68: Ryan Delany | It's Coffee All The Way Down, Coffee Economics, Coffee Supply Chain, Coffee As A Commodity & The Ethics Of Coffee

🎙️: https://atlasgeographica.com/ryan-delany/

Ryan Delany is the guest, and he runs the Coffee Trading Academy.

Ryan is a veteran of the US military and after serving as a dedicated marksman in Afghanistan in the early 2000s, he then went on the be educated at Harvard under the GI bill and it was here where he discovered his love and passion for coffee.

Ryan Delany is a coffee trader and educator and as we speak about in the chat, you’ll hear how there is a clear diction between trading a commodity and growing or mining a commodity.

This distinction informs much of his worldview and makes for an extremely realistic, informed and objective take on coffee.

You can expect to hear in this podcast about the following and more…

• The Geography Of Coffee.
• How The Environment Effects The Coffee Market.
• The Legiticamny Of Rainforest Alliance, UTZ, Fair Trade, etc.
• The Stupifying Efficiency Of The Whole Supply Chain.
• China/US As The Next Superpower>
• & More, More + More.

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• 00:00 – Introduction.
• 02:24 – What Is A Coffee Guy?
• 09:44 – The Geography Of Coffee.
• 24:54 – The Coffee Consumer & The Coffee Commodity.
• 38:04 – How Climate Change Effects Rainforest Alliance, UTZ, Fair Trade, etc.
• 54:09 – Labour Rates & Issues From The Trade.
• 1:17:54 – The Unbelievable Efficiency Of The Coffee Market.
• 1:29:24 – Exciting & Closing Facts On The Coffee Industry.
• 1:34:24 – A Geopolitical Side Bar On The China/US Superpower Question (The Thucydides Trap).
• 1:46:44 – Conversation Between Any Two People Of History.
• 1:48:48 – Afterthoughts & Ambition For The Podcast.

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Transcript

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SPEAKER_04 0:00

The following is a conversation about coffee, where it's grown, how its economics works, its amazing supply chain, and then all the way down to the subtleties and nuances between the different species. I was lucky enough to have this conversation with a man who is a world-class authority across all of these topics and more. His name is Ryan Delaney, and he runs the Coffee Trading Academy. Ryan is a veteran of the US military where he served as a dedicated marksman in Afghanistan in the early 2000s. After his career in the military, he then went on to be educated at Harvard under the GI Bill, and it was there where he discovered his love and passion for coffee. Ryan is both a coffee trader and an educator in the trading of this commodity coffee as well. And like we speak about in the chat, you'll hear how there is a clear distinction between the trading of a commodity and then growing or mining a commodity. This distinction informs much of his worldview and makes for an extremely realistic and objective take on coffee as an industry, coffee as a commodity versus coffee that you consume at Starbucks or coffee as it's grown in the hills of Ethiopia. This distinction between trading a commodity or growing the commodity is the key takeaway to understand Ryan's worldview here. In this chat with Ryan, again I'm saying Ryan so many times, it feels very bizarre to do, you can hear about the following. The stupefying efficiency of the entire coffee supply chain. And then plus, at the end we sort of go on a sidebar about the China-US Thucydide and debate on who will actually come out on top as the next superpower. Plus, uh there is uh much more as well. So if you're into coffee or the commodities biz, then you should get a lot out of this because Ryan delivers a wealth of knowledge for takeaway. And hang around the end to hear my afterthoughts from this chat, and then as well, I shall describe my ambition for the podcast. With no more from me, here is the man himself, Ryan Delaney.

SPEAKER_00 2:24

Mr. Delaney, thank you so much for joining me this afternoon.

SPEAKER_04 2:30

So your bio reads that you're a coffee guy and that everyone in the industry knows what that means. For those of us outside of the industry, what are you talking about?

SPEAKER_03 2:41

Sure. Uh so first of all, you know, you can call me Ryan. It's a strong name, good name. Uh Might get a little confusing, but uh yeah. Uh so what is a coffee guy? Uh well, it's basically just people in the industry, so that would be uh roasters, producers, and traders. Um I my background is on the trade side, so that you know I'm I'm more biased in that sense. Um that's kind of you know where we're where I evolved, and that's that's who we think about as the coffee people. Just sort of like um, you know, if you have uh in any sort of commodity desk and um they have like oil guys or something like that, and then it's all the people who like you know they know all the oil industry and they know all that stuff. So that's what I mean by by a coffee person.

SPEAKER_04 3:27

So it's nurse knowing the industry back to front, inside and out, every angle of it, obsessed with coffee.

SPEAKER_03 3:34

Yeah. Well, you know, I have a mentor, and they told me once I had a mentor who when I first got in the industry, he said Ryan, and he he was like, you know, a very suave Latin American guy, and he was like, he was like, coffee is the jealous mistress. You you you get in, but you never really leave. You know? Um and I think what he meant by that was that there's so much like information and experience that's so peculiar and focused on coffee that it's not useful anywhere else. So like once you start developing all this stuff, like you're just kind of like that becomes what you you know, you you build on that and you you it doesn't apply necessarily in a lot of other industries, so you kind of you know you kind of get stuck in there. It's the Hotel California. You uh you check in but you can never leave. Um so one of those things in particular is what's called cupping. And um if you were looking at getting into the coffee industry at one point in your life, maybe you're familiar with this, maybe you've done cupping. Um but basically it's it's uh sensory analysis, right? So it's tasting. Um so it's a cupping coffee is a skill that really it takes years to develop, and it's years of of tasting coffee on a daily basis and from all over the world. Um I mean it's not doesn't have to be all the world, you know, you have people from Brazil or from Vietnam or whatever, and they have experience in cupping those particular coffees, and they get very good at at the nuances of that. But that's just one example of like part of like the very nuanced knowledge that is not relevant anywhere else, um, so you kind of get sucked into this into this world.

SPEAKER_04 5:20

I suppose there could be or maybe you tell me, but can that sort of logic apply to any of the specific commodities? Say there might be aspects of the timber industry that is just totally nonsensical to anyone else, or is coffee special in that way?

SPEAKER_03 5:35

I think probably. I mean, part of it is our own, you know, everyone has their own sort of narcissism, and we all think that we're special, you know, in whatever way that we uh that we happen to be involved in. But but there is also uh like you could be a metals trader and you're not necessarily like, oh, I'm a silver guy, like I love silver, you know, like so much you know, eat, sleep, and breathe silver, you know. Maybe maybe those people exist, I don't know. But I kind of feel like if you're you if you trade precious metals, then like you're kind of you're familiar with all of those. Or if you do uh grains, you have grains guys, and they do corn, wheat, you know, um beans, whatever. Um so there I think some people look at the different commodities more as like a a basket. And even you know, i within those industries you might have like corn people, especially farmers. I mean farmers are different because farmers, you know, they um to some degree they're loyal to the crop, but to some degree they're like, whatever, if if corn's good, I'm gonna grow corn. But if I get a better yield from soil, I'm going over there. Exactly. But uh that's not necessarily that's certainly not true with coffee though, because um coffee not only is it geographically kind of specific, right? And and all all plants are kind of geographically specific. But coffee needs to be grown, it's a tropical crop that has to be grown um or or grows best in the mountains. And not only that, unlike say wheat or corn or or cotton or something, uh, which are row crops, those are annuals, right? So every year that farmer is deciding what should I plant here? And they it's often an economic decision. It's not entirely an economic decision. Uh as an as a brief aside, I've been told that uh American and Australian like farmers have uh like a bias towards planting corn. And the reason why is because they like the way corn looks. They like to go in like you know, it's almost like a macho thing. They're like seeing this big giant crop, you know, right there. It's like satisfying them. So they Yeah. Um But uh other than that, with coffee, because it's a tree crop, you can't just you can't just pull up the trees and plant something else there, right? So you if you if you want to plant coffee, you plant it uh even if you buy a sapling, right, a seedling that's a that's a year old, it'll still be probably two or three years until it's producing any coffee, and m m three to five years before it's producing its maximum yield, you know, its primary yield. So it's a commitment from the farmer's perspective. Um and even the farmer as well, they have to they they're they're usually pretty well versed in like the quality of the crop, right? Usually it's a generalization, it depends um from region to region. And so same with uh traders of coffee, you know, think of it more like wine. If you're a wine trader, you know, you're not really someone who's like, oh, I could trade wine, I could trade trinkets, I could trade, you know, uh, you know, donuts, I don't know. Uh if you trade wine, you have a specific set of like experiences and knowledge and and that's that's relevant to that, and there's such a range in wine as well, right? Um so that's that's kind of the ways that I would I would think that it's sort of unique.

SPEAKER_04 9:10

And um I want to get into the geospecific breakdown of how coffee is distributed, but before I do that, you mentioned that there are not all cases is coffee grown at altitude. I was under the impression that that was kind of a prerequisite to coffee. What is an example of it being grown at sea level?

SPEAKER_03 9:28

Well, I don't know if it's grown at sea level, um, but in any origin that grows coffee, they you have a range of altitudes. And so, for example, in Honduras, you have high grown coffee and you have low ground coffee, right? Um I don't know the exact difference between those two in terms of like the altitude. Like this coffee's only like you know, so you don't know what the lower bound would be a hundred meters. No. I but um but I've seen coffee grown in Disney World. And we had coffee grown in uh in my office in New York where we had coffee. That was uh so the the the altitude is not necessary for the plant to exist, but what the altitude does is it makes for a denser bean. Okay. So um that is considered desirable. Interesting. Yeah.

SPEAKER_04 10:23

And so could you broad strokes, map of the world, how coffee settles into it, and so we've got the X amount of degrees north and south of the equator, and then in mountainous regions. Could you just break that down for us? Where is our coffee coming from and tonnage amounts as well if possible, just to give a sense of the scale of this industry?

SPEAKER_03 10:43

Yeah, absolutely. So if you think about the world, uh the globe, and I see you've got one behind you there, uh, is uh you have the Tropic of Cancer and the Tropic of Capricorn, and and those two bands uh dictate the tropics, and it's basically, you know, um uh a set amount of miles or kilometers or whatever above and below the equator. So anywhere that is tropical within that band and has mountains or you know uh higher elevated areas is gonna grow coffee for the most part. By the way, did you know that there's coffee grown in Australia?

SPEAKER_04 11:19

Yes, I did. I actually really want to get my hands on the colour. Northwest.

SPEAKER_03 11:23

But yeah It's a very small portion of the country.

