What a volatile C price means for a fixed-differential contract

By The Coffee Company CR Trade Desk

For most of the last decade, a fixed-differential contract was the safest instrument in specialty coffee: agree a premium over the New York 'C' price, and let the exchange do the rest of the pricing work. Three harvests of unusually sharp C swings have made us rethink how often that structure actually serves the producer.

Why the differential stopped protecting anyone

When the C price moves 20 cents in a week, a fixed differential locks the producer's return to a benchmark that has very little to do with their cost of production. We watched two of our partner farms nearly walk away from contracts they had already accepted, simply because the underlying exchange price had detached from what it cost them to pick and process the cherry.

The farm shouldn't have to bet on the exchange to know what next season is worth.

What we do instead

For most specialty lots now, we quote an outright price at the point of sampling — set from the farmgate figure plus our margin, not from wherever the C happens to sit that morning. Roasters get a number that doesn't move once samples are approved, and producers get a return that reflects the coffee in the cup rather than a commodity index.

We still use differential pricing for a handful of higher-volume, more fungible lots where the flexibility genuinely helps both sides. The difference now is that it's a choice we make lot by lot, not a default.