Coffee and the Market: Specialty Coffee vs. Commodity Trading

July 07, 2014

 
    Last week, we talked about how coffee is traded on the commodities market, and how trading affects the price you pay for your coffee. In this post, we'll talk about the difference between commodity coffee and specialty coffee, and why those differences are important.  

Specialty Coffee vs. Commodity Coffee Trading

  If you're buying your coffee from an artisan roaster, you can be pretty sure that your coffee was never traded on the commodities market. However, the C-market price for coffee does affect the price of coffee bought outside the market. If the commodities market is paying more per pound for generally low-quality, generic coffee, those prices will force the price of specialty coffee, Fair Trade coffee and even direct trade coffee up. The C-market price is a floor for Fair Trade, which guarantees a premium above the market price, and direct traders often pay more than Fair Trade buyers.   On the other hand, roasters who engage in direct trade with farmers -- especially those who work face-to-face with farming families and communities -- are often already paying considerably more than even Fair Trade prices for the coffee that they buy. Because of that, fluctuations in the price for C-market coffee isn't going to make much difference in the prices they'll pay for high-quality coffee. They're already paying so far above commodity market prices that those C-market prices would have to rise a heck of a lot to force them even higher.  

Specialty Coffee - Worth the Price

  Let's talk a little about why we pay more for specialty coffee. There are a number of reasons, all of them important.  
  • Producers deserve to make a profit on their product. This is a basic tenet of the whole Fair Trade movement. It's the Fair part of it. On the commodities market, it's not unusual for farmers to barely clear enough for their crops to pay their workers and maintain their crops.
  • It promotes sustainability. When coffee prices plunge, farmers often abandon their enterprise. Some go so far as to uproot or burn down their coffee trees in order to plant a more profitable crop. When they get a fair price for their coffee, they can afford to keep producing coffee.
  • The coffee is distinctive. Commodity coffee is generally gathered up in large batches from multiple farms and regions and mixed together in huge lots. The end result is coffee that is only as good as the lowest quality coffee in the bunch. When coffee roasters or importers buy from individual farms, they can pick and choose among what's available. As a bonus, you know exactly where your coffee came from.
  • The coffee is better. When better coffee brings higher prices, coffee producers are encouraged to invest time, knowledge and money in producing the best coffee crop possible. Many of our roasters make this even easier by partnering with small farms and making suggestions to help increase and improve coffee production.
  Of course, speculation and C-market prices aren't the only thing that affects coffee prices. In the final part of this series, we'll take a look at some of the factors that really do have an effect on coffee prices and talk about why coffee prices are rising -- and why it's nothing to panic about.  

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