SPEAKER_04 11:26

I've never seen it in retail. I just imagine that's because it's ridiculously expensive. But yeah, I did see I I I've got this great uh photo. Uh maybe I'll send it to you after. But it was a book in a bar in a pub I was sitting in, and it was coffee. I was like, all right, interesting. And I was just flicking through it, and then it showed this great map of the hotspots, and yeah, there was one in one in Australia up in the north, North Queensland. Northwest, yeah. So did you try them? I haven't.

SPEAKER_03 11:55

I've not I've I've I've been to Australia. I took a commodity course there uh years ago in uh Melbourne. Um but those were mostly uh you know cotton guys, and you know, I think there's a lot of uh a lot of row crops in Australia.

SPEAKER_04 12:11

It's funny, not to bring it too much on a tangent, but the cotton industry is being lambasted at the moment in Australia. It's the absolute enemy of the people. Yeah, for so long we never we never thought about it because we sort of knew that cot uh cotton was grown in Australia, very organic, high quality, all the X's and O's. But recently um a lot of attention's been drawn to the amount of water that's used for the cotton crops and where that water is actually coming from. And Australia is famously a drought-ridden country. I remember growing up we had loads of water restrictions. You couldn't wash your car, for example. Um, there were, you know, if you watered your grass, you'd get evil eyes from all the neighbours. So in a country that's very, very strict on water, you know, you have these huge acreages of cotton, which is an extremely water required that's the wrong phrasing, but needs loads and loads of water. So they've actually become a bit of an enemy.

SPEAKER_03 13:01

Um, like a cultural shift. Yeah. That's funny. Um yeah, I mean I don't know that I don't know the politics or even the s the S and D really of water, because I know that like that's you know, it's a i in some places that is essentially a commodity too. That's that's either scarce or or or plentiful. Um and there's also coffee grown in South Africa too. I actually spoke with the South African who does who said he grows coffee. I was like, okay, that's the first. But anyway, uh we started with the two of the most abstract origins. That's that is not the coffee world. So Brazil is really the center of the coffee world, and uh Vietnam is the other pole, right? If we had two origins uh that were that are really define coffee. But um so if we're talking about size, let's say hypothetically the world grows uh 160 million bags of coffee, right? Um per year. Forty percent of that per year. Forty percent of that is produced in Brazil. Okay. Uh maybe twenty percent of that is is produced in in Vietnam, okay. Um and it depends on the type of coffee too. There's Arabica and Robusta, and we can chat about that later. Um but Brazil is really the dominant force in in the coffee world. Um and then the sort of historical region, I'd say with the traditional coffee regions from an American perspective would be would be Central America and Colombia. So that's um that's uh where we tend to think of our coffee being grown, and you know, it's it's close to us, and so that's where we we get a lot of our coffees. Um in in Europe, you're probably getting more uh East African coffee um and Asian coffee uh as well, on top of that. You're also getting Brazil and Central America uh as well, um, but but that's sort of how the dynamics play out. It's and it's largely a matter of logistics, right? It's like which shipping line lanes uh easily transport coffee to your regions, right? It's also about preferences and um and um uh cost, you know, those are those are important too. Um so if we're talking about uh so we can divide the coffee world into north and south and east and west, I guess. So uh on in the Western Hemisphere we have Central America, uh specifically, what we call maybe the super sex, so you have Honduras, uh you have Honduras, Nicaragua, Guatemala, um South uh Mexico, sort of Chiapas area. Um you have uh um also Colombia is considered one of the mild as well, sort of in that basket. Uh and then Brazil, as we mentioned. There's some smaller there's some other origins in there that also produce coffee, Peru and um Ecuador and such. Um but those those are the big ones in the Western Hemisphere. And then you have East African coffee. You have coffee uh grown in Kenya and Uganda, um Tanzania, uh and um the Congo. You have a little bit of West African coffee in uh Ivory Coast and um in that area, and uh and then you have Asia. And then in Asia, Vietnam, as I mentioned, is sort of like the workhorse of coffee. They produce, say, 30 million bags of low quality but cheap coffee that that supplies a lot of the world with robusta. And then you have uh Indonesia as well. So, you know, if you think about uh the island of Java is a historical place where where coffee has been grown, so that's where we get the word Java from, right? That's uh you know, we say cup of Java or whatever. Um that's that's in based in Indonesia. Um and uh those are your your primary origins. Um I should have mentioned in Africa also you have Ethiopia. Ethiopia is a big uh producer of coffee as well. Also the home of coffee, right? Well, yeah, I mean uh I think Yemen it might be considered where coffee's from, but right around that sort of that's the Horn of Africa. Yeah. And and Ethiopia has a really cool coffee culture, too. They've got a whole coffee ceremony there where you really are cool. When you yeah, um, which I've never seen. I've never I've never been to Ethiopia. Um but so that's kind of an overview of the of the world, and then you have the north and the south, which is important if you're a trader because the uh depending on where you are in relation to the equator is is depends on when the crop is harvested. So uh the northern hemisphere crops are October crops, and then the southern hemisphere crops are sort of like April, May. Um is their harvest.

SPEAKER_04 17:56

And um, so when I first moved to Sweden, I thought my business was going to be creating this specialty coffee brand and did a bunch of research into how it all works and so forth. It ended up going very, very cold on ice, but it was at least for a time there I thought it'd be interesting. And um could you also correct my understanding of well of that geospecific breakdown that basically starting in Vietnam and then going west um or east doesn't really matter, but you basically go robust through Asia, then into East Africa, and then you get into the Arabica as you're coming back over to Latin America. And so could you correct if that's a you know as a pretty broad stroke?

SPEAKER_03 18:39

That's a that's a pretty good broad stroke. So I mean if we're talking about types of coffee, right? So or you know, species, right? You've got the Arabica plant, and you have the Robusta plant. And you have a few other secondary or types of coffee that are not very popular, not very w widely grown. Like there's Excelsa coffee, I think, which is like these very big, tall trees that make a like sort of a weird-looking coffee bean, football shaped. Interesting shaped coffee. Um Yeah. Um almost never I've seen them once in Uganda. Um but for the most part you have Arabica and Robusta, right? And so if you were a specialty interested in a specialty market, you would probably look at Arabicas. Um and so Arabica is considered the better quality coffee, the nicer tasting coffee. It's also the more sort of fickle, right? It's a little bit harder to grow. Um and Robusta, as the name implies, is cheaper, hardier, and easier to grow, and you know, often grown in in light uh maybe lower grown areas. But the other interesting thing about Robusta is that it's higher in caffeine. And not only is it higher in caffeine, uh, but and I'm I'm going deep into coffee nerd lore here. No, that's good. Interesting. But uh uh is that um Robusta also has higher concentration of uh oils in it. And so i even though Arabica it tends to be a nicer f flavor and and people like the the taste of it better, it has more acidity and all these other things, uh positive qualities. Uh Robusta is actually desirable um for uh espresso. If you ever have an espresso, there's a little foam on the top of the espresso called the crema. And uh because of those oils and the robusta, it be they say that it makes a nicer crema. Interesting.

SPEAKER_04 20:36

Yeah, that's counterintuitive. Because you would think that you want your espresso to be the highest quality bean that you could get your hands on. Exactly.

SPEAKER_03 20:44

Um and and it's often a blend, so it's not only those usually, but uh but that's those are desirable for that. And also, you know, people just some people like uh, you know, quote, stronger coffee, they want more caffeine. So um so you'll see some of that as well.

SPEAKER_04 20:58

And it's interesting to know you said Robusta was higher in caffeine. It's almost 2x, right? It's almost double the amount of caffeine, so it's significantly higher.

SPEAKER_03 21:08

That sounds right, but I I I don't know. Okay, okay.

SPEAKER_04 21:14

Because you can just uh it makes sense then what the commercial uh value might be for Robusta, then if it gives you more caffeine, it's easier to grow, and it's uh It's really about the price though.

SPEAKER_03 21:27

Yeah. I mean I I gave you some of the kind of you know uh side interests in Robusta. And there's been the movements as well to talk about like let's r just appreciate Robusta for what it is. Let's not, you know, you know, so there's been talk that maybe you know, maybe w what we think of as good coffee and good tasting coffee isn't really better, it's more just what Arabica tastes like. And maybe we should just appreciate Robusta for the way that that tastes and uh So there's uh there's an organization called um the Specialty Coffee Association. Um it used to be SCAA, which is Specialty Coffee Association of America, and then they had SCAE, which is the coffee association of Europe. Um but I think they might have merged. I'm not sure. Don't quote me on that. But um at any rate, so the SCAA um and the Coffee Quality Institute, CQI, um so you didn't know all those crazy organizations existed, right? They have a whole criteria and process for sensory evaluation, right? We talked about cupping earlier, uh, of Arabica coffees and specialty coffees. And so they have this whole crazy little form you fill out. Now it's probably an app, but it used to be on paper, and you would you would score all these different sensory aspects of your specialty arabica coffee. And so when I was in Uganda, they had were experimenting with what they called an R grader. So that was that's a Q grader that does Arabica, right, for quality. And then the R grader, R for Robusta, they invented this new sensory evaluation form and everything for the robustus. And so uh Uganda's known for their their sp their their high quality robusta, which is almost an oxymoron, but not quite. And uh and so they invented this there, and we were evaluating these R-grading forms to like sensory, do a sensory evaluation. But it that's a little controversial. I mean I I've I've talked to some specialty people about that, and they're like, oh that's that's garbage. Robusta's terrible, aerobic is good. Like there's a reason for that, don't don't mess with it. But just give it I'm I'm presenting you both sides, and you can do with that what you will.

SPEAKER_04 23:39

Um talk to me a little bit about how the market of coffee as a commodity is significantly different to thinking about it as a everyday product that we consume. Um does that question make sense? Sure.

