Farmgate: more than a buzzword

An interesting article about farmgate has been making waves in the coffee community.

For professional roasters and green coffee buyers, the term farmgate price isn’t just industry jargon. It’s a critical indicator of how much money ends up in a coffee farmer’s pocket.

With fluctuating C-market prices, inflationary pressures, and a growing focus on equitable sourcing, understanding farmgate pricing and its application in Brazil, the world’s largest coffee-producing country, is crucial for making informed purchasing decisions and supporting genuine sustainability on the ground.

Let's dive into what it means for Brazilian coffee farmers and green coffee buyers.

What are farmgate prices?

The farmgate price is the amount of money a farmer receives for their product at the “farm gate,” meaning before any intermediaries, exporters, processors, traders, or cooperatives add value or take their cut.

It reflects the actual income earned by the farmer for the raw, unprocessed product, and excludes costs such as transportation, export fees, warehousing, or financing.

In coffee, this price is typically expressed in the local currency per bag or per kilogram of cherry, parchment, or green coffee, depending on the stage at which it's sold.

Farmgate prices can vary widely not only between countries but even between neighbouring farms, depending on infrastructure, access to markets, quality premiums, and negotiation power.

The link between the C Market and farmgate pricing.

The C price (short for Coffee Arabica Futures Contract) is a global benchmark traded on the Intercontinental Exchange (ICE) in New York. It sets the base price for most commercial Arabica coffees.

Here’s the key nuance: an increase or decrease in the C price doesn’t always mean a proportional increase or decrease in farmgate prices.

In theory, a rising C price should boost farmers' income. However, in practice, farmgate prices are shaped by a complex web of factors:

  • Currency exchange rates: In countries like Brazil, where coffee is exported in USD but local costs are in Brazilian reais (BRL), a weak local currency can offset gains from higher global prices or amplify them, depending on timing.

  • Supply chain structure: If coffee passes through multiple hands before export, farmers may only see a fraction of the market increase.

  • Harvest contracts and fixed-price sales: Many Brazilian farmers pre-sell their crop months in advance at fixed prices. If the market rises later, they miss out on potential gains.

The Brazilian context: Farmgate in the world's largest coffee producer.

Brazil is unique in many ways. With its vast farms, sophisticated logistics, and strong internal market, it operates differently from smaller producing nations.

Yet, the farmgate concept remains central to understanding the economics of coffee here.

In Brazil, farmgate prices are typically reported in BRL per saca (60kg bag) of green coffee. Many farmers sell to cooperatives, exporters, or domestic buyers, either as cherries, parchment, or fully processed green cherries.

The level of processing affects the final price, but the farmgate price remains the baseline income earned before any additional services or margins are applied.

When C prices spike as they did in 2021 and again in early 2024, farmgate prices in Brazil often rise too. But again, the correlation is not 1:1:

  • Larger, well-capitalized farmers may hold inventory and sell at opportune times, benefiting more from market surges.

  • Smaller farmers who rely on forward contracts or sell cherries locally may not benefit fully from price spikes.

  • Input costs, such as fertilizers and labour, also rise with market booms, sometimes negating gains in gross revenue.

Why It Matters for Roasters and Buyers

Understanding farmgate pricing gives you a more realistic view of the impact your purchases have on farmers. A high FOB (Free On Board) or delivered price might look good on paper, but unless there’s transparency about the farmgate level, there’s no guarantee the farmer benefited.

How our approach to coffee sourcing supports the farmers:

  • We trade directly with coffee growers, bypassing non-essential intermediaries in the coffee supply chain and creating more value for farmers and green coffee buyers.
     
  • Our commitment to transparency gives peace of mind to roasters and ensures coffee growers are properly compensated for their hard work.
     
  • We work in a partnership with the farmers in Brazil helping them to choose the right coffees for each market and making sure that each lot has a different treatment in terms of quality/price, so the farmers can have a fair price for each specific lot instead of selling all of them mixed at a single price.

    This encourages them to focus more on quality and control, knowing that we will give a specific treatment to the coffee, increasing the farmers' income and sustainable prices year over year.

Farmgate pricing is not just a number. It’s a window into the economic reality of coffee farming. For Brazil, a country that sets the tone for global supply and pricing trends, it’s essential to understand how global market shifts translate into local incomes.

As a roaster or green buyer, asking the right questions about farmgate prices won’t just help you make more ethical sourcing decisions. It will also help build resilience, traceability, and long-term partnerships in a coffee supply chain that continues to evolve.

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