0:10

Hello, and welcome to another episode

0:13

of the Odd Lots Podcast. I'm Joe

0:15

Wisn'tal And I'm Tracy

0:17

Alloway. Tracy, We've

0:19

talked a lot about various stresses

0:22

and price increases that we've

0:24

seen throughout the economy. But one of the

0:26

themes I guess I would say is and we've we've joked

0:28

about, is we talked about a lot of stuff that's very

0:30

much in the background, things that are

0:32

sort of like disconnected or

0:35

mediated by several steps from

0:37

the end consumer. Wait, Joe, can you explain

0:39

that we talk we talked a lot, you

0:41

know, like we recently talked about the increased price

0:44

of palettes, right, and then it's gone

0:46

up a lot. But most people don't experience

0:49

the increased price of wooded palettes

0:51

or even the increased price of a shipping container

0:54

in their day to day life. Oh, I

0:56

see, Well, I don't

0:58

know. Um, I guess the gets passed

1:01

on like eventually, right.

1:03

But yes, you're right, we're

1:05

not like purchasing containers

1:07

once a month, um in the same way that we

1:09

are purchasing consumer goods

1:11

and things like food and stuff

1:14

like that. Yeah, exactly right, That's

1:16

all I mean, which is that a lot of these things

1:18

are things you wouldn't necessarily see

1:20

yourself. Even lumber, which we've talked a lot

1:22

about on the show, you might not necessarily

1:24

see. We've talked a lot about grain, which

1:27

people see, but in many ways that manifest

1:29

itself in the form of higher meat

1:31

prices or dairy prices

1:33

for consumers. So a lot of these

1:35

things they seem to be like sort of like background factors

1:38

that eventually feed through. Yeah.

1:40

But on the other hand, since

1:43

we're basically talking about inflation now, there

1:45

are some price increases out

1:47

there that are very much

1:49

in front of consumers right

1:52

now. Um, primarily food,

1:54

right. I did a deep dive into

1:56

mayonnaise and that was like something like eight

1:58

person And everyone has

2:01

an opinion on food inflation

2:03

and what's going on, and it really seems to um,

2:05

I guess touch and nerve with people.

2:08

Yeah, food inflation in particular, gasoline

2:11

probably the other one is that people that really

2:13

touches a nerve, but food for

2:16

sure. And everyone has a theory and everyone's

2:18

trying to figure out is this a macro

2:20

thing that's something about the money supply

2:22

or fiscal that's pushing the price of everything up

2:25

with food. You also have this other dynamic of

2:27

wet weather and other idiosyncratic factors.

2:30

Anyway, I'm very excited

2:32

because we're going to be talking about another consumable

2:35

good that is highly

2:37

emotional for people, that's highly relevant

2:40

to a lot of people, and that is the price

2:42

of coffee, right, so truly

2:44

something that a lot of people would

2:47

consume on a daily basis.

2:49

So the price of coffee has

2:52

dramatically surged over the past

2:54

year or so, and uh, I

2:57

guess the question is how much

2:59

of that pricingcrea is actually being passed

3:01

on to consumers. And

3:03

here I have to confess I really

3:05

have no familiarity with

3:08

the coffee market at

3:10

all. So I'm very, very curious

3:12

to learn how purchasing

3:14

actually works, how hedging works,

3:17

and how the coffee sort of gets from the farmers

3:20

all the way to Starbucks or

3:22

you know, a can in the grocery store.

3:25

I am very excited about learning all that

3:27

as well. So we have the perfect guest we're going

3:29

to be speaking with, Ryan Delaney. He is the founder

3:31

and chief analyst at Coffee Trading

3:34

Academy. He has a

3:36

career of coffee trading both

3:38

the spot physical markets

3:40

futures and so forth. That he trains companies,

3:43

he gives them analysis and research on how the

3:45

coffee market is doing. So we're gonna

3:48

learn everything about how this commodity market

3:50

works hopefully. Ryan, thank you so

3:52

much for joining us. Yeah, thanks

3:54

for having me. Why do you actually

3:56

just give us the very brief overview

3:59

of why are we talking to you? What is

4:01

your expertise in

4:04

the coffee market? How do you know it? That's

4:07

a good question. I got no idea why you guys are talking

4:09

about. So I've been I've

4:11

been in the coffee industry for about a dozen years.

4:13

Um, but come up, my entire

4:15

sort of commodity experience

4:18

is in coffee. So I uh

4:20

to give you, you know, the thirty second

4:23

version of my my background here. I

4:25

started out with one of the large multinationals

4:28

and you know their rotational program

4:31

um that is, one of the top traders

4:34

of coffee. So I

4:36

worked and lived in origin in

4:38

India and in Uganda sort

4:40

of buying coffee locally, processing

4:43

it, uh and then exporting it to

4:45

two consumers. And then I came back

4:47

to the US and traded

4:49

coffee physical coffee there for a little while before

4:52

I transitioned to our company's

4:54

hedge fund. And you know a lot of these large

4:56

multinational commodity firms have hedge

4:58

funds to sort of capitalize on

5:00

their their information informational

5:03

edge, you know. Um, so I

5:05

was the coffee and coco analysts

5:07

and trader for our hedge fund. And

5:10

uh, you know, one thing you'll hear a lot in the

5:12

coffee industry the more you talk to coffee people

5:14

is how much uh, there's there's

5:17

coffee guys, there's coffee gals. You know,

5:19

we refer to ourselves as coffee people. It's

5:21

it's very much a tight knit community. So

5:25

we I missed that interaction, you

5:27

know. So I actually transitioned

5:29

to the cell side from the from the hedge fund

5:31

and and from the prop book I was trading,

5:33

and from there I was that was actually

5:36

very interesting because I was advising

5:38

clients on managing their price

5:41

risk, their coffee price risk across

5:43

the supply chain. So that meant producers

5:45

and exporters, trade houses

5:48

and uh and traders, speculators,

5:50

but also roasters and consumers.

5:52

So I kind of really got a crash

5:54

course um in in price

5:57

risk management for coffee, and that led

5:59

me to starting this this

6:01

firm that I work in now

6:04

where I provide research and

6:06

training to people who have a steak

6:08

in the price and coffee. So, first

6:11

of all, it's really um fascinating

6:13

to think that a company like Nestley might

6:15

have a a hedge fund nestled

6:18

inside of it trading coffee

6:20

futures. And I definitely want to ask more about

6:22

that. But before we do, I have a very basic

6:25

question and I was just thinking of it when

6:27

when I said in the intro, you know the price

6:30

of coffee has surged. If

6:32

we say the price of coffee is

6:34

at a ten year high,

6:36

what are we actually talking about,

6:39

Like, what is the benchmark of being

6:42

because I know they're there are obviously

6:44

different types, but like,

6:46

what's the being equivalent of the I

6:49

guess the ten year US treasury?