SPEAKER_03 23:55

Yeah. Uh so like I mean, there's sort of two different perspectives, right? You've got your I mean, there's plenty of different perspectives on it, but I think what you're kind of getting at it is like, hey, I'm I go into the grocery store or a coffee shop and I want to buy a cup of coffee, and I think about it as, you know, a food item, essentially, that I'm gonna consume. Um but traders look at it as a commodity. And it's it's controversial as a commodity. And a part of that has lots to do with who the consumer of coffee is, right? Um and so I coffee is like if you think about your stereotypical barista or um you know coffee shop coffee snob, right? There's lots of them in Australia. Yeah. Uh they're all over. They're um they you know, they're very socially conscious, right? They they tend to be very progressive and you know, uh forward thinking and all these these things. So that doesn't necessarily jive with um, you know, hardcore capitalism and you know free markets. So there is like some pushback there, and so so that's why I say like the coffee trading world is like kind of this weird mix of these two sort of groups, because the in some sense the consumer demands like a more compassionate um progressive uh supply chain, but that's not how traditional commodity markets work, right? So I I'm and and if we think about the you know uh the the history of coffee, the history of coffee has always been kind of progressive, at least since the Enlightenment, right? When they first started coming up with these coffee houses, it was an alternative to pubs, right? You had you had pubs in in the UK, and then you in, you know, say the the eighteenth century or whatever, um, and then you had coffee houses. And these were places where, unlike the pub, where you get stupider the more you drink. Uh and when you're drinking when you're having coffee with people, then like you get more and more wound up, right? So people would uh you know, that's uh why I say I sort of tongue in cheek say coffee is responsible for the enlightenment, right? Because all these people were in coffee houses discussing these high-minded ideals and whatever. Um so coffee is a commodity, and I I teach this in my course, and people don't a lot of people in coffee don't like that idea. They don't like to say coffee is a commodity, like, no, coffee's not a commodity, coffee is all these wonderful things, right? But it's not a commodity. Why do we say that it is a commodity? And and I guess that begs the question or or raises the question, what what is a commodity, right? And so a commodity is uh it's a raw it's a raw ingredient to manufactured goods, and it's also uniform, right? So like gold is an example of a commodity, and gold is gold, right? So it's you can melt down gold and it's indistinguishable from other gold, right? If you think about agricultural commodities, you have corn, and when you when you're buying corn, you're not like picking out individual kernels of corn, you buy bags and bags of corn, right? You're like it's all the same, I just want to buy corn, right? Or wheat or whatever. And so coffee is a is a commodity in the sense that when you're buying coffee beans, you're not picking out the beans, right? It's it's supposed to be to some degree indistinguishable. Now, that does not completely match up with what we think of, especially on the specialty side, right? Because if you're buying specialty coffee, then it's more like the wine analogy. Then you're saying, okay, I want a single-origin Guatemalan uh, you know, strictly high grown coffee from the uh whatever region, uh Weiway Tenango region of of Guatemala, right? Um and uh and so then that is not a commodity in the sense that you can't replace that with a Vietnamese robusta and say that it's the same thing, right? Um but they they are commodities, especially if we look at we have futures markets for coffee, we have a we have a coffee futures markets, and um that coffee futures market is is created from a basket of eligible origins, eligible qualities of coffee. And so the futures market then represents essentially this basket of coffees that that can be deliverable to the exchange. Now one of the things that's b beneficial about that and in my class I I I use the example of gold and golden artifacts, right? So if you've ever been to Colombia, if you've ever been to if you go to Bogota, the capital of of of Colombia, there's a museum there called the Museo del Oro. And the Museo del Oro has all these golden artifacts from the Incas and the Aztecs and the you know the the indigenous peoples of those regions that were made, you know, pre-Spanish explorers, and many of them were made of gold. Museo del Oro is, you know, museum of gold, right? Um so the value of those artifacts is not the fact that they're made from gold, right? In many ways, the gold that's within the artifact is the least valuable thing about it, right? You could melt down this little tiny, you know, Incan treasure ship uh that's you know this big and maybe it's worth two thousand dollars worth of gold. I don't know, I'm just throwing a number out there.

SPEAKER_04 29:50

No, yeah, it's value is the artificial scarcity of it being a piece of history.

SPEAKER_03 29:54

Exactly, right? It's the artisanship, the scarcity, the history, uh all these different things. But it's still made from a commodity. But we can say that the value of this piece of art is is we can we can isolate the value of that piece of art uh by separating it from the value of the commodity, if that makes sense. So just in the same way, we can look at like this that Guatemalan coffee I just mentioned, and we can say that is worth let's say it costs three dollars per pound. It's not what it costs, but let's say it costs three dollars per pound, and the futures market is trading at two fifty, then you can say that particular coffee is worth fifty cents more than the commodity, then the generic coffee.

SPEAKER_04 30:46

So the futures market is literally bundling in all of coffee together. You're not buying specific markets of the Wawi Tanga high-grown Guatemalan coffee. You're buying just coffee.

SPEAKER_03 30:58

Right. The futures market is a basket. So that seems like such an inefficiency in pricing. Oh no, it's not at all. It's uh because it provides liquidity.

SPEAKER_04 31:08

Okay.

SPEAKER_03 31:08

You know? So the the the reason that it's useful is because that is your I mean that's your baseline, right? So um when you when you buy that Weiwe Tango coffee or whatever, um the reason that it's easy to buy is because of the fusures market. So um and and some super specialty coffees have less of a relation to the the futures market, but if it but most of them are have some you know relative uh correlation with it. Now the reason that it traders are successful and traders are a necessary part of the supply chain is because the trader takes on price risk that the producer and the consumer do not want. Okay. So the producer wants to sell their coffee for a high price, and the consumer wants to buy their coffee for a low price. And the way that that's possible is because of the futures market. So the trader will buy coffee from the producer and give them a high price and sell a future against it. Right? So they've bought coffee and they've hedged it with a future and then they turn around and they can sell that to a uh consumer of coffee for a low price, and the way that they do that is then at the lower price they will buy back their short future and sell the uh the physical. So the trader does not have any price risk themselves um on the majority of that coffee because it's been hedged in the futures market. But because they were hedged, they were able to give a high price to the producer and they were able to give it a low price to the consumer. Does that make sense?

SPEAKER_04 32:59

Look, I uh don't understand the trading component of it. So um although everything you said made sense, the overall idea of it did go over my head. So could you uh explain that last bit again, why say the what it means that the traders provide liquidity and therefore what it means to be selling a futures contract, for example. I suppose like how how does all this pricing work and so forth?

SPEAKER_03 33:25

Okay, yeah. So I mean when you hedge something, you you need to have a derivative, and that's what derivatives are for, right? Uh derivatives exist because of price risk. So this is one of the things I talk about in my class, is I'm like, okay, in in one sense, a derivative seems kind of stupid, right? Because you're like, it's an asset whose value is derived from another asset. So it's this one fake asset here that's value is derived from another asset. That doesn't make any sense. Why not just trade the asset, right? So in our case, we're talking about coffee. So we have coffee that's a real thing that people are buying and drinking, and that costs money. Then we have a future. And the future, the value of that future is based on the value of the physical. Now, why would we have that? Well, we have that because of price risk. So if you are a trader, your job is to buy really what you do uh a a big part of your job as a trader is is logistics. What it is is it's moving stuff from point A to point B. If we think about like ancient traders, right, um in the Middle Ages or whatever, what do they do? They go from one place and buy stuff and they bring it to another place and they sell it, right? And that's that's like that was a valuable service, right? That's really what but traders are still doing, right?

SPEAKER_04 34:47

They're especially when it's super high risk to transport things, right?

SPEAKER_03 34:51

Yeah, well, especially now, right? That's a big big issue. But even even if it wasn't high risk, right? If you were a a roaster, you were look thinking about opening up coffee, um, doing coffee business in in Sweden, how you know it is beyond your ability, at least in a cost-effective way, to know all of the different producers in Brazil, in Colombia, in Honduras, and Nicaragua, you know, etc., and all the ones in in Asia, right? So, you know, even if you knew a hundred of them in each country, right, which would be a very small percentage, like that's really that's a lot of work for you. Or you can go to a trader and say, I want to buy Colombian coffee, and they can say, Okay, which one do you want? You know, and they've they they have all the relationships, they have all the risk. Um but let's say you're a trader, okay? So your business is to buy up coffee from people who are growing it, right? And those producers of coffee, they want to get rid of it, they want to sell their coffee, right? They don't want to bring bags of coffee to Europe and like talk to every roaster there and say, Would you try my coffee? you know, and they'd rather have a trader there, you know, with a warehouse right next to their farm who says, I will buy all of your coffee, bring it to me. Yeah. Right? So that's what the trader does. So if you imagine the trader, they've got a warehouse full of coffee somewhere. So if they buy that coffee from farmers, and the price of coffee goes down, they've lost money. Right? So what the trader does is they buy the coffee from the farmer, and at the same time that they buy that, they sell a futures market, which is you can think of it, it's not fake, but think of it as a fake asset, right? It's like an ETF or something, or you know, a stock market.

SPEAKER_04 36:46

It's just a financial asset, financial product.

SPEAKER_03 36:49

Right. That and that financial product makes money when the the coffee market goes up and it loses money when the coffee market goes down. So if you if you trade an opposite position to your physical coffee, so if you own physical coffee and you've sold futures against that, if the price goes up, you don't make any money. If the price goes down, you don't lose any money. Now that's beneficial because you buy that coffee from the producer, it's hedged now, and then when the price of coffee goes down, you haven't lost any money, but you still own that coffee, and you can turn around to the consumer and say, hey, the prices are cheap now. Do you want to buy some of my coffee? And they say yes, so you sell them to them that coffee at the cheap price. And because it's then you just lift your hedge at the same time that you sell that to them. So I don't know if that's the same.

SPEAKER_04 37:35

No, that that actually that explained it really well. Um for sure. If we're thinking more about trading coffee or the commodity market for coffee, uh your job, you know, your competitive advantage, whatever, is just having some sort of good information or unique insight or very in-depth. So I wonder what you think about um how you can price in climate change into your strategy. So I know it's a big question, but how does the market respond and how do you think about how the coffee commodity responds to the threat of climate change, both pricing in the potential future risk based off a model that has been wrong a hundred times and might be wrong again, versus how it affects farmers versus the rest?

SPEAKER_03 38:27

Yeah, I mean, climate change is it's one of those sort of controversial topics. Um and it's really only controversial, I think, because people get emotional about it. Um if we could just look at the data and and talk about it and whatever, then like that would be fine. Uh but it's not. I think people on both sides get very sort of like upset about climate change, right? Um but in general I would say the people in the coffee industry are very what's the word? Um maybe I was gonna say into climate change, but maybe that's not the right way to phrase it. They're very like they're very knowledgeable about climate change and they are active in thinking about mitigating big interest in understanding how it's gonna fit.

SPEAKER_04 39:22

Yeah, yeah.

