Every Coffee has its place

Coffee has a place in every market, whether you subjectively class it as ‘good’ or ‘bad’ it’ll be sold, and cast off into either the commodity market or the specialty market. You can think of commodity coffee as shares on wall street, as one of the traders watches the C-price rise and fall waiting for the right moment to lock in a contract. Coffee is traded on the New York Stock Exchange and it isn’t sold based on quality, rather based on the C-price, where coffee is traded just like oil or gold. The NYSE doesn’t care about where the coffee comes from, how it tastes, or who grew it, it’s purely about supply and demand. When prices drop, farmers earn less, sometimes less than their cost of production. 

There are a number of variables that dictate the C-price, such as weather, crop yields, political events and speculation, which has been a big player lately. To sum it up, it is the starting point for what farmers get paid, and sometimes it doesn't cover the cost of production. While commodity coffee definitely has its place in the market, it sells to big multinational corporations (such as Nestle), it leaves the farmer vulnerable. Mind you, not all farmers are taken advantage of, they choose commodity coffee  as it is incredibly difficult and takes a huge commitment to grow and sell specialty coffee. So they opt for the commodity world, they find it is more secure, less risk involved and less expensive. Coffee isn't a way of life for them, it is just a means to put food on the table, and pay the bills and that is also ok. Having said that, many farmers get trapped in what we call a ‘cycle of debt’. Many will sell at a loss just to repay loans, or pay wages or provide food for their families. Large multinationals and traders control logistics, storage, and contracts, therefore they put the farmer at the mercy of the buyer as they are forced to accept whatever price is set for them. So there is a darker side to commodity, and specialty coffee hasn't escaped the C-price either, the market has just found better ways to work around it.

Specialty coffee is still anchored around the C-price, however farmers usually use this as the base and build up from that in what is known as ‘differentials’. Specialty Coffee is built on Traceability, transparency and quality, and because they invest heavily in these areas they are able to dictate their own value with differentials. Lets say coffee C-price is sitting at $3,44 USD (which is incredibly high and where the C-price has been floating at for a long time) the farmer will then add their profit margin (differentials) to that base price, which might be +$0.50 for a really high end coffee, 86p+. Which then puts the selling price at $3,94 per kilo. Traders are usually happy to pay for this as they are not only investing in high quality coffee, they are also building what we know as ‘direct trade’ relationships. Specialty coffee celebrates the farmer and heroes the coffee. It takes you on a journey of every step in the supply chain.

Specialty coffee farmers will usually have higher paying wages, they are able to reinvest in process and innovation and with the help of partners, they are able to experiment. Some of these farmers are incredibly small and some may be poor, but they are producing extraordinary lots and those direct partnerships with traders or roasters help them grow and evolve. In my experience, specialty coffee has allowed me to build incredible relationships directly with the farmers I work with, it has gone beyond coffee and created connections that ground me and that inspire me.

But, like everything, it also has a dark side. The dark side of specialty coffee is that the same system that celebrates transparency can also exploit it, turning words like “direct trade” and “sustainability” into marketing tools instead of genuine practice. “Transparency” has become a buzzword, and traders know it sells. 

Some traders may even refuse to buy the coffee as it might be ‘too expensive’ and that is a huge risk to the farmer. 

They’ll publish FOB (free on board) prices, photos from the farm, or fancy traceability reports  but that doesn’t necessarily mean the farmer was paid fairly, or that the relationship is ongoing. Maybe they only bought from the farmer once, took a bunch of cool photos, recycled it on their socials and called it an ongoing partnership.

Many traders and or roasters, cherry-pick one-off microlots, take photos with farmers, and call it “direct trade” or claim that all of their coffee is traceable.
In reality, they might buy from an exporter or importer who bought from someone else, such as as a co-op in Brazil, multiple layers removed from the source.

It’s transparency without accountability, and I've seen this a lot on my travels.

But, I always choose to celebrate the good work that is achieved through specialty coffee. It is easy to lose hope, when you only see the dark side, but there are many coffee importers and roasters who are doing incredible work. There are so many parts in the chain doing amazing work in the specialty coffee world, and it is out there, if you look for it. Never be afraid to ask tough questions, those who are solid in what they do, won't find it difficult to answer.