6:52

Okay, So I love that

6:54

being equivalent of the question. Yeah,

6:57

if you could put it in financial terms, Uh.

7:00

Yeah, So the coffee futures

7:03

market, effectually known as the C market,

7:05

is the primary benchmark for the price

7:07

of coffee. As you kind of alluded

7:10

to, there are two major

7:12

types of coffee. There's Arabica, which is what

7:15

we trade on the C market. Uh, and then there's

7:17

Robusta, which is what is traded on the London

7:20

market. Now, the Arabic

7:23

market is traded in cents per pound and the

7:25

Robusta market is traded in dollars per

7:27

metric ton. But the Arabic market

7:30

is the larger, more

7:32

volatile and more exciting market,

7:34

so that that also attracts a lot more of this speculative

7:38

interest. But those are the two main

7:40

markets that were trading. And of course

7:42

there's there's you know, a spot market. There's a cash market

7:44

that's incredibly varied

7:47

because coffee has really exploded

7:49

in the last twenty years into

7:52

this this idea of specialty coffee

7:54

and fine coffee. So there's a whole you

7:56

know, secondary market out there, much

7:58

like there is for for wine.

8:01

Right there's probably a benchmark price

8:03

for wine, but there's also a huge

8:05

variety on the you know, on the low

8:07

and the high end. So quickly, quicklyure

8:10

are these are the futures that are traded. Are they cash

8:12

settled futures or are they physical

8:14

delivery future? They are

8:16

physical delivery and that

8:19

is an essential part of the

8:22

you know, keeping these futures

8:24

honest. So there really is

8:27

a connection you know, between

8:29

the futures prices and the and

8:31

the physical and and then you know that's done through

8:33

the certified stocks. It's particularly

8:36

relevant because the

8:38

exchange has set very

8:41

steep aging penalties and

8:43

and that exists for a very important reason,

8:45

and that's to to facilitate that cash

8:47

convergence. Right. We don't want the certified

8:49

stocks to just be a sort of a theoretical

8:52

financial asset. At the end of the day, someone

8:55

needs to take that coffee out of the warehouse

8:57

and drink it, right, So they put

9:00

heavy aging penalties on that to incentivize

9:03

consumers to d stock

9:06

certified inventory and consuming. So

9:09

could we um dive into that a

9:11

little bit more, because I was reading

9:14

that people traders are using

9:16

more futures than normal right

9:18

now because they're worried they might not be

9:20

able to get enough stock piles

9:23

on the physical the spot

9:25

market, so they're worried there won't be enough

9:27

to actually take delivery of. Can

9:29

you just explain how that

9:31

process typically works and how

9:33

much of trading is divided between

9:36

UM spot and futures

9:39

and sort of forward hedging versus

9:41

buying right now, because I imagine again

9:44

a company like Starbucks or Nestley,

9:46

which needs huge amounts of coffee

9:48

every year is probably hedging

9:50

its exposure very far in advance. Yeah,

9:54

So it really depends because there's

9:57

a there is a variety of

9:59

size in the consuming side

10:02

and on the export side as well. Right, So

10:05

there is a threshold that you need of

10:07

of production or consumption to

10:09

to make hedging in the futures market relevant

10:12

and useful. So, for

10:14

for context, a single futures

10:16

contract of Araplica is thirty seven

10:19

five pounds. So if you're

10:21

just a small mom and pop roaster,

10:24

you're probably not going to be hedging, you know,

10:26

on the futures market in terms of

10:28

adding coverage. This is,

10:30

as you kind of mentioned, something for the bigger

10:33

traders or the bigger consumers

10:36

to deal with. They have a

10:38

a pretty you know, clear system.

10:40

They have a methodology to how they're

10:43

they're acquiring coffee in general, and

10:45

that is a combination of physical

10:47

contracts and futures

10:49

contracts. If you're if you're a large

10:52

company like you know, Nestle or Folgers

10:54

or whoever, you you have a network of

10:56

suppliers um and you

10:58

will put out you know, sort of bounties.

11:00

You'll say, hey, who wants to sell me coffee,

11:03

give me your best bids or offers

11:05

rather and and they will send

11:07

out proposals to to those big

11:09

companies. I don't want to get too

11:11

into at the moment UH the

11:13

nuance of differential

11:16

contracts and and price to be fixed

11:18

contracts, but essentially,

11:20

if you're a company like Nestlie, you need to there

11:23

is a spread, right, there is a premium

11:25

or a discount to buying specific

11:28

physical qualities of coffee to

11:30

the futures contract. So there's

11:32

there's two different kind of risks that they need to

11:34

manage, but there there is also

11:37

a general larger correlation.

11:39

So if you're a company that does size

11:42

that needs that physical of

11:44

coffee, you have the option of either buying

11:47

that physical making a physical contract

11:49

with a producer or an exporter to

11:52

buy that coffee. Or if

11:54

you don't have a good deal there's

11:56

not a good UH offer to

11:58

you, or or you're not sure exactly

12:00

which qualities you want to buy, you could

12:02

buy futures right, so you could just buy

12:05

you know, as much of the physical

12:07

that you need in futures contracts and

12:09

hold that as a hedge until you

12:12

are prepared to

12:14

sell those out and buy your your

12:16

physicals. Just

12:33

for the sort of

12:35

my visual understanding of this, can

12:37

you sort of walk through very quickly

12:40

every player that's involved between

12:43

the grower and you mentioned

12:45

you worked in India and Uganda. And then I

12:47

drink some coffee, Let's say I buy it at

12:49

a gas gas station, or I

12:52

drink it at the office like sort of like office office

12:54

quality coffee, which is actually very good.

12:56

At Bloomberg by the way, we have really good coffee. But

12:58

anyway, can you just talk like, okay, someone,

13:01

there's a farmer in Uganda, India.

13:03

Can you just real quickly like the whole supply

13:05

chain from farmer to mouth. Oh,

13:08

sure, I can. The coffee industry

13:10

is really divided into or

13:12

let me sit put it this way, that the farmers are

13:15

primarily divided into

13:17

Brazil and everybody else. Historically

13:21

coffee is produced, it's a it's a small

13:24

holder production. It's done

13:26

on small farms and small estates

13:29

um and that's has geographical

13:32

underpinnings because coffee

13:35

is what we call high grown, so it's grown

13:37

in the mountains and it's tropical. So

13:39

it's really only possible to grow coffee

13:42

in tropical mountains. And that

13:44

doesn't facilitate itself well

13:46

to big, mega farms,

13:49

and so that that kind of has this sort of small

13:51

holder farmer implication. The

13:54

exception to that is Brazil, which has

13:56

these very large plateaus,

13:59

so they are able to grow large

14:01

amounts of coffee and indeed they're the world's

14:03

largest producer of coffee and mechanize

14:06

it at the same time. So they are the exception

14:08

where they have these, uh, these these large

14:11

farms and and sort of the mass production

14:13

of the farming

14:16

of coffee. So you're

14:18

gonna have exporters now

14:20

who are generally multinationals,

14:23

but there's also local exporters

14:25

as well, who are positioned in all

14:27

of these key origins, these

14:29

key producing origins, and they'll have buying

14:31

centers uh, spread out throughout

14:34

the coffee farming regions, and much

14:36

like you know grain elevators

14:38

or whatever in the US and other countries.