SPEAKER_03 39:23

And and it it's very relevant to everybody in the supply chain, right? So i if you need coffee, and we talked about where coffee is produced in the world, um, then i if the climate is changing and the evidence seems to support that, then that's gonna change the dynamic of of where coffee is produced and how much it's produced. So everyone in the in the chain is is is worried about that and and and and following it. Um now what is not clear to me is what can be done about climate change, you know, and I'm not an expert on that, but there's no data that I'm aware of that says like if we do X, Y will happen. It's mostly like we know these things are happening and we think that they that the climate is changing in this way, and we think these things are causing those. So uh the best we can sort of say is like if we stop doing these things that seem to be contributing to climate change, hopefully that will help, right? But we don't we don't really have a number that says like we need to reach this level of emissions and then and then things are fine. To to my knowledge, I don't think we have that that number. Uh and so I don't know what the industry is doing to combat climate change per se, although I know that a lot of the coffee companies and the trade houses have, you know, you know, net zero goals and you know, they've got all they're they're aware of and and and part of the discussion. But I also know at that at the producer level, um the coffee industry has been very into the environment for a long time, right? You probably are familiar with Rainforest Alliance. Um that's it's a pretty old organization now, and you know, and I I'm not sure exactly when that was started, but probably in the the eighties. But you know, before or 70s maybe um it was you know it was before people were talking about climate change per se. It was more like that started under the kind of the save the rainforest type of uh movements, you know, when when people were concerned about sort of the slash and burn uh classic environmentalism, people don't like seeing forests deforested. Exactly. But that's kind of become part of the you know the discussion on climate change too, is you know, like greenhouse gas emissions and um you know and uh plants obviously are are uh part of that. I I'm not a scientist, so I'm kind of I'm talking here. But I can tell you that that that those certifications are a big part of the coffee industry, and those certifications include a lot of environmentally safe practices. So um that is that's grown from like a fringe part of coffee in the 90s to uh a mainstay of coffee now, where you've got fair trade, organic, you've got rainforest alliance, like all of these things, and those are putting on environmental standards, uh imposing environmental standards uh in cooperation with the farmers.

SPEAKER_04 42:38

Um since you brought up the Rainforest Alliance, I did have a specific question on it because it basically comes down to how much skepticism should we have over the uh validity of a rainforest ticket of approval or a UTZZ certified um, you know, or a fair trade certification or the no dolphins harmed certification. You know, I read in a Starbucks, I was in Grand Canary recently, so a Spanish island, and in the Starbucks there it has proudly said on the wall 99% of our beans are ethically sourced. And I get that that's a nice sentiment, but I was like, wait a minute, you're Starbucks. You're literally buying thousands of tons of beans a year. Are you telling me 1% of those are not ethically sourced? Because that's hundreds of small farms. In fact, that's hundreds of big farms, and so um I heard that, and then there was another anecdote that a um international journalist came on the show and spoke about cacao and the industry there as well, and how Nestlé egregiously will sort of rope in a bunch of good suppliers into their supply chain and then a few really bad ones, but because there are good ones in there and they all go to the same warehouse somewhere, they can say this is this line of care. Anyway, all of that being said, um, as someone who has travelled the world to presumably hundreds of small farms now and Hundreds of different warehouses. How much skepticism should one have over a one of these ticks of approval, you know?

SPEAKER_03 44:09

That's a good question. Um I don't know if I can answer that directly, but I can kind of talk about it a little bit in the sense that I think from the company's perspective I mean y you've got a bunch of different perspectives, and one of them is the consumer, right? And the consumer um the consumer's got a lot going on, right? When you go to a grocery store, how much time do you have to go, you know, you go but you buy some eggs, you get some milk, you get some coffee, like how much time do you have to investigate the source of all of those different things that you're dealing with in a daily life, right? Even if you think the eggs are pretty good, you know, they've even got a stamp of certification on it that says cage-free eggs, you know, are you gonna do your due diligence on that stamp, you know, and go go talk to the people who gave you that stamp and say, like, okay, well, what do you mean by cage-free? Because I've heard that when you say cage-free, that just means that it's it's a you know, it's still a mega farm, you know. It's not like they're happy chickens, you know, they're burning off the beaks or whatever, doing all these terrible things. So this consumer's got a lot going on. And so I think these certifications are a really useful tool for the consumer because it provides transparency and accountability. So they can look, you know, they've got, you know, they're one thing they can do is they can say, when I go to a coffee shop, I want to go to a coffee shop that cares about these things and and has a way of demonstrating that to me. And one of the ways they can demonstrate that to you is through the certifications. And when you have a certification, we've sort of divvied up the labor. And the people in the world who care the most about um environmentalism and uh um, you know, fair trade practices and stuff, they go and work for these organizations, right? And what the the benefit that those organizations provide um in addition to the actual work they're doing on the farm and with the people involved in it, is they are a third party, right? They're not the coffee company themselves telling you that everything's fine, right? They're a third party that goes in there and checks it. They have their s set of standards and everything, and they have legal teams that will prosecute people if someone is using their um, you know, logo or whatever inappropriately or not living up to their end of the bargain. So at some point you have to kind of trust that. And it's up to the consumer to say, okay, well, I'll do my due diligence on fair trade and and reinforced alliance and stuff and see if I agree with what those things are. Um but then they but then they're doing me a service by putting their stamp on that bag of coffee, and then that's a shorthand for me to know, like, okay, I can choose this, and you'll have to pay a little bit of a premium to get it, but you'll you'll you'll do it. Now to answer your question, how much skepticism should they have? It depends. Um in my limited experience in this, um the these organizations are are quite thorough and they care a lot about um the outcome, right? They care about what it is that they're putting their seal of approval on, um, and but they have specific standards, and sometimes there is gray area, like for example, child labor. If you have a farmer in Uganda and he has a two-hectare farm, right, which is not super small for him, for in terms of those farmers there, that might be a big farmer. Um so he has a family with, you know, a wife and maybe he's got four children, and maybe he hires two laborers to help him. You know, I'm just making these numbers up. But do we tell them your children can't help you on the farm? Because I mean, I don't know if you grew up on a farm in Australia, but uh, you know, I've got friends, I've got Australian friends uh who are farmers, and they from the time they were a kid, they were helping on the farm, you know, and that's that's sort of historically true. Um and then so then it's like, okay, well, one th it's one thing if your kids help you on the farm, but what we really don't want is to like pull kids out of schools, right, and have some kind of like horrible slave labor situation, right?

SPEAKER_04 48:43

Because there are copious amounts of examples of that in corresponding industries. You know, famously like the salt pits, not salt pits, the sandmines of Cameroon are just littered with kids that should be in school, the cacao industry, even the banana trade, the vanilla trade. It seems like quite rampant, particularly in Africa. It's not just some guy's kids. It's you know it's Yeah.

SPEAKER_03 49:07

I mean, and you have camel jockeys and you have, you know, you have you know child prostitution and all kinds of like atrocities around the world. And you know, there's um so I think I want to say in cacao it might be more prevalent, um, but uh and and I don't I I you know my business is mostly on researching um you know the the global supply and demand of coffee and talking about the futures and options of it. I I lived and worked in Origin uh buying coffee. I lived in Uganda for uh a year and I lived in India for uh a couple of years as well, um sourcing coffee and and trading it. Um and so I've and I and throughout my time as a coffee trader uh as well, I've I've visited uh I've done crop tours in in numerous countries and um you know many different continents and so I I have connection to it and I have experience with it. Um but I think that would really require some d dedication and investigation uh to to to to find out the answer to that question, right? Because the on the surface they're telling you it's not happening, right? Um I think it's a liability, and this is a this is a I think a triumph of the coffee industry in the last thirty years or whatever, is that and and I and I would say that coffee is ahead of most agricultural commodities in this sense, that um no one wants to be involved. It's a liability if you if you if if someone finds out you have child labor in your supply chain, you know, if you're in Nestle, and it's not like Nestle owns these farms, right? But they and they might buy it from a an international trade house, and this international trade house might have bought it from a local trader that sold it to them, and that local trader might have bought it from hundreds of different farmers. And if if they find out somewhere that there was a child labor or slave labor involved in that, like that would be a huge headache for for Nestle. Oh, for sure. They don't want that. And that's that's really why we have this whole concept of traceability and certification, right? Because it's traceability is about exactly that. It's about following that bean of coffee from the coffee cup all the way back to the farm. And so a lot of these big, you know, giant coffee trading firms have whole departments dedicated to traceability because they want to sell, when they sell their coffee beans to their clients, they want to sell to them this a certified, you know, this is true and you can count it, and it's provable, um, that there's no nefarious activities going on with that. So that's a big part of the industry. Now, does this does some wiggling happen around with that? Yes. And and I'll tell you where where you should be skeptical about it and where where there is a lot of wiggle room is it. If you're buying, if you buy uh Rainforest Alliance coffee, right, if you're a trader and you're buying locally from Rainforest Alliance farms, right? Now there is some opportunity for the trader to be like, well, technically this batch here is the Rainforest Alliance coffee, but this other batch here actually tastes better. So we're gonna just switch the the labels on those two bags, right? Not saying anybody does that, but that is theoretically possible. It would be unethical, right? It would be kind of lying. Um but at the same time, if they've bought that coffee, it it's almost like a carbon credit, right? It's like from from from you know, maybe a less ethical perspective, you could say, well, on the net basis. Yeah, exactly. I still did it what I was trying to do. But those beans that you have bought that might be in your bag of coffee, even though it says Rainforest Alliance on it, could actually not be that other one. Now, I I will also say uh that Rainforest Alliance and all these organizations have people that investigate this stuff, and and they can go to the warehouse and and and look and make sure that it's happening properly. So there are sort of checks and balances on it, but that that would be one way that someone could try to budget the system.

