer to specialty roasters.

He explains that it has required him years of experience to find a strategy that copes with the market’s demand, processing trends and desired flavour profile in order to make his specialty clients happy.

A producer needs to have enough cash flow in order to plan ahead the harvest’s costs and be lucky to count on great weather conditions for when the beans are ready to be picked and processed. Teodoro explains that labour, fertilization and picking incur the highest costs meaning a big budget before the harvest begins.

Focus on Three Different Categories

There are different parameters that a producer needs to evaluate when producing and financing a microlot: market’s demand, microclimate conditions, varieties, processing trends and infrastructure. Additionally, what Teodoro recommends to make the right decisions is to work on three different categories:

Estate Lots: These are the volume wise lots that will generate cash flow, coffees that can be sold under contracts through exporters with an established price beforehand.

Regionals: These are traditional profiles used for house blends and espresso blends that can be sold for higher prices to specialty roasters.

Exotics: These are exotic varieties with special processes that enhance profiles that may change year after year, championship coffees and special editions that a specialty roaster would get from time to time.

While this is an ideal mix if done right, it’s not the norm that rules it all. However, it is a strategy that helps to balance costs because producing only specialty or very exclusive lots is not sustainable.

Know Your Costs

Speaking about costs sounds logical but the majority of growers are smallholders in most producing countries and are having a hard time when it comes to understanding their costs.

Teodoro explains that looking for productivity focusing on costs’ structure and efficiency is key to playing the financial game in order to produce high quality coffees.

Processing exotic coffees create higher costs, imply more people involved and are risky sometimes, therefore, if a producer wants to create this category to reach specialty roasters it is imperative to understand what it takes to produce better coffees.

Microlots are definitely great products when they are produced based on a plan, they are great to promote farms and a great source of innovation. Additionally, is a passionate work that brings people together around flavours as well as the recognition of the producer in the international market.

Achieving great quality is a long term goal, producing microlots in a sustainable way may take a while but is possible through partnerships and understanding production costs according to the varieties grown, microclimate, altitude and infrastructure of each farm.

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