14:41

UH, the farmers will will have

14:43

relationships with those buyers and they'll

14:45

know the prices and they will deliver

14:48

They will harvest the coffee themselves and

14:50

then they will deliver it to the

14:53

exporters. The processing

14:56

of coffee is actually kind of nuanced

14:58

as well, and there's two primary

15:00

ways of processing coffee.

15:03

So the coffee bean itself, like that

15:05

brown bean that you see in in the bag when

15:07

you buy that bag, that starts

15:09

out as a green bean inside

15:11

of a ripe cherry, right like a red cherry

15:13

piece of fruit. So the

15:16

two ways of processing that and getting that

15:18

bean to the roaster is

15:21

either what we call it the natural process,

15:23

which means that the farmer picks those those

15:25

cherries, they spread them out on a patio

15:27

to dry, and they dry

15:29

over that bean like a like a kind of like

15:32

a raisin, you know, um, like a hard

15:34

raisin, and you can actually pick those up and shake

15:36

them and hear a little rattle inside when they're when

15:38

they're ready, or they have the washed

15:40

process. And with the wash process,

15:42

you're picking that ripe cherry and

15:45

you are putting it through a wet

15:48

mill and and that sort of has

15:50

kind of like uh, remember

15:53

you know the log shoot ride in Disney

15:55

World where you're you know, you're getting the log

15:57

and it goes down to the thing of water. It's

16:00

what I like that. And so you're being

16:02

goes through this this shoot of water and

16:04

goes through kind of like a cheese graater type of device,

16:07

which pulps that cherry off of it and

16:10

then brings your washed green

16:12

being at the end out the other side. So

16:14

those are your two primary ways of getting

16:16

that that being to

16:19

the the exporter UH, and the

16:21

exporter will convert either of those

16:23

methods into a green processed

16:25

green being that they will sell to the

16:28

consumer. Now, the big issue that you guys

16:30

have probably been talking about with with others

16:32

and um that everyone is talking about in general is

16:34

supply chain issues. Right so right

16:37

now there is a big issue

16:39

especially in Brazil, but all over the world in Asia,

16:42

Vietnam with getting containers

16:44

and getting ships there to to actually get

16:46

that coffee to the people who need it UM.

16:48

And this is this has been affecting the price

16:51

and the supply and demand issues because

16:53

now destination markets have had

16:56

to draw down inventories and consume locally

16:58

coffee that normally would have

17:00

been been imported in. Now, once

17:02

that gets into the destination marketing and

17:05

that importer has that coffee, they will sell

17:07

it to the roasters UM. And

17:09

those can be large roasters

17:11

like the various groups that

17:13

that roast Dunk and Donuts coffee, or

17:16

or or small roasters or mom

17:18

and pop shops and when that

17:20

roaster gets that those bags

17:22

of green beans, then they will put it in

17:25

their roasting machines and they will come up with

17:27

with blends of coffee and

17:29

then it's and then it's delivered to the to the coffee

17:32

shops. So maybe

17:34

this is a good place to explain

17:37

exactly what is driving the price

17:39

of coffee higher. And I know

17:41

you mentioned supply chain issues, but

17:43

it seems like, well with most

17:46

things that seem to be experiencing

17:48

a shortage or some degree of scarcity

17:50

recently, it seems like it's a combination

17:53

of factors. Absolutely,

17:55

and it's really been you know, what

17:58

do you call it a perfect store? You know, a

18:01

confluence of events here. I

18:03

am a fundamental um

18:05

trader at heart. That's kind of how I was

18:08

raised. And what I believe drives markets

18:10

in general is supplying de marin

18:12

and fundamentals. And and this has been a

18:14

fundamental story. So coffee

18:17

is a biannual crop, so

18:20

it um meaning that the

18:22

coffee is a is a tree crop, unlike row

18:24

crops, and that you're planting with

18:27

you know, corn or wheat or cotton

18:30

or whatever. So you have a tree that

18:32

produces fruit and and so what happens

18:34

is the tree usually produces a lot of

18:36

fruit one year and then the

18:39

next year it sort of has to recover and rest,

18:41

and so it will have less fruit the next year.

18:43

And that's sort of the general biannual cycle

18:46

of coffee. So you tend to have an on near and an off

18:48

here. So we had a very big on

18:50

year in Um

18:52

where there was a surplus and abundance

18:54

of coffee, and then one

18:57

we were expecting to have an off

19:00

year, and that was normal, but but

19:02

it actually was exacerbated a bit more than that

19:04

due to droughts in Brazil that

19:06

that affected the coffee crop

19:09

on sort of two ends. Now,

19:11

again, coffee is a tree crop,

19:14

so the way that the

19:16

fruit comes onto the tree is

19:18

in sort of two phases. You

19:21

will have the branch growth the year

19:23

prior to the coffee crop,

19:25

and so that you will have what we call new growth

19:28

on the end of the branch of the

19:30

coffee tree, and then the following

19:32

season you will get flowering and

19:34

fruit on that new growth. So

19:37

what we had was we had a drought that

19:40

stunted that new growth and made

19:42

less room for coffee cherries,

19:46

and then we had also aged route

19:48

during that blooming season during the flowering

19:51

season where where those would grow into new

19:53

fruits. So that had kind of a double whammy

19:55

on already a down year for

19:58

for coffee. Now, just to

20:01

make things even more interesting,

20:04

um, we also had the worst

20:06

frost that we've seen in Brazil um

20:09

in in in twenty five years.

20:11

And so even though we had

20:13

this bad crop that we were like, okay, this

20:16

is a bad crop. There's a deficit, but you

20:18

know, we had an on year the year prior. That's

20:20

normal, so you know, the market needed

20:22

to rally, and all that was was well and good,

20:25

but at the same time, we had this frost

20:28

that essentially killed

20:30

a lot of the new growth now on

20:32

on the tree that we were expecting

20:35

for our next on crop, our next on cycle.