SPEAKER_04 53:48

Um I suppose, I mean, not being an insider or anything, but just from an outside perspective, I suppose, like you said, coffee's uh much better than a lot of other commodities when it comes to this. I suppose you could say anecdotally it's true, it's not like it's a an illegal copper mine or a you know stupid uh uh or a horrible mono soy crop that required salted soil in a deforested Amazon to grow or one of these, you know, or just uh a forest being chopped down for its wood, like in Romania. I IKEA got into a lot of trouble recently because they chopped down this very, very old forest in Romania to get uh you know wood. Um comparatively coffee might be good, but this also is a reflection of just I suppose most commodities. What about the environmental damage of uh a lot of coffee? Because just to say quickly anecdotally, Nestle, who I think are uh net the largest purchasers of coffee in the world, they are putting pressure on this very small group of thinkers in the southeast hills of Veracruz. And uh was in Mexico last year with my mate uh who runs a coffee shop there, and we went up to see where we got his beans from. It was a fascinating day because these very small farm owners took us through, showed us theirs, showed us the corresponding properties, the difference in like the satiated soil, the difference in the land. One was a monoculture, one was a more wild um forest-ish, not forest, but wild uh plants, and native plants stayed in the soil, created more biodiversity in the soil, etc. Basically just meant nicer coffee, but they were essentially getting priced out by Nestlé because they would essentially make more money than what they do right now, which is just a little bit better than average. They would become rather relatively wealthy people because their land is worth a lot. And the environmental consequence of that would be that this very organic um Arabica is gonna be replaced by this very cheap uh robuster because it grows faster and more reliably, and it will turn out crop after crop after crop until the soil's worth nothing, etc. So that's a lot just to say if you could comment on some of the environmental damage of coffee generally. Um, and like I said, I'm not picking on coffee, it's like you said, it's probably the best of all the commodities, but it's still interesting and I think inevitable thing to think about when you're preparing to speak with an expert in the coffee industry, you know?

SPEAKER_03 56:20

Yeah, I think, you know, environmental damage is also subjective, right? So for example, let's say um let's say we're talking about wheat, right? If you want to grow wheat, um you need a like a prairie. And like one thing I've heard is that um like the Midwest of the United States is there's almost zero prairie left. Like there used to be just prairies, and that was a um that was a habitat, right? It would it had biodiversity, it had sustainability, like it w the it would renew itself as a prairie, and there were certain insects that lived there, there were birds and fish and animals and everything that all were part of this habitat. And that's basically gone. There's there's almost zero prairie. I I'm not an expert on this, I'm this is just stuff I've heard, so I could be wrong on all this. Um so from that perspective you could say that like the wheat wheat is terrible, right? It's it's completely replaced this entire ecosystem, right? And so I imagine that there's probably wherever you're planting coffee, you're essentially replacing an environment, right? Like there was something there before the coffee. It was it might have been rainforest, or it could have been just, you know, mountainous environmental spots. So that's one area where there's really no way around it. If you have any kind of farm, you're replacing an environment with with an unnatural environment that you're cultivating. Now there's d you have other environmental aspects too, like okay, is this uh uh are we creating emissions, right? And most of coffee is uh picked by hand. There's very little farm equipment when it comes to coffee. The the notable exception is Brazil. And that's because in in these mountainous uh regions, you you you can't really just take your big John Deere tractor and and drive it across it and and pick the coffee. And even if you could, um coffee is grown is is is it's a berry, right? It's a cherry. So it it does it doesn't ripen all at the exact same time. And so if you want to get the best cherries, what you do is you go through, you see which ones are ripe, and you pick those by hand, and uh those are your your ripe cherries, and you have to go through several times to get all the ripe ch cherries.

SPEAKER_04 59:05

That's crazy. I had I had no idea the majority was still handpicked. It's crazy it's so cheap considering that.

SPEAKER_03 59:11

Yeah, well it and and labor is uh labor is always an issue or often an issue, right? Um and that's why I think I think that might be why a lot of farms are small. 80% of they say 80% of farms, coffee farms are small holder farms, they're two hectares or less, right? Um So it's not it's not a a problem in that sense, I guess. There's not except for Brazil, where you have you have big machines going through and and and and doing this by uh by machine, most of the places it's it's by hand. Um but I imagine there's other environmental costs as well, like if you're putting in fertilizers and stuff that are not uh you know that that maybe the there's water runoff or something. But that is also where the certification comes in. Um is that the Rainforest Alliance, especially, but OOTS and um are our fair uh Fair Trade Organic and these other things, they have standards on what what are good practices for those areas, and you know what's um what what is the most sustainable and environmentally friendly way to grow coffee. Um and that really has to be driven by the consumer, right? If the consumer only cares about buying the cheapest coffee available, then that's what they're gonna get. That gets passed through the supply chain. And if the if the consumer wants environmentally certified, environmentally friendly, you know, ethically sourced coffee, then then they have to they have to buy that. You know. I don't know if that answers your question.

SPEAKER_04 1:00:52

I wonder it it it it's it's also kind of like a harsh truth, isn't it? It's like in the face of everyone complaining about the woes of the world, well, how much do you actually vote with your wallet? Yeah. Um is there any, you know, you could apply this name to say fast fashion, arguably one of the worst environmental practices that has increasingly become worse and more prevalent as climate change has become more knowledgeable, so it's you know runs convex to each other, which doesn't make any sense. So is there any way, and I know this isn't within your maybe your specific realm of expertise, but I'm sure it's something you've thought about. Is there any way past that? Is there any way to ensure that I can't go and buy the cheapest, worst dried kilogram tin of Nescafe coffee at the cost of the environment, even though I'll happily drink that, you know, at the cost of the environment. Is there any way to get past that where the only thing that we're shopping is actually good for the environment?

SPEAKER_03 1:01:59

Yeah, I mean, I I I think there is. I think the example well, there's you have a sort of the top-down approach and you have the bottom-up approach. You know, I am a uh you know, I I I'm uh you know, I'm a stereotypical freedom-loving American. I prefer the the the the the bottom-up approach. I prefer to bottom-up approach. Yeah. But of course, you can always enact legislation, right? I mean, you could just you can but the the I mean the problem from that with that from my perspective is that i is the the degree to which it's coercion and colonialism, right, which is a another problem. You know, we when I was in Uganda, um people would bot would burn charcoal and wood uh cooking fires. Um and a lot of uh Uganda's a crazy place, by the way. As an aside here. Um because the only white people in Uganda were either South Africans uh or they were missionaries, or they were people from NGOs, right? Um and I mean not the only white people, I guess there were others too, but by and large, that's what people came to Uganda for. Uh foreigners came to Uganda for So you and a lot of these uh foreigners were very well-meaning, right? They were very concerned about the environment, they were concerned about saving people's souls, they were s concerned about, you know, uh ethical, you know, treatment of people. Um these were their priorities when they came there. But there is a level of hubris, I think, when you come as a foreigner to somebody else's country and you say, This is the way you need to behave, because that is the proper ethical way to to behave, right? Um and so for example, I mentioned these stoves. And so these the Ugandans would burn wood and charcoal in the stoves, and there were a lot of foreigners there who were concerned about the environmental impact about this and would lecture these Ugandans. And it's like these you spent, you know, five hundred bucks on your plane ticket to get over here, and that's their annual salary, you know. And you're here telling them that they're burning the wrong kind of wood in their fire, you know, um, to feed their kids. So we can and and I wrote I wrote an article recently called uh Why Coffee Farmers Are Poor. Right? And it's a big problem, and it's it it's not a problem it's not that we should ignore the problem or pretend it doesn't it's not say, oh, it's not our problem, it's someone else's problem. It's not that we should ignore it, not that we shouldn't try. But we have to be respectful, I think, of of the complexity of the situation. And so for example, um coffee, as we mentioned, is a tropical crop. And so it's grown within the Tropic of Capricorn and Tropic of Cancer. And those countries, all the countries in the world, and I in in my article I I break down the the per capita income of these different countries. All the countries in the world that can that are able to grow coffee are something like five times poorer on average than countr than the mo the uh what are they called uh temperate zone countries.

unknown 1:05:43

Okay?

SPEAKER_03 1:05:44

Just just looking at temperature, not even like developed or undeveloped, right? Just looking at their their latitudes and longitudes. Um and there is a tremendous uh burden on countries within this tropical band to develop. And and if you think about it like for example, roads, right? If you've ever been uh on a coffee origin trip, you mentioned uh Mexico. I don't know how the roads were in in Veracruz, Mexico. Maybe they were great, but in almost all coffee origins, the roads are terrible. Why are they terrible? Is it because there's stupid, lazy people in charge? No. They're terrible because you have monsoons every year in that region. And so there's essentially nature itself is imposing a tax on living in those countries, right? Uh whereas if you're in Canada most of the year, you know, you have snow in some places. Uh but but otherwise if it's just a giant flat, you know, the Trans-Canada Highway is just one big flat temperate zone uh road, right? Um and so and uh a lot of technologies that have been developed in in the temperate zones also do not translate immediately very well. You can't just pick up those technologies and and use them in in these other countries. You know. So uh I guess my point is you can the countries themselves where they grow coffee can make laws that say like, no, they can make win minimum wage laws, for example. Um but we can't just make a minimum wage, you know, a hundred dollars an hour where no one would would be working in these countries, right? And and you know, so if we look at incomes of coffee farmers, and this is what I was looking at in this this this example here, one way of looking at it is like, oh my gosh, all of the coffee farmers in the world, most of them, eighty percent of them, are making like five grand a year, something like that. You know, some s I'm pulling a number out of the air, but something that looks horrible to us, and not only does it look horrible to us, it's actually less than the average income in these countries, right? But does that mean that uh they shouldn't be growing coffee? Maybe. Maybe it means they should you know, maybe we should be encouraging them to and this is one of those things I sort of tongue in cheek suggest in my article is that if we care about the coffee farmers, we should tell them to move to the cities and work for an IT company, right? Because then they'll they'll you know, then the they'll improve their their standard of living. But it's not that easy if you've if you're growing up in a rural rural Colombia, right? Maybe coffee farming is a viable solution to you. It's not doesn't provide a a middle class income by you know European standards, but but maybe that is you know the best solution for you in in your time, in your area. So look, these companies, these countries could make laws to say uh we're not gonna have child labor, we're not gonna have any environmentally unsound practices, etc. Um, and they I would think they would be in the best position to determine what the cost benefit that they could do for their for their for their people. And we could potentially in the West or you know in the the northern temperate zones try to put pressure on those countries uh to to change their laws. But then that goes back to the idea of colonialism. It's like, okay, we're we're we're giving you financial aid, but we're gonna send an attache there to ensure that you're doing what we want you to do, and what our priority, and our priority in the West is is environmental standards and climate change, and your priority in Uganda might be making sure everybody has enough food to eat, you know. Um so it's a it's it's a complex uh situation.

SPEAKER_04 1:09:49

Yeah, and it's also kind of paradoxical, isn't it? I mean, the second Brazil has a high standard of living and the cost of labor increases in accordance with a high standard of leaving of a country entirely, because as the labor market becomes more competitive because there are more job opportunities for people, they're gonna start asking more for their all of a sudden 40% of the coffee market could get more expensive overnight.

SPEAKER_02 1:10:11

Yeah.

