Coffee Tao

(This is part one of a three-part series addressing the debate of Fair Trade vs. direct trade, their political ramifications, and why I prefer direct trade. Read Part 2 here, and Part 3 here.)

If you spend enough time in the coffee industry, it’s almost impossible not to get mixed up in a cause. Coffee is the world’s second-highest traded commodity (behind oil), and that global reach, combined with the inevitable disparities in economy of participating nations, means coffee is by definition political. Be it funding education in poor coffee-producing countries, or lobbying for the right for coffee laborers overseas to unionize, you’ll be hard-pressed to find someone heavily involved in the specialty coffee industry who doesn’t champion a crusade of some kind.

My own banner is hoisted over the current debate about Fair Trade versus what’s called “direct trade”. I prefer the latter, which I see as a systemic solution for many of the industry’s current problems. In an upcoming post I’ll explain why, but before I do I’d like to clear up some confusion surrounding both terms–terms many people have heard, but not everyone clearly understands.

Fair Trade is the trademarked name of a kind of certification, administered an independent monitoring group named TransFair USA. If a coffee is certified to be Fair Trade, that means that the beans meet certain criteria in both quality and economics. Certain quality and labor standards must be met, and in return the producing coffee plantations are guaranteed a minimum floor price for their beans at auction, resulting in a higher wage for the growers. This certification costs money, by way of arbitration fees paid by the growers (this of course has no influence on the actual certification of the beans).

Fair Trade does not mean “organic” coffees, which are coffees produced without pesticides or unnatural processing, though the guaranteed floor price is higher for FT growers who provide organic beans. Coffees may be Fair Trade certified, or organic, or both, or neither.

Direct trade is a general umbrella term for coffees that are imported directly from the growers themselves, rather than brokered in bulk at auction. The roastery develops a direct relationship with the owners of coffee farms, negotiating individual terms and prices. Because there are no middlemen or outside agencies involved to take their cuts, the growers receive a much higher price for their beans.

Think about it like this: typically, a grower will sell his crop to a coffee auctioning agency (or his government, to sell to that agency) all at once, for let’s say–making numbers up here–30 cents per pound. The auctioners sell to an importer for 50 cents per pound, who in turn sells to the roastery for $1.40 per pound. In direct trade, the roastery buys directly from the grower for–still making it up–$1.15 per pound, negotiated down as incentive to trade this way, and barring shipping costs the entire $1.15 goes directly to the grower. In practice it’s a little more complicated, but the gist is that the roastery pays less, and the grower gets considerably more money for his beans.

However, direct trade is a private agreement, one requiring a lot of footwork by both parties, and the only requirements for quality or labor standards are defined by who the roaster or grower chooses to do business with. It is not certification, only a name for a method of doing business.

That said, I much prefer direct trade, and coming this week I’ll explain why I think it’s a better deal for everyone involved in the specialty coffee industry.