20:38

So that turned out to be

20:40

an absolute disaster. And that

20:42

was just back in July, and

20:44

so we were waiting until the

20:46

flowering which which starts

20:49

in um sort of October November, and

20:52

to see how how bad things

20:54

were. And we had a

20:56

decent flowering, so we thought things were gonna be

20:58

okay, but it turned

21:01

out that what we call

21:03

the setting what was subpar.

21:05

So what what happens is that the branch

21:08

grows these flowers, um, and

21:10

then those become pollinated and turned

21:12

into fruits they set into a bean.

21:15

But uh, we much less of those

21:18

flowers turned into you know, juvenile

21:20

beans than than expected. So now

21:23

we have a massive deficit in

21:25

the current year that we're already in and the

21:28

bumper crop that we were looking to save

21:30

this deficit to solve the deficit has

21:32

now been severely compromised by

21:34

frost. So that's the supply

21:36

and demand issue, but it kind

21:38

of we had other factors as

21:41

well that went into that. You know, we had

21:43

We've been talking a lot about inflation, right,

21:45

UM, that's been uh, certainly

21:48

a factor, and we saw that coffee

21:51

largely um rallied

21:53

into uh dollar weakness,

21:56

uh you know, last the earlier

21:58

part of this year, UM, along

22:00

with many other commodities, and it's

22:02

really kind of never looked back. You

22:05

know. The people are always it's

22:07

like people hear these supply

22:10

side explanations and weather in particular,

22:12

and I feel like it's almost unsatisfied to them.

22:14

And what you said is like totally makes sense, but they're like,

22:17

yeah, but sure, certainly there must be like some big

22:20

macro story. And you mentioned the dollar a

22:22

little bit. I'm curious if there's any sort

22:24

of demand element, and I'm thinking

22:26

specifically in two ways, Like one is

22:28

a has there been a new change in overall

22:31

volume demand? But be did

22:33

the shift in particularly the

22:35

developed world and say, you're

22:38

really all over the world from offices

22:40

where people obviously consume a lot of coffee

22:43

to uh home to working from

22:45

home? Did that change coffee

22:48

buying behavior at all in terms of what kind

22:50

of coffee people drink and did that have

22:52

any sort of ripple effects on the

22:54

overall market. Yeah? Absolutely.

22:56

And you know there's a reason that we look

22:59

at the supply side over the demand

23:01

side, I think, UM, at least in coffee,

23:04

and that's because the supply side is

23:06

volatile and the demand side is relatively

23:08

static. So I always teach them

23:10

my classes that you know, coffee is

23:12

has inelastic demand and

23:14

it also has inelastic supply generally

23:17

UM. And that's why it's so it's so volatile

23:19

because because it's a tree crop, you

23:22

can't just plant more if

23:24

prices are high. You have to plant that

23:26

profits several years earlier, and

23:29

so this exacerbates moves on either

23:31

side. So you know, prices are high,

23:33

you plant a bunch of new trees, and then

23:35

three years later you start getting the

23:37

supply from that um that point,

23:40

so then you can get a massive oversupply at that

23:42

point. But to your to your point about

23:44

demand, to the initial reaction

23:46

back in in in in when

23:49

COVID first became people first realized

23:51

that COVID was going to be here to stay and it was gonna

23:53

be a problem, was a sell off. The initial

23:56

reaction was, this is going to destroy demand.

23:58

Now that that was true,

24:00

and and I'll tell you why in a second, but

24:03

but before I do, In

24:05

general, coffee has very inelastic

24:08

demand. And that's because you if

24:10

you're walking down the street and someone is like, hey,

24:12

coffee, free coffee, you might say,

24:14

oh, great, I'll take a cup of coffee, right uh.

24:16

And then you walk a few more feet and someone says, hey, free

24:18

coffee, you'd say, no, thanks, I already have one. Right.

24:21

You drink one or two coffee, so coffee a

24:23

day or whatever whatever it is that you drink,

24:25

whether the price is ten dollars or one dollar,

24:28

right, that's just it's very there's there's

24:30

not a lot of substitutions for it. You're not like, oh,

24:33

should I have a coke, or should I have a coffee? You

24:35

have your coffees, you know, set amount

24:37

of them, no matter what. Now

24:39

where the demand does have

24:42

some wiggle room and some play.

24:44

One of the major ones is in out of home

24:46

consumption. When Starbucks

24:49

charges you ten dollars for a latte

24:51

or whatever it is, uh, then you might,

24:54

if if times are toffee, might say I can't

24:56

afford that, I'm just gonna buy the

24:58

cafe bustello, local

25:00

bodega and and that'll and that's how I'm

25:02

gonna have my coffee. So the overall

25:05

demands tends not to move that much, um,

25:07

but you might shift where you're buying

25:10

it. And when we had COVID

25:12

and the lockdowns, that created an intense

25:15

shift from out of home consumption

25:18

where the business of coffee shops

25:20

was all but destroyed, to grocery

25:22

store where that was suddenly where or

25:25

or Amazon or whatever you know, digital subscriptions,

25:28

and that was really the model now where people had

25:30

to consume their coffee. But

25:33

more than that, the other

25:35

sort of hidden demand that was destroyed

25:38

was the sort of social

25:41

demand for coffee. You mentioned office

25:43

coffee, right, so whereas in

25:45

normally you would have had to go to the office and

25:48

you make a brew of pot of coffee, and

25:50

then you brew a second pot of coffee and if no one drinks

25:52

that, you dump it down the drain, right, Or you

25:54

go to a wedding and they

25:56

might brew a couple of big vats of coffee

25:59

and then they dumped down the drain. What people

26:01

don't consume. So all of these sort of

26:03

out of home events and or

26:06

or industry events, right, you know, people

26:08

stopped going to industry events for a while, so

26:10

all of that demand from catering

26:13

and and from coffee shops was

26:15

was pretty much destroyed. M So

26:18

what happens when coffee prices

26:20

go a lot higher, like A how

26:23

are the costs actually absorbed

26:26

or passed on? And then be do

26:28

you see a lot of people maybe

26:30

switching from high quality

26:33

coffee beans like Arabica to something

26:36

cheaper to try to offset that price increase?

26:39

Oh yeah, absolutely, so you see

26:42

you definitely see switching. Like I mentioned,

26:44

total demand doesn't tend

26:46

to change that much, but you definitely see

26:48

switching from different varieties.