SPEAKER_04 1:10:12

And uh it's kind of like what are the downstream consequences of that? Does that mean people are gonna start buying coffee? Does that mean that that would be a coffee production moves elsewhere?

SPEAKER_03 1:10:20

You know, you mentioned Starbucks before, and um in most coffee uh most coffee shops, most coffee uh sellers, the cost of the beans is not that much money. Um and you know, they're just they're just paying market value um for for the coffee, and and that's a whole other discussion, I guess, but you know, the market does what it does. It you know, when when prices are cheap, that discourages production, and when prices are expensive, that encourages production, and that's kind of what we want the market to do. Um But if coffee became two or three times more expensive, that is not going to translate into two or three times more expensive for the consumer. Right? Because if the c if the price of a cup of coffee is five dollars, the cost of the beans might be ten cents, right? And so if that doubles Is it really that dramatic? It's it's it's a small it's a very small portion of it.

SPEAKER_04 1:11:19

That's that's what, five percent of the cost or even less?

SPEAKER_03 1:11:23

Yeah, something like that.

SPEAKER_04 1:11:24

Um so that it's See that's a wild statistic. Um I wish you had said that earlier. That's that's that's super interesting, right? To try and think about what the what this market is. Okay, but sorry, go on.

SPEAKER_03 1:11:37

Well, but but that's you know, and that's it's an it's a it's a it's a a common thing that people talk about in the coffee industry because they're like, oh, we're not paying the cot the farmer enough. And this is another thing. Seems like there's room. There is room. There's plenty of room for it. And but the the thing is that's that it it is not the job of coffee, and it should not be, I contend this is my contention, it's not the job of coffee to provide people a living. Coffee is uh a commodity, you know. And it's not to say that we should treat people badly or treat people unethically, but it's just like um like anything, you know. Uh if you you might invent you might become, you know, the the the the classic example is is someone carving vulture statues. You might really l love carving vulture statues, but that doesn't mean you deserve to have a living selling vulture statues, you know. And and it's uh it is a a problem you know, I'm gonna sound like a complete jerk here. But it's not the market's problem what people's living standards are. And it should not be that the the market's problem. It's a separate problem, in my opinion. It's not that it's not a problem, it is a problem, and we should be concerned with how people live, right? And we should care about our neighbors and and and and what their standard of living is, but you you can't use that tool. It's not a tool that that fits to to deal with that, and it shouldn't, right? Because if you consider what I'm concerned with, and I don't mean like concerned like oh it it it bothers me, but concerned like that's my business, is like the supply and demand of coffee, right? And so if we tell farmers, we guarantee you not only a good living, but or not only a sustainable living, but but a good living. We we promise you a middle class lifestyle if you grow coffee, what do you think is gonna happen?

SPEAKER_04 1:13:47

Way more people will try to become coffee farmers and it'll drive the cost of labor down.

SPEAKER_03 1:13:51

Yeah, everyone's gonna become a coffee farmer, right? Because why would I be con why would I waste my time trying to grow something else if I can be guaranteed a good living uh as a coffee farmer, right? And this happens on a small scale, uh, in in all kinds of in all sorts of ways, because it's not that people haven't tried this because roasters, as I mentioned, the consumers do care about the producer of coffee. And I there are some trade houses and there are some roasters who are like, I don't care what the price of coffee is, I will guarantee the consumer I will guarantee my farmers a living wage, right? And I'm gonna pay for that, right? But if they do that, what they're saying, essentially, is they're first of all, they're gonna come up with their own calculation of what a living wage is, right? And what their own estimation of that might be, right? Um and so they might they'll do some little calculation and say, well, I determined that the cost of production is a dollar twenty per pound, and I believe that most farmers are this size, and therefore I'll pay a dollar fifty per pound, because that guarantees them a living wage income or whatever, right? And that's fine, that's that's totally within their prerogative to do that. But if they're doing that, what they're really saying is I'm gonna pay you for your coffee, and then I'm gonna give you a donation on top of that, that is the X, right? And that farmer that sells them the coffee, they might be rich, right? But should we still pay them above uh the market price, like uh for that coffee? Or it could be, you know, or or then does the roaster then need to have personal relationships? And this goes back to like why we have a trade, you know, to begin with. Um, and the roaster is gonna have personal relationships with individual farmers and say, I only buy from Ben, I only buy from Steve here and Judy, whatever, and they're my they're my suppliers, and I know them and we trust them, whatever. But what if someone offers them more money? You know? What if someone else says to Judy, hey, I really love your your coffee here, I want to buy from you. Then then that roaster is like, oh shoot, now I just lost my supplier, right? So they've got to go. So I it's it's it's it's quite complex, I think. And I think what the market should do is regulate the supply and demand of coffee. That's what the market is good at. If we try to force the market to do something besides that, then it's gonna fail.

SPEAKER_04 1:16:18

And it's and it's not gonna be there'll be all types of unintended consequences.

SPEAKER_03 1:16:22

Exactly. I would rather people say, like, look, I'm gonna buy coffee for whatever the price of whatever the price of coffee is, and I'm gonna make it sustainable and certified and traceable, right? I'll follow these guidelines to at least I'm not gonna be contributing to any sort of unethical situation in the industry. And then I'm gonna take a portion of my profits and I'm gonna donate it to uh climate change organizations and uh rural welfare organizations in Colombia, you know, for example. And and those organizations I think are better suited to to find problems in in those areas and and address them than than just saying I'm gonna pay more money for my cup of coffee. So, but you know, that's it my that's my probably unpopular opinion in the coffee market. I there's probably a lot of other people in the coffee market is like, no, Ryan, you idiot, you just pay them more money for the coffee, right? And that other people are entitled to that as well.

SPEAKER_04 1:17:23

Yeah, well, I mean it it tracks with what you said, you're classic free market guy. I mean, that is the classic free market approach, as am I, um, largely at least, obviously there's exceptions. But if you think about how amazing it is that this one crop, one plant with several species, but one plant, which can only be grown in a very specific part of the world, as a cherry, can then be cleaned, dried, given to a giant market for different traders, exported, locally roasted, packaged, distributed, and almost, at least in my experience, I've never been anywhere where coffee hasn't been an option. That type of distribution and ubiquitous availability is so remarkable. So remarkable. And so although it makes it kind of surprising that only 5% of the final product goes to the farmer, um maybe that's the cost of having the coffee available, and it goes back to what we said earlier. You know, what's an alternative to you just paying with your wallet? Like I was in um, I already mentioned that I was in Grand Canaria, in addition to that Starbucks uh anecdote, I also just brought uh small vacuum-packed um ground beans to make at home, and I was shocked, I was flawed by the price. I think it was 500 grams, and it was two euros. And I just said to myself, how many how many how many plants of yield was this thing I was holding in my hand? And it came from Africa. And it's two Euros. So I I I just couldn't believe it. Um but I guess it's a testament to how sophisticated the market for coffee is.

SPEAKER_03 1:19:10

Yeah, I mean, and and you think about it too, you know, it's also what the market is trying to do when they when they're paying the the farmers this price is I think it does basically take into account the cost of production, right? You're basically saying, like, here's the cost of production, and I'm gonna give you a premium or discount on this cost of production based on whether there's a lot of coffee available. And right now, farmers are pretty happy for the most part because coffee the price of coffee has doubled in the last uh you know year um due to supply concerns, right? There's a short been a shortage of coffee and uh and so the market has been going nuts. Um Where's the shortage come from? Brazil.

SPEAKER_04 1:19:47

Why what's that?

SPEAKER_03 1:19:48

There was uh basically uh we had problem upon problem, but it was essentially like first they we had droughts. Coffee's a biannual crop, so it tends to g uh go you know, it's uh the way that we as humans we like to personify things, it helps us to understand them. And um with coffee the the coffee has a good yield, a good year, and then it needs to kind of rest for a year, right? Um because because it expended a lot of resources to produce a big crop, and so the next year it has a smaller crop. So in general, coffee has this biannual cycle, especially in Brazil. And so we had last year we had a down year, uh in uh well not last year now, I I you know it's part consequence of getting older. I always think of uh yeah, but the the 1920 uh crop um was a down year in Brazil. 2020. Yes.

SPEAKER_04 1:20:49

Now you've gone back a hundred years.

SPEAKER_03 1:20:51

Oh, so um you mean 1920. When you talk about um coffee crops, it tends to straddle two years. So the 1920 crop is 2019, 2020. Yeah. Uh I was like No, that's an important distinction. So we get used to saying sort of lingo-y things and forget, you know. Um but at any rate, there was a down year, and then uh we had uh uh so let's see, I'm getting confused here. The most recent crop was the 1920 was a down crop, then 20 so let's see, 2020, we're in we're about to have the 22-23 crop in coffee, um, which was supposed to be a bumper crop, supposed to be a big yield crop. Um our last crop was a down crop, and that was supposed to be a down crop, but it was worse than people had expected because of drought, right? But the market was kind of like, okay, well, it that's fine, it was down crop, but there's plenty of coffee around. We have stocks, we have inventory available. Um, but then there was a frost on top of that, um, and that frost affected this coming year's crop, the uh 22 crop. Um and so now what was supposed to have been a really big crop is now a compromised crop, and so the market is kind of going nuts to compensate for that. But what I was gonna say before was that um when we think about that that cost of that cup of coffee, like we talked about before, and how such a small percentage of it is is going to the farmer. Um that is because the there's a lot of costs in between when that coffee is grown till when it's served to you in a cafe, right? And so we like the farmer. People like farmers, right? That's why in the US, like we always have like we always pass all kinds of laws like to benefit farmers because like it's romantic and we like them and they you know, salt of the earth people and all that. Yeah, 100%.

SPEAKER_04 1:22:53

They have a cultural affinity in every single amount of subsidies that dairy farmers get is ridiculous. We're gonna talk about commodities here. Exactly. It's ridiculous.

SPEAKER_03 1:23:03

Um in in coffee, you know, we like the coffee farmers. Like we do, like we do we care about the coffee farmers, we romanticize them, um, and uh and I've known plenty of coffee farmers, and they are good people, and I do like them, right, right, and I want the the best for them. Uh but so we're always like kind of appalled that they get such a small percentage of the of the of the total cup, right? But if you think about it, like what's the relative cost of say um growing coffee on a farm in Colombia or you know, Ethiopia or wherever? Um, and then also think about what's the cost of processing that. You know, for to process it, you need a large factory essentially, uh, with capital equipment, right? And you need people to run that. Um you what's the process cost of uh bagging it and the labor of you know taking that coffee once it's there and putting it into separate bags, transporting it, uh putting it onto um containers or whatever, and then shipping it, right? You gotta move ship it from you know across the world, literally across the world, right? Uh and then once it gets to the destination, you're paying taxes on it, right? Then it gets to the roaster. The roaster has the costs of and now we're not in uh origin markets anymore, now we're in a destination market, right? You're in Sweden. Uh I would imagine that if you hire if if if pop culture says anything to me, that if you if you hire someone in Sweden, you probably have to pay uh health insurance and pension and um all of these labor costs are huge. They're huge.

