More Into Coffee Than International Shipping? Here’s a Guide to FOB for You

The image “The Main Port, Cartagena, Colombia” by Reg Natarajan is licensed under Attribution 2.0 Generic (CC BY 2.0).

FOB, which stands for “free on board,” is a term that’s bandied about quite freely through these digital pages, often without definition.

Yet for as common as the term is as a price metric for green coffee transactions — especially as the specialty coffee industry gravitates towards more sustainable sourcing and price transparency —  it’s also commonly misunderstood.

For starters, FOB is not by any means a true representation of prices paid to coffee farmers. However, since it relates to sea freight shipping and is found on nearly every green coffee contract between buyers such as importers and sellers such as exporters, it is one of the only reasonable price-comparative tools at the coffee industry’s disposal.

But did you know that it’s also officially an Incoterm, part of a copyrighted collection of terms established by the International Chamber of Commerce to create a common language for international trade?

For this revelation and others about FOB, we turn to the latest episode of Coffee Economics with Karl, featuring Karl Wienhold of the Colombian coffee trading company Cedro Alto.

Said Karl, “For folks that are more into coffee than international shipping, we made this video as an introduction to the concepts described by incoterms, including FOB. We explain what exactly is meant by the ‘FOB price’ in the coffee supply chain and hopefully bust some myths about what the FOB price for green coffee means and doesn’t mean.”

For more in the Coffee Economics with Karl series, check out:

• What is Coffee’s Farmgate Price, Really?
• Coffee Economics with Karl: A Better Understanding of ‘Farmer Price’
• Coffee Economics with Karl: Currencies and Exchange Rates