26:52

The COVID really hurt

26:54

the specialty coffee business that

26:56

has been something that have been growing tremendously for

26:58

the last twenty years, as I mentioned, you know, there

27:01

there was a large group of people

27:03

who enjoyed going to the specialty

27:05

coffee shops and using a chemics or

27:08

um you know, a special pour over type

27:10

of delivery system and and drinking

27:13

these single origin find coffees. That

27:15

all kind of went away um and and

27:17

a lot of that was lost. But

27:19

it's more generally if you're talking about

27:22

large prices increases and and how

27:24

are you switching, well, you you

27:26

have the switch in both

27:29

destination markets and in origin. So

27:32

in origin, the producing

27:34

countries tend to drink locally

27:36

and consume the cheaper qualities

27:39

of coffee and export the

27:42

higher qualities that that

27:44

that are are more valuable. So

27:47

in Brazil, for example, they produced both Arabica

27:49

and Robusta. So with the high

27:53

prices of Arabica, what

27:55

you'll see is that the local consumption

27:57

will shift towards Robusta UH

28:00

and they will export less Robusta and

28:02

more more Arabica. So

28:04

we'll see that shift there. But also on

28:06

the consumption side, there's plenty

28:09

of companies and and businesses

28:11

that do Arabica UH

28:13

and so they can't really shift

28:16

that that split, although they will shift too

28:18

cheaper versions of Arabica if

28:20

they if they need to. But but many companies

28:23

just put out like a breakfast blend or

28:25

you know, they're you know, their French roast or whatever,

28:27

and they don't specify where where

28:29

that coffee is coming from, and so

28:31

then they're really selling more of a flavor profile.

28:34

And then it's just a matter of optimizing

28:38

cost versus flavor. When

28:40

when when prices are expensive, is

28:43

it the Arabica robusta spread?

28:46

Like, isn't that a thing you trade? Yeah?

28:49

For sure, So there is the we

28:51

call it the ARB, even though it's not really

28:53

an arbitrage. There's sort of two different products,

28:55

um but but that's what we we we call

28:58

the ARB. So the ARB tends

29:00

to be have a nice little range

29:03

when things are calm, you know, maybe something

29:05

like sixty cents or something like

29:07

that would be the typical Arabica arbitrage.

29:10

But when Arabica goes

29:12

nuts, that ORB tends to just

29:14

sort of disappear and just become the

29:16

price of arabica because Arabica tends

29:19

to um outpace robustas

29:21

so steeply that it's

29:24

it ceases to have that sort of range

29:26

bound nature and

29:29

just tends to have I don't know how

29:31

into options you are, but uh, it

29:33

tends to have the same delta as Arabica.

29:36

So is trading coffee. Uh you

29:38

know, given all that volatility that

29:40

you just laid out, and given these different

29:42

spreads between different types of coffee

29:45

bean, is trading coffee fun

29:47

and lucrative? Should we all be going into

29:50

the coffee trading business? All

29:52

become coffee people. You might need

29:54

to take a couple of courses first at the coffee

29:56

Trade ACAP. But no, they

29:59

they it's not true. It's a myth.

30:01

But they say that coffee is the second most

30:04

traded commodity in the world. Um,

30:06

for exactly that reason. It's because it is fun.

30:09

I love the coffee business. It's very

30:11

interesting. Um. If you travel

30:14

to do crop tours, you know you're going to

30:17

sort of interesting and exciting places

30:19

to to learn about it. But from

30:22

a lucrative speculative point

30:24

of view, there is volatility and coffee

30:27

and volatilities how you make

30:29

or or in many cases

30:32

lose money. Right. But but you need that

30:34

volatility to be able to trade.

30:36

So the what we call the tourists

30:39

interesting coffee is is heavy. Uh,

30:41

there's a lot of uh, there's a lot of people

30:43

who are you know, not necessarily coffee

30:46

people don't necessarily have a coffee background, but like

30:48

to trade coffee. Uh, both you

30:50

know, sort of technical analysts and sort of amateur

30:53

or armchair fundamental traders.

30:55

Um. And and there's there's plenty of good ones too.

30:57

You know, there's plenty of people who are are just sort

30:59

of part time specs who make money

31:01

and coffee. Interestingly enough, I

31:04

I only got into Twitter

31:07

for my business, but in the Twitter sphere,

31:09

the financial twitter sphere, there

31:11

is a lot of heated discussion

31:14

on the coffee market and what's going

31:16

on there something

31:32

I'm curious about. It's like, okay, we've talked

31:35

about Arabbic on Robusta, but I think there's

31:37

other types of coffee and I'm

31:39

sort of curious, like you know, more specialized

31:41

beans or like kna. I

31:44

was in Hawaii and I had ConA coffee

31:46

there, and then I know also like fairly traded

31:48

coffee, which I imagine has something

31:50

of a different market structure. Let's

31:53

say, like I want to sell in

31:55

volume ConA coffee in New York,

31:58

can I predictably you use the

32:00

futures markets for say Arabica

32:03

as a hedge as a hedging instrument,

32:05

even if my end need isn't Arabica,

32:07

Like, they're enough relationship

32:10

generally between the price where

32:12

these instruments will be of use

32:14

to me regardless of whether I'm actually

32:16

selling Arabica. Well, that's a great

32:18

question, and um, you know, the

32:21

unfortunate answer is that it depends right.

32:24

Uh. So of

32:27

coffee is either Arabica or Robusta.

32:30

There is a tiny proportion

32:33

of coffee that is um some

32:35

sort of ancillary uh species

32:38

like Liberica, which

32:40

is sort of a much larger coffee

32:43

tree. And I've only ever seen that

32:45

once and that was the people used

32:47

to sort of to border uh

32:50

their plantations. So it was just kind of created

32:52

a sort of a tree border around their plantation

32:55

that also produced a little bit of coffee. But they're

32:57

not efficient, um and they

32:59

don't produce good tasting coffee. So

33:01

almost all of it is Arabica or Robusta.

33:04

Now where you see the specialization is

33:06

really an origin. So it's really if

33:08

you're talking about ConA coffee, you're talking

33:10

about Arabica that's produced

33:13

in Kona. Um. It's that's

33:15

that's that's produced there and other people like

33:17

you might, I personally always buy

33:19

a hundred percent Colombian. That's my personal

33:22

coffee that I that I really like. It doesn't,

33:24

then you know the secret for you. It doesn't have to be expensive

33:27

Colombian coffee. If you can just you just go

33:29

by the the can of a pent Colombian,

33:31

it's usually gonna be pretty decent. So most

33:35

Arabica coffees have a

33:37

good correlation with

33:39

the futures market. Now each will

33:41

have a differential based

33:43

on how in demand

33:46

really that origin is versus

33:48

the the overall the overall market.