SPEAKER_04 1:24:40

And probably And the tax to import it as well, actually. It's funny you mentioned Sweden. It's kind of upset. Right.

SPEAKER_03 1:24:45

I don't know how much real estate is in Sweden, uh, but if you want to have a fac a roasting plant or whatever, you've got to do that. And that's before it even gets to the cafe. Once it gets to the cafe, you know, then uh that place also needs to pay rent. They have to pay their employees and pay all their health insurance and everything. And you know, the you often give free milk with you know, we talked about milk a second ago. You'll often give free milk and free sugar with uh coffee, right? But that's not free to the to the uh to the seller of the coffee, right? So all of those other so you basically have two other commodities that you're giving away for free, uh, in addition to this one that you're that you're selling. So we we look at the coffee and we think like, oh, why isn't the farmer getting more of it? But the the all those other costs are also added in packaged into that cup of coffee that you get at the uh at the coffee shop.

SPEAKER_04 1:25:39

Yeah I'm happy you did that. You broke down the whole supply chain of it. Um because it was uh when I like I said, the ideas on ice, but when I was looking at it, I sort of just came to the conclusion that no one makes money in the coffee industry. Like perhaps perhaps the trader does, but from what I was looking at it, if I wanted to be a specialty seller, uh I didn't make any money. The roaster that I was speaking to and his anecdotal experience, they don't make any money. Um basically no one makes money. And just to give you a really tangible example, uh, Company X, who I think should remain there mostly decades, they they roast the they have the contract to produce all the beans for Espresso House, and Espresso House is the Scandinavian Starbucks. They have hundreds of locations, uh, presumably have a required tonnage per day of ready-to-roast beans throughout Finland, Denmark, Sweden, Norway, um, maybe Iceland too. Anyway, this very boutique, specialty coffee brand who I was speaking with, sort of he just said, Oh, by the way, you know, this is what we're doing. And he sort of was saying that that alone wouldn't actually work as a business for them. Because the even at the tonnage that they are roasting per day, the margin is not enough to uh account for all of the different labor costs that go into roasting that many beans, and that was a real light bulb moment for me. Like, this is crazy. Ever I think everyone in that whole supply chain just takes the thinnest razor margin.

SPEAKER_03 1:27:14

And you whilst you can rightly speculate and the same thing with the trade, honestly, too, is because you know the trade is is fungible. The trade is not, you know, you think like coffee's a commodity, like if you're a roaster, you do not care whether you're buying from e comm, Neumann, Noble, Sukofina, whatever. Like they're just they're all delivering you the same beans. Like you have no loyalty essentially to the trade house. And so commodities notoriously have razor thin margins, um, because a commodity by definition is indistinguishable from a from any other commodity, right? Um, so the when I was in the trade, I remember uh one of my mentors there said Ryan, if If I make two cents of margin on uh on coffee, then then I did a good job. Yeah.

SPEAKER_04 1:28:07

Yeah. So the type of volume you have to do to justify that is. Exactly.

SPEAKER_03 1:28:11

Well that's why you have you know the the history of the trade houses is interesting too. Because and we're running up on time here, so I'll I'll I can't go too deep into it. But uh there's a good book called Merchants of Grain, um, which uh talks about the uh the grain industry. Um but it's an it's analogous to the coffee industry. And what what you'll find is that there's there's these family dynasties in uh it's what it's one of the only industries that has um giant corporate family dynasties. And what that the reason that is, is because these coffee trading firms all f were founded in in in or many of them were founded in in the mid to late 1800s. And that's because coffee is an international crop, right? Uh and it's a commodity. So because of that, uh it required uh global companies and it required economies of scale, right? So you needed uh you need people in Brazil, you need them in Vietnam, you need them in Ethiopia, wherever, and you needed in all the destination markets, too. So in the mid-19th century, that was when technology was sufficiently powerful, transportation, especially, shipping, you had railroads, you had, you know, um intercontinental travel was was reliable at that point, still took a long time. Um and so at that point that's when these sort of global trade houses emerged and became these powerhouses because they they because the economy of scale was so important, it's sort of that was what survived. And the reason they're family organizations is because these dynasties would essentially they'd send one son to Brazil, they'd send one son to Switzerland, they'd send one son to New York or whatever, and or a cousin or whatever, uh, because you couldn't trust, even though there was enough reliability in the transportation, it still was, you know, a month minimum, you know, to get uh uh a letter from London to New York or whatever it was. Uh so you you would only trust your family. So you would put so it created these sort of family dynasties that lasted and um are can continue to this day.

SPEAKER_04 1:30:37

Yeah. On uh the topic of good books about commodities, did you read uh The World for Sale?

SPEAKER_03 1:30:43

No, I've uh I've had it recommended though. I'm gonna have to now I'm gonna have to actually check it out.

SPEAKER_04 1:30:48

As a commodities trader, I think it's it's probably required reading. Um, but they uh mostly cover oil, obviously, which is just a whole nother beast in its own right. Because something interesting about commodities as well is that you know they're not just this sort of medium of exchange, you know, they they do serve a legitimate purpose. You take oil, I mean it runs the world, right? You take corn, it is the base food for so many uh products. You take coffee, it's ingrained into people's cultures, and people have it every single day. I drink shit tons of it. Most people in Scandinavia do. Like, um, so uh yeah, really interesting. But like you said, we are we are uh coming up on time. Um I liked the fact 5% of the total five percent of your latte is actually going to the pharma. Um the 40% is from Brazil, 20% is from Vietnam, the way Robusta and Arabica is split. Yeah, there any other interesting facts about coffee that would surprise me and the listener.

SPEAKER_02 1:31:52

Interesting facts about coffee that would surprise you.

SPEAKER_03 1:31:55

Um Well, there is a um there's an off-repeated myth that coffee is the second most popularly traded commodity in the world after energy, and that's actually not true. I saw uh a study done that had it be the put it at the 22nd uh most popularly traded. But it but it is very popular, and the reason that it's popular is because it's volatile, and coffee is particularly volatile because it has um in a if you go back to my economics 101 class here, it has inelastic supply and inelastic demand. Um because as we mentioned, it's a tree crop, and so if you want to increase supply, it's gonna take you several years to get that supply increase, right? To plant new area and have those trees mature sufficiently uh to produce. I mean, if think about it like if it was apple trees or something, right? And you want to create more apple trees, like you can't just do that overnight, right? Um and uh and the demand side is also very inelastic, like you said, you have you're probably not price sensitive at all to coffee, at least in the quantity that you drink. It might you might be price sensitive in like, okay, if coffee's ten dollars uh uh for a latte at Starbucks, maybe I'll I'll brew it at home instead, right? But you're still gonna have that cup of coffee, right? So uh people tend to be very um uh consistent in in the amount that they drink. Um so if there's a weather issue, and coffee's dependent on the weather, um, then your supply will get thrown out of whack, and so you will have uh you can have years of very high prices or very low prices. And that's why that's why speculators love to trade it.

SPEAKER_04 1:33:43

Nice. So that's a good one. Myth busting the fact that it's the second most traded commodity. Because yeah, you do hear that a lot, don't you? Um I guess it makes no sense. Um Okay, well, um I think Ryan, that was Ryan, it feels so weird, boys went off Ryan. Um I think that was um very interesting. I'd love to leave you with two questions that I try to ask every guest, um, if you wouldn't mind. The first is if you could name a country looking forward into the future that you are particularly bullish on. And it doesn't have to be coffee specific.

SPEAKER_03 1:34:17

Um a country that I'm particularly bullish on. Uh that's it's funny because I I'm like I'm so f focused on uh the the two that come to mind are the US and China. Um but the I'm like very hesitant there because I don't you know th those two are at each other's throats constantly and um it's not clear to me which one is really you know gonna dominate in in in the near future and and you can make the case on both of them and you could also make the case for both of them that they've reached their peak, you know, uh and or are overvalued. So those are the two I've been thinking a lot about. The other one I I think about all the time and and and focused on so much is Brazil. But uh and I want to be bullish on Brazil, but um and uh if you know any Brazilians, they're famously bearish on themselves more than anybody. Yeah.

SPEAKER_04 1:35:30

Yeah, but Brazil's like the perennial disappointment.

SPEAKER_03 1:35:34

Yeah, my brother called it people are always touting it to the tomorrow's world of the future. It's always it's always tomorrow's world of the future.

SPEAKER_04 1:35:41

But uh well, you've gotta you've gotta read Peter Zihan um or at least watch a few interviews with him. He's uh probably your country's most famous geopolitical analyst, and uh it's funny, he is uh he gives quite a bad um prediction for Brazil, uh, but also uh an extremely optimistic one for the United States. And I'm about to publish an article called Is Trying to Do It. So and it's mostly off the work of Peter Zion.

SPEAKER_03 1:36:09

He's absolutely but he uh the next hundred years.

SPEAKER_04 1:36:15

Yeah, by George uh George Freeman.

SPEAKER_03 1:36:18

He also did the next ten years too, where he recanted a lot of that. But it reminded me of what you were uh what you were saying.

SPEAKER_04 1:36:24

Um yeah, well actually George Freeman was the he was the mentor to Peter Zion. Um yeah, Stratford was like their geopolitical firm, and Peter Zihan had now his his own thing, Zion Geopolitics, but um yeah, they pretty much have the same worldview, those two guys. But it's this notion that America after World War II ensured the security of international trade, which fostered globalization to drive down the cost of labor and transport mostly internationally to allow for the emergence of all these different markets. Because, you know, as you know, so many markets, I mean, look at coffee. Coffee coffee would not be as ubiquitously traded and available as it was if you couldn't safely get it from Uganda to Stockholm, right? And um because the US dominates deep water transport uh lanes and routes and ensure the security of trade in these routes, it means that the cost of transport is much lower, and therefore all the unintended consequences of allowing for lower trade is what globalization is. And ultimately, because America ensures that China is uh you know, you know, it's interesting.

