The Coffee Trade
A widespread rumour quotes coffee as being the second-most traded commodity in the world, but this is not the case as it does not even figure in the top 10 worldwide. Nonetheless, due to its huge popularity and ethical awareness that has developed in recent years, it has become a big focus for ethical trade organisations.
We are going to discuss about the business point of view of the coffee rather than the product itself, as we believe it is important to know how things work in order to bring your favourite drink to wherever you are.
First thing to know, is the fact that a global price for coffee exists, it’s called the C-price that defines the average for commodity coffee being traded on the New York Stock Exchange. Only a small percentage is actually traded in the stock exchange, but the C-price allows to set a basis for a minimum price for the coffee trade worldwide.
If you are familiar with this, you may know that prices are based on supply and demand, which means that with the rise of demand for coffee worldwide, then the prices have spiked as well and reached their highest ever in the 2010s due to a lack of supply.
The second thing is how the coffee production is discussed, the units used being the bags – 60kg or 69kg depending on their region of origin – and shipped in containers that contain about 300 hundred of them.
Due to the C-price sometimes causing producers to lose money over their production, the Fair Trade movement has been initiated and, even though some confusions remain about how exactly it works, it has become a successful tool for people wanting to buy coffee with a clear conscience regarding where the products come from and whether the producers receive a reasonable share of the profit. This is especially true regarding the commodity coffee industry but there are still issues regarding the real impact that it has and, because of that, more and more people in the speciality coffee industry are changing their ways of sourcing coffee and moving away from the commodity coffee model.
The Speciality coffee industry
As mentioned above, there are now different ways that can be used to describe how speciality roasters are sourcing and buying their coffee, which leads to different relationships with the growers as well, as we will see now (as explained by “the World atlas of coffee” by James Hoffmann):
- Relationship Coffee: easy to understand, this kind of relationship is ongoing between the producer and the roaster, with direct dialogues and collaborations in order to get a better quality coffee for a reasonable price. This arrangement often means that coffee must be bought in sufficient quantities for the partnership to be positive.
- Direct Trade: This term is used especially for roasters that desire to communicate that the coffee is bought directly from the producers, without any importer that is being portrayed as a simple middle-man.
- Fairly Traded: This model presents a clear and transparent traceability of the product, generally with the prices of the product being higher than the average. Any third party that is present in the process is considered as bringing an added value to the final product.
These models have developed on the idea of bringing a more traceable product to the final customer, allowing a long-term investment from both producers and growers, as long as the processes are done fairly and honestly, with people that obtained a great knowledge and are specialised in the logistics of moving coffee around the world.
Finally, we will mention the three main certifications that regulate most of the free-trading for coffee:
- Organic certification: formulated in England,
the US and India, it has been developed to
create a verified and sustainable system
for food production in harmony with nature,
supporting biodiversity and the health of nature.
- Fair Trade Certified: developed to supporta better life for farming families and the developed world thanks to fair prices, direct trade and community development. It began in the 1970s in the Netherlands and is now based in Germany
- Rain forest Alliance: developedto integrate
biodiversity conservation, community developments and workers’ rights,it was created in 1992 by Rain forest Alliance and a coalition of Latin American NGOs
We hope that this article shed some light on how the beans are traded, there is a lot more to learn regarding this, but you now have the basic knowledge regarding the relations between the producers and the workers, as well as some of the rules managing them.