33:51

So because the futures market is really made up

33:53

of a basket of what we

33:55

call milds um so that those would be

33:57

washed coffees. So the futures

33:59

are good that we look at. It's sort of like an average

34:02

of Arabica's right, of

34:04

a certain group of Arabicas. If

34:06

you look at Colombians, they tend

34:09

to be say, you know, ten or twenty cents

34:11

more than that right now, they're more like

34:13

fifty five or sixty cents more just because of

34:15

supplying demand issues. If you look

34:18

at something like ConA coffee,

34:20

you have almost zero correlation with

34:23

UM with the futures market, because that

34:25

is such a tiny area of

34:27

production and such a highly sought after

34:29

coffee that it's always gonna be like

34:32

four or five dollars per pound. I'm just making

34:34

that number up, But so even

34:36

if the futures market is rallying heavily,

34:39

that that price tends to be sticky. Same with

34:42

Kenyan coffee. Kenyan coffees are

34:44

often like a hundred cents more than

34:47

than the futures market. So for

34:49

those sort of very outlier

34:52

specialty coffees, you're probably

34:54

not it's probably not gonna make a lot of sense

34:56

to to use the futures market to hedge

34:59

it. But for the bulk

35:01

of coffees first say, the UM,

35:06

it definitely would make sense. Can

35:09

we go back to something you said in the

35:11

very beginning about large multinationals

35:14

having hedge funds UM that profit

35:18

off of the information

35:20

flow, and it kind of reminded me of UM. I

35:22

guess Goldman Sachs pre

35:25

um vocal rule sort of pre

35:27

financial crisis, where it could

35:29

have a very lucrative internal

35:32

trading DUSK that traded for its own account

35:34

and it used it's sort of position

35:37

in the market looking at the flow

35:40

going through it to help it make

35:42

trading decisions. Is that sort

35:45

of what's going on here with coffee?

35:47

I would in differentiate first

35:49

of all, between say a consuming

35:52

company and a trading

35:55

company. Okay, this is somewhat

35:57

of an arbitrary distinction, because

36:00

no matter who's trading coffee, you're

36:02

and this is something I was taught from

36:05

day one as a trader, is you're

36:07

always speculating. Right. If

36:09

you don't buy, you're speculating that

36:11

that's you know, a good decision. If

36:13

you if you're buying now, then you're you're

36:15

essentially bullish. If you're if you're selling more

36:18

than then you're buying, then you're barish. Right,

36:21

So, no matter who you are in the supply chain,

36:23

you're always speculating somehow in

36:25

your interaction with the futures market. So

36:28

if you are an exporter, for example,

36:31

exporters will trade sort of

36:33

a prop book. Usually

36:35

they you know, different companies have different

36:37

rules on internal lafer for managing

36:40

their price risk. But you know, let's say

36:42

you're just a normal local

36:44

exporter. You buy coffee locally

36:47

and then you sell it for export.

36:50

So what they would normally

36:52

do if they're a differential trader is they

36:54

would buy coffee locally and local currency

36:57

from the farmers and the producers,

36:59

and then they would immediately sell futures against

37:02

that in the futures market, and

37:04

that would create a differential position.

37:06

So they would have, say that the

37:08

current futures prices two

37:11

dollars and they're buying coffee

37:13

at two thirty

37:15

UH cents per pound, So they

37:17

buy coffee locally at two per

37:20

pound, they sell a

37:22

future against it at two dollars per

37:24

pound, so they would have they would be buying

37:26

coffee for thirty cents over and

37:28

they have locked in that differential

37:31

right. Then when they export that coffee,

37:33

they sell it to another company,

37:36

and maybe that company buys it for thirty

37:39

two cents over the market, right,

37:41

and then they would lift their heads and sell that coffee

37:44

to that company. Now,

37:46

if that exporter is smart

37:49

and they know that prices

37:51

are going to rally, they know that,

37:53

Let's say you're a Brazilian exporter and

37:56

you know you need to buy coffee uh

37:58

for your you know, for your business, and

38:02

you know that the crop is gonna be small this year

38:04

and the market is gonna go nuts, then maybe

38:06

you would buy futures ahead of time

38:09

so that when you're ready to buy

38:11

physical, you can sell out those

38:14

futures and and make make some profit.

38:16

Or maybe you wouldn't hedge it right away.

38:18

Maybe you would buy that physical from

38:21

the farmers, and then rather

38:23

than just immediately turning around and selling futures

38:25

against it to lock in your hedge, you might wait

38:27

for it to rally another five or ten cents and then lock

38:29

in your hedge. Right. So, so

38:31

that's how they're going to be sort of speculating

38:34

in that in that market, and the consumers

38:36

are going to do the same thing on their side, sort of the

38:38

opposite. They'll be buying or selling

38:40

futures or options to

38:43

protect their books and protect their

38:45

hedges in different ways. But the

38:47

trade themselves sometimes

38:49

have a hedge fund that's either or

38:52

a prop test that's either part of the company itself

38:55

or sort of shares a parent company

38:57

and share information, but have sort of Chinese

38:59

walls and operations, and so

39:02

they are straight up you know, I

39:04

don't want to say gambling, but you know, speculating

39:07

without a physical position in those

39:10

um in those markets. That honestly

39:12

makes a lot of sense, and I think is good for

39:14

the market because they have

39:17

insights into what the supply

39:19

and demand is going to be, and so it

39:21

is better for the market if we

39:23

know there's going to be a shortage for

39:25

the market to start rallying now and

39:28

repricing to what the proper

39:30

price of coffee should be, to the levels

39:32

that are going to incentivize production. You

39:34

want that to happen as soon as possible. And

39:37

and the opposite is true on the other side, right

39:39

when when coffee is vastly oversupplied,

39:41

you need to push the prices down to a point that's

39:43

going to disincentivize production.

39:46

You know, we talked about, okay, the price of these

39:49

commodity coffee futures

39:52

roughly having doubled in the last year, how

39:54

volatile is the end price of saying,

39:57

you know, like I would say I buy coffee at Starbucks.

40:00

Actually I typically buy a coffee at Dunkin Donuts

40:02

when I buy a couple out there, Like how

40:04

much is the bean in that price

40:07

versus you know, all the other things like

40:09

the labor of staff at dunkin Donuts and so

40:11

forth. It's a great question, and it's always

40:13

a little bit controversial because

40:16

coffee is the one of the most socially

40:19

conscious commodities out

40:21

there. Um, I think just by nature of the consumer.

40:24

I mean, historically they

40:26

say that coffee house has created the

40:28

enlightenment. Back in the seventeenth century, before

40:30

that, everyone went to the pub. Once people started

40:33

making coffee houses, they were sober enough to

40:35

actually sit up and talk and think with

40:37

each other. So that tradition has carried

40:39

on to today where if you have coffee

40:42

houses that the consumer of coffee

40:44

tends to be sort of conscientious

40:46

and they tend to care about

40:49

whether the beans come from. That's not true,

40:51

you know, entirely, it's not true across the boards.