SPEAKER_03 1:37:40

I remember they were talking because this came up that sort of same concept, um because you remember like ten years ago piracy was uh sort of on everybody's mind again. We had all these like pirates in Somalia and whatever, and like and and that was a recent phenomenon that people were sort of surprised about because of this sort of post-World War II, you know, Pax Americana um uh uh I guess we gotten a little spoiled, right? Not realizing that for most of human history, I guess piracy was a thing, right? Um and then suddenly we were surprised about it again.

SPEAKER_04 1:38:18

Yeah, it was incredibly dangerous to just sail out into the ocean.

SPEAKER_03 1:38:23

Um yeah, I'm actually I was like um but yeah go ahead.

SPEAKER_04 1:38:26

Well, furthermore to it, uh basically uh to for the bearish case for China is that they have demographic issues that are sort of beyond saving. Uh they're the oldest population in history, and their uh main reason for their economic growth was because they had extremely low uh labor rates, and that's why they became the manufacturers of the world. But as the middle class has risen in China, so has the cost of labor, and so forth they're no therefore they're no longer cost competitive on what has been historically the whole reason that they were so economically successful. So they have this very, very imposing bomb that's about to explode when the oldest population in history retires, and the uh generation under them are not producing enough taxable receipts to be able to pay any sort of pension, and so you're just gonna have a total collapse. They have one of the lowest birth rates in the world. That's funny. I saw there, you know, there's myriad issues.

SPEAKER_03 1:39:26

There's a a guy I follow on LinkedIn, I think his name is James Eagle, um, but he he does um visualizations, data visualizations, and one of the ones that really struck me is that in a healthy demographic uh economy, uh you have essentially a pyramid, right? With the most people on the bottom are the young people, right? And then you've got s uh successively smaller groups of people till you have a very small group of very old people on the top, right? And that's a sustainable uh demographic, right? Um because you've got you know a large group of people coming in to kind of support the people uh uh that as they you know as they need it. And I think they said that uh they showed up China's pyramid was essentially inverted, right? Where you have the the whole you're gonna have a huge band of of older people on the top and a successively smaller supporting them on the bottom. Um then you have also the the male-female uh problems from the one child policy as well.

SPEAKER_04 1:40:31

Um Yeah, the split is fifty-six forty-four in favor of men, and in a country of 1.4 billion people that translates to 40 million people. There are 40 million more men in China than there are women. Um, and that's in itself just a completely unsolvable problem because they also have extraordinarily low immigration rates, so you can't even bring in women for these people. Uh it's like uh yeah, it's a basket case or something.

SPEAKER_03 1:41:01

And it's also that's also potentially I mean that's one of the you know, one of the scary things about China too is that also makes a war um almost uh what's the word appealing for the leadership there, right?

SPEAKER_04 1:41:17

Right, yeah. At least go out on top.

SPEAKER_03 1:41:19

Well, because you have to do something with all of these men.

SPEAKER_04 1:41:23

Yeah, yeah, no, precisely. And uh yeah, and there's also a giant undocumented population in China. But thankfully as well, if you if you I think if you read or ingest Zion and take his word for what he says, then you can sleep easy because according to him at least, should a conflict flare up, um the United States would be able to deal with them no problem.

SPEAKER_03 1:41:48

That's what he says. Well, it's uh it's complex and you know when I when I Yeah, but you you uh used to serve in the yeah, I was I was in the Marine Corps um a long time ago now. Um but uh yeah, and I've got my old uh uh this little t-shirt up there. This is actually um signed by Arlie Ermee, who if you know who Arlie Ermee is, if you ever seen the movie Full Metal Jacket, um Stanley Kubrick? Yeah he was the the drill instructor in that movie, and so he he was uh he was a real Marine. Um and Stanley Kubrick hired him to be a consultant for his actor in that movie and to like teach the the actor how to behave like a drill instructor, but he was so good at his job that they just got rid of the actor and had him play the role. And so within the Marine Corps, he's like very um he's like he was iconic, unfortunately he's he's passed away. Um and he was a big supporter of the Marines and he would c he came out when we were in uh overseas. Um and uh, you know, I think that was in Bahrain um uh during the Iraq war, so he came out to s kind of support, you know, his for morale or whatever. Uh signed my my thing. But when I was in um college, I I went to Harvard after I got out of the Marines and I was uh a political science major, so that was like a I I love discussing all this stuff here and um and I took a class called The Future of War um with uh a professor there. I can whose name escapes me now, but he's uh you know, he was b been involved in you know US policy for years and everything and even back then we were talking about different uh scenarios and uh so this would have been early two thousands and one of the big issues that was concerning was the Senkaku Dayu Islands um you know, which has come to pass now. That's become like something that uh i is you know one of the the geopolitical flashpoints is these disputed islands in the China Sea uh that um you know are essential for essentially for shipping lanes. Um but uh I forgot why I brought that up, but um in that book that we mentioned with the few the uh the next hundred years or whatever, they had talked about how the plan with China had always been kind of um uh at least at least from from the the Western, you know, NATO perspective, was like, okay, we welcome them into the World Trade Organization, we welcome them into um you know the global uh economy, and as they get richer, they will liberalize, right? Um and instead that didn't really happen. And that was what they predicted in that next hundred years, was that you know the the east coast of China is very wealthy, and that um the as groups of people become wealthy, they demand more access to power, right? And and so they sort of predicted this sort of breaking up of China. But I think what they didn't anticipate was was how willing the the Chinese party the the the party is in China to to or how important it is for them to maintain control. And they've really doubled down on you know all kinds of um sort of repressive uh methods, right, or or tools um in terms of social media and you know artificial intelligence and all of these uh wait s I just I just saw a podcast with uh General McMaster, uh who was the former um who was he? Not Homeland Security Advisor. He was uh he was like the head of the military. Yeah, he was like national security advisor, I think. I think he's national security advisor. Yeah, yeah. Yeah. Under Trump. Yeah. And he's a nonpartisan guy. Um, you know, he's he likes you know, he's uh and he's not a he's not much of a Trump fan either. Uh but uh you know, but he you know that's his business.

SPEAKER_04 1:46:02

It'd be hard to be a fan of him after you work directly with him from all the time.

SPEAKER_03 1:46:06

I would imagine so. Uh but um he he was talking about how the the threat from China is really a totally guess we'll see.

SPEAKER_04 1:46:19

Required reading. Peter Zynman, I think you'll enjoy it a lot. Um finally, Ryan, uh if you could witness a conversation this is my favorite question. If you could witness a conversation between any two people of history, dead or alive, no language barrier. So if you could listen to a podcast, who are you listening to?

SPEAKER_02 1:46:38

Jesus and Pontius Pilate. I want to see that uh conversation.

SPEAKER_04 1:46:42

And Pontius Pilate, okay, the nice one. That's a new one. Jesus is probably the most common answer.

SPEAKER_03 1:46:47

Yeah, take the wheel.

SPEAKER_04 1:46:48

Yeah, it's usually Jesus Buddha, something like that. But okay, yeah, interesting. So why's that? You just want to hear a discourse.

SPEAKER_03 1:46:57

I think it's a supply and demand. Uh I think that's probably the one of the most scarce uh interviews available. Uh so that I thought that would be uh I thought that'd be interesting. Um but uh I I I'm a student of religion as well. I think the uh the Bible is just a fascinating book. Um and uh you know that that dynamic was uh quite a quite interesting one there. Um, you know, be if you if you read the back and forth between um Jesus and Pontius Pilate, because it's uh I mean it was it was sort of like a uh you know two ships sort of passing in the night type of thing where it was like neither of them really wanted to be there, you know. Pontius Pilate kind of was like, you know, he he didn't he didn't see anything wrong with this guy and was like, I don't really understand why we I have to deal with him, but I do. And Jesus obviously didn't really want to be there either, you know, and there meaning in in prison, you know. Um so I think that would have been an interesting conversation.

SPEAKER_04 1:48:03

100%. Well, Ryan, thank you. Yeah, my pleasure, Ryan. Um I get the sense we probably could have spoken for a bit longer, but uh I hope we did a little bit of justice to the coffee industry in that.

SPEAKER_03 1:48:16

Cool. Well, thank you very much uh for having me. Hope this was uh useful for your listeners.

SPEAKER_04 1:48:22

No, my absolute pleasure. I hope as well. Cheers. Well, that was fantastic. Thanks again, Ryan, for giving me your time, mate. Um, for anyone who wants to start trading coffee, do reach out to Ryan on Twitter or through his business, the Coffee Trading Academy, which is coffee tradingacademy.com. And the links to both his Twitter and that website are going to be in the show notes, so you'll be able to access them there, no problem. If you liked this chat, I think you might be into some of the other more geopolitical focused episodes as well. So I can throw you back to James Robinson, episode number 24, the author of Why Nations Fail, several with Tim Marshall, I think 13 and 31. He's the author of Prisoner of Geography and Power of Geography. But then there is also my most previous previous episode with Spencer Roberts on the degradation of agriculture worldwide. Um, and so I know that we gave it quite an optimistic picture of of coffee here, but it is a but it is a part of this agro this broader agricultural picture, and this chat that I had with Spencer really gives quite a depressing outlook on the food that we're eating, because the food as it's being grown in this giant agricultural complex. So help yourself to a healthy dose of that podcast. It might ruin your appetite, but it's kind of in line, those that I just mentioned with the theme of today's show. But finally, my ambition for the podcast. I hope to corner the market for eclectic curiosities in whatever country it is that you, my dear listener, who these audio waves are coming through, massaging the lobes. I hope to corner the part the podcast market for eclectic curiosities in. Your market, whichever country it is you're listening in from, whether state, city, ethnicity, demographic, age, gender, all of it. In your specific corner, I want to be the eclectic curiosity podcast for you and everyone else in the group. And uh to do that requires a lot more feedback into the algorithm. So I would ask that not only you leave a review yourself, not only you go into your Spotify, leave five stars, go into your Apple and leave five stars and a very nice comment, but instead you take it a step further. You grab your boyfriend's phone, your girlfriend's phone, you do the same with them. You start pulling people over as you walk past them on the street. Next time you're in a Zoom call with your colleagues at work, just stop what they're doing, hold up the conversation, and insist that everyone go and review and say really nice things about me and my podcast. That would be amazing. The podcast algorithms are in the Stone Age, it's the only thing they're paying attention to. So it's the best thing that you could do for me and the show. And so, with that, I hope you really enjoyed this. And again, cheers to Ryan and tune in again. See you next time. Ciao.