40:53

Some people, you know, just wake up and they want a cup of coffee,

40:56

and that's fine. But that sort of

40:59

culture has spilled over into

41:02

the demand side. You mentioned fair trade

41:04

coffee before. That's, um,

41:07

something that basically came out of

41:09

this coffee culture and this desire to ensure

41:12

that there's sort of equitable treatment of

41:15

farmers and everything. Because of

41:17

that demand for it, that is that

41:19

is spilled into the trade, and so the trade has to facilitate

41:22

sustainable practices. Something

41:24

that was pioneered in the coffee industry is

41:27

what we call certified coffee

41:30

um, which is where you have fair trade or

41:33

Rainforest Alliance or boots or whatever,

41:35

that where they have to actually

41:37

certify that these certain practices are being

41:39

met, you know, in order to to sell your coffee

41:41

in that way. So to answer your question, So

41:44

that's why it's a little bit controversial because when

41:46

we look at the price of coffee versus what you have

41:48

in a coffee shop, and I just saw an infographic

41:51

about this the other day that was put out by the Financial

41:54

Times, then the it's

41:56

it's pretty depressing because

41:58

you say, for a cup of coffee that

42:00

costs say, uh, five

42:03

dollars, maybe about twenty

42:05

cents of that is going to the grower.

42:08

I don't think that that's necessarily inappropriate

42:11

because a lot of the costs

42:13

are are heavier on the shop

42:15

side. For example, if you offer

42:18

free milk with your coffee, that often

42:20

has almost the same price as a commodity

42:23

to coffee. So so that's that's

42:25

gonna be one portion of your

42:27

costs. The rent for

42:30

your coffee shop is going to be something

42:32

like nine times your cost

42:34

to buy the coffee beans. If you

42:37

have staff, that's gonna be something like six

42:39

times the cost of your of your coffee

42:41

beans. Right, then you have taxes, right,

42:43

that's that's that's four times the cost of those

42:45

coffee beans. So you have all

42:48

of these different costs that that really

42:50

are built into the price of that

42:52

cup of coffee, which feels unfair,

42:55

you know in a lot of ways to that to that grower.

42:58

And you know, there's a lot of people who have dedicated

43:00

their lives to ensuring that the

43:03

the grower gets more of that. And uh, you

43:05

know, I think that's a very that's a very popular

43:08

industry in the coffee world is facilitating

43:10

that. But I think what really

43:13

sort of irks people about it

43:15

is that it feels like a cup of coffee

43:18

is almost like a direct commodity.

43:20

Right. It feels like, oh, you

43:22

know, if you buy uh

43:25

an orange in the store, like most

43:27

of the price for that orange should go to the grower

43:30

of the orange. Right, the same thing if you buy a cup of coffee,

43:32

you feel like it's it's coffee. Shouldn't you

43:34

know, require anything but money to the grower,

43:37

But it really requires a whole lot of

43:40

capital aside from that

43:42

that initial being that a being is part of it,

43:44

but you have to on top of

43:46

you know, once that being just gets sent to the

43:48

exporter. Then you have a huge capital

43:51

equipment costs to process it. Right,

43:53

all of that those wet mills and dry mills we mentioned

43:56

those are those are big intensive machinery.

43:58

Then you have to process and

44:01

transport it. Right. The we've

44:03

all seen the prices if you look at the Baltic Dry

44:05

Index or something, you've seen the prices of shipping.

44:08

How much of that goes into it Once it comes

44:10

to the destination market. The

44:12

roaster has a huge amounts

44:15

of costs, energy costs and

44:17

UH and capital equipment costs

44:19

to turn that green bean into a brown

44:22

bean. And then once it gets to the shop,

44:24

right, that shop owner has to pay their staff,

44:27

they have to pay health insurance, UH, they

44:29

have to pay taxes. So there is really

44:31

a whole unseen sort

44:33

of supply chain of costs that go into

44:35

that. Yeah, it sounds

44:38

a bit like oil, right where there's

44:40

a huge outlay for capital and

44:43

exploration UM. And then of course

44:45

you have the refining process and

44:47

all of that actually goes into the cost

44:50

of the end product. Ryan,

44:52

I want to ask you the obvious

44:54

question here, which is how

44:56

long would we expect

44:59

these high price is to persist,

45:01

and I asked, because lots of people

45:04

seem to be suggesting that this is going to be

45:06

a longer term issue. But

45:09

we're actually recording this episode on

45:11

the day that the US Department of Agriculture

45:13

just released its latest coffee

45:15

report, which is a thing that I

45:17

didn't know existed. And um,

45:19

the Department just increased its

45:22

estimate for world coffee

45:24

output. So coffee prices are

45:26

falling, at least for today. So

45:29

I guess the question is is this a turning point

45:31

or would you expect price pressures to be

45:33

with us for some time? So

45:36

I would I'm a fundamentalist, And

45:38

the reason that coffee prices are

45:41

high, I believe or because of supply

45:43

and demand issues, and we are

45:45

in the midst of those supply and demand issues

45:47

now. Historically, if

45:50

you look at the price of coffee on

45:52

a fifty year charge or hunter deer charge

45:54

or something, you'll see that it looks almost

45:57

like an e k G. Right, you know, like that machine

45:59

that goes deep in the hospital. You have

46:01

these spikes, then it comes down and rest for

46:03

a minute. And then they had a spike and it comes down and rest

46:05

for a minute, and it tends to do that between

46:07

one dollar and three dollars, so to

46:09

fifty is as my boss

46:12

or twenty five as my my old

46:14

boss used to say, the hedge fund, it's

46:16

kind of half pregnant. Um, it's not really.

46:19

It hasn't really hit that full

46:21

three dollar. This is a major

46:23

problem mark that we typically

46:26

expect from coffee. Now. I don't know if

46:28

it's going to actually go there or not. Maybe we've

46:30

maybe we've solved the supply issues already, but

46:32

it doesn't seem like that. It seems

46:34

more like and in the U. S d. A

46:37

UH is great for things like corn and

46:39

wheat and especially those US centric markets.

46:42

It's not the people in the

46:44

coffee world don't pay a ton of attention

46:46

to it. Um, it's not. It's not necessarily

46:49

market moving. But if

46:52

you look to the people in the know right now, it's

46:54

all about revising down Brazil

46:57

estimates um for this coming

46:59

crop. And that's really what it's all about. We're

47:01

in the deficit market right now, that's for sure.

47:04

Now the question is will

47:06

twenty two be balanced

47:09

a little bit of a surplus or a deficit,

47:11

And there are some people saying that it's going to be

47:13

a massive deficit. They're kind of outliers.

47:16

I think the consensus is more

47:18

for a modest deficit and moderate

47:20

deficit, which is no small

47:23

thing on the back of a big deficit, right, especially

47:25

when you were expecting a surplus

47:27

after that, So that tightness

47:30

should in theory continue uh

47:32

into the next deficit year. But

47:35

the real estimates

47:38

so we're right now, we're in the cycle

47:41

of Brazil where the flowering

47:43

has happened, the setting has happened,

47:45

but the beans are really too small to really

47:47

be able to get an accurate account

47:50

engage yet of what that crop is going to be. But

47:52

in January we should be able to get a

47:55

more accurate count, will start to see the

47:57

real estimates coming out as to what

47:59

that crop will be, and that's largely going to

48:01

determine the direction the price of coffee.

48:04

Ryan, thank you so much for coming on

48:06

odd Lots. I just learned a ton about

48:08

coffee and really appreciate you joining my

48:11

pleasure. Yeah, thanks for having me, Thanks

48:13

so much. Frying that was great, Thank you so much. Frying crazy.

48:29

You know, I know people get frustrated

48:31

a little bit about all these sort

48:34

of like weather and idio sittingcratic

48:36

explanations because they think like, oh, surely

48:39

must be all about the FED or inflation

48:41

or something like that. But it really does feel like coffee,

48:44

especially as he described at the beginning, like, yeah,

48:46

it's really about like a bunch of weird weather

48:49

stuff and a lot of it, particularly in Brazil. Yeah,

48:51

I mean, it does seem like we've had

48:54

these events where a confluence of

48:57

different factors come together to create

49:00

this, Ryan said, the perfect storm

49:02

for a lot of commodity prices recently.

49:04

But I guess, on the other hand, you

49:06

might expect that to happen given that

49:08

we've just had a global pandemic

49:10

which has really up ended the way we

49:12

do things normally. Right, a pandemic

49:16

isn't technically a storm. But

49:18

if you you know, if you don't have to um,

49:20

you don't have to extend that metaphor or

49:22

that analogy like too widely to

49:24

say, like how we could use the term perfect

49:27

storm and have it encompashed that and of course

49:29

is Ryan pointed out, you know, there's energy

49:31

prices go into coffee.

49:34

He mentioned the Baltic Dry Index

49:36

and shipping, so all of these things

49:38

getting jostled or whacked

49:41

at once. Uh yeah, Like of course,

49:43

like it's going to happen even in

49:45

coffee at the you know,

49:47

in the middle or you know, the later

49:49

stages hopefully of a pandemic whack

49:52

inflation strikes again. Actually,

49:54

there's one thing I'm

49:56

bummed I didn't ask Ryan this, but

49:59

I wanted to ask how much of the

50:02

buying that we've seen over the past year

50:04

that's helping to push up prices, how

50:06

much of that is people buying

50:08

in order to pad their inventories, um,

50:11

just in case they can't get they

50:14

can't get coffee beans in the future. Because

50:16

again, this is an issue that we see in lots

50:18

of different commodities, this bullwhip effect

50:20

where businesses people

50:23

find it difficult to balance

50:26

their ordering with actual

50:28

demand, and so you get these big swings

50:30

in inventory and then a big swing

50:32

in the price as well. So I'm curious whether

50:34

or not that's coming into play, But I

50:37

guess I'll have two d m Ryan on

50:39

on coffee Twitter. Yeah we can, uh, we

50:41

can write a follow up a blog

50:43

post on that for the blog. But yeah, I mean, you

50:45

know, as you pointed out, like everyone in

50:48

the industry more

50:50

or less, is some reason to have a prop book

50:53

on the side, or as you put it

50:55

like everyone is also kind of speculating

50:57

as well, and so if there are these concerns.

51:00

I thought that was really interesting about actually

51:02

the lack of sensitivity on the

51:04

supply side for tree

51:07

grown crops versus other

51:09

kinds of crops. So obviously, you know, we talked

51:11

about you know, you can talk about like corn and

51:13

rice and soy, and if it looks like the price is

51:15

surging, then a farmer could say, Oh, I'm just

51:17

gonna like reallocate more of my

51:20

uh my acreage next year

51:22

to soy or corn or whatever it is. That's

51:24

a really interesting distinction that I had never thought

51:26

about that that's inherently impossible

51:29

with a tree grown crop that's going

51:31

to have a minimum like say like two or three

51:33

year cycle before that tree

51:35

bears fruit. And we kind of interesting,

51:37

like I hadn't thought about that at all, But you know, like watching

51:39

the next two years, and now I'm gonna like, oh, do about

51:42

the sort of like the supply sensitivity

51:45

two crops or to any commodity

51:48

in which there is that longer, longer

51:51

lead time on the supplies. Definitely,

51:54

Joe, what's the what's the best coffee

51:56

that you've ever had? Oh?

51:59

Good, question. I

52:01

just probably just like at a seven eleven or

52:03

a dunkin Donut somewhere and a styrofoam cup

52:05

like to me, you know, like on

52:07

the on a road trip, big

52:10

a big cup, like a really big cup

52:12

of coffee, sort of just like hitch

52:14

the spot. What about you? What you probably have?

52:17

Knowing you, you you probably have like some very specific

52:20

being. I'm not seek

52:22

out when you're in some soon. No, I'm not

52:25

like I'm not a coffee

52:27

snob. I like plain

52:29

black coffee as well, but I

52:32

would say probably the best coffee I've ever

52:34

had was um in Vietnam.

52:36

I had one of those egg cream coffees

52:39

that has like egg mixed

52:42

into it. That was so good. You

52:44

are a chocolate snob though, right, No,

52:46

not really. I am equal opportunity

52:49

chocolate consumer. I like all the chocolate,

52:52

like from from her, She's all

52:54

the way up to the very fancy stuff.

52:57

All right. Well, anyway, plenty

53:00

more to talk about. We'll have Ryan back on next

53:02

year, or to talk about what happens

53:04

if the if supply and demand normalized,

53:07

and we'll be watching those January January

53:09

being reports from Brazil. Yeah,

53:12

alright, shall we leave it there let's leave it

53:14

there, all right. This has been another

53:16

episode of the Ad Thoughts Podcast.

53:19

I'm Tracy Alloway. You can follow me on

53:21

Twitter at Tracy Alloway and

53:23

I'm Joe Why Isn't All. You can follow me on

53:25

Twitter at the Stalwart. Follow our guests

53:27

on Twitter Ryan Delaney, He's at

53:30

Coffee Ninja Ryan. Follow

53:32

our producer Laura Carlson, She's at

53:34

Laura M. Carlson. Followed the Bloomberg

53:37

head of podcast, Francisca Levi at

53:39

Francisca Today. And check out

53:41

all of our podcasts at Bloomberg under

53:43

the handle at podcasts. Thanks

53:45

for listening

54:02

to