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Become a Coffee Expert · Level 12 of 14 · The wider world

The coffee industry

Who handles coffee between the tree and the cup, how it is priced, and what certifications certify.

What you will be able to do

  • Name the actors in the supply chain and what each adds
  • Explain how the commodity price relates to what a farmer is paid
  • Define specialty coffee in at least two of the ways the term is used
  • State what Fairtrade, organic and Rainforest Alliance certification each cover
  • Ask useful questions of a sustainability claim

Assumes: Level 6: Green coffee.

The chain

CoffeeHQ explanation of the mechanism

Between a farm and a cup there are usually at least five businesses. The producer grows and picks the coffee and may process it. A mill — a wet mill or washing station for processing, a dry mill for hulling and sorting — prepares it for export. An exporter assembles lots, handles quality control, finance and paperwork, and ships. An importer buys, finances the coffee during its weeks at sea, stores it and sells it on in smaller quantities. A roaster buys green coffee and sells it roasted. A café or retailer sells it to a drinker.

Each step adds a real service: processing, sorting, finance, risk, logistics. 'Cutting out the middleman' sounds appealing and usually means that someone else has to do the same work. Direct trade, where a roaster deals with a producer, typically still relies on an exporter and an importer to move and finance the coffee; what changes is who negotiates the price and how much information passes along.

Who handles coffee, and what each adds

CoffeeHQ diagram

  1. ProducerGrows and picks; may process. Bears the weather and the price.
  2. MillProcesses cherry, then hulls, sorts and grades.
  3. ExporterAssembles lots, controls quality, finances and ships.
  4. ImporterFinances the voyage, clears customs, stores and sells in smaller lots.
  5. RoasterSelects, roasts, packs and brands.
  6. Café or retailerBrews or sells to the drinker.

A typical export chain. Roles are combined in many businesses, and cooperatives often act as mill and exporter together.

In more depth: Coffee production, stage by stage · Origin and traceability terms

How coffee is priced

From published standards or research

Most of the world's coffee is priced against futures markets: arabica against a contract traded in New York, widely called the C price, and robusta against one traded in London. These prices move with global supply and demand, weather in Brazil, currency and speculation. A contract for a particular coffee is commonly written as the market price plus or minus a differential that reflects origin and quality.

The consequence for producers is exposure to a price that has nothing to do with their own costs. The market has at times fallen below what it costs many farmers to produce, and has also spiked sharply; both cause harm. Coffee also pays once or twice a year, at harvest, against costs that fall all year round.

Specialty coffee is often sold outside this structure at a negotiated fixed price well above the market. That is a small share of world trade. And a high price paid by a roaster does not tell you what reached the farmer; the price at the farm gate is the figure that matters and the one least often published.

In more depth: Coffee economics and price formation · Modern coffee labour and cooperatives

What 'specialty' means

Common convention — cafés and regions differ

The word is used in at least three ways. Technically, it has meant green coffee that meets a physical standard and scores 80 points or more when cupped. Commercially, it means the part of the market that sells coffee on its distinguishing qualities — origin, variety, process — and not as an interchangeable commodity. Culturally, it means a style of café and roasting, sometimes called the third wave, that treats coffee as an artisanal product with a traceable source.

These overlap without being the same. A coffee can meet the technical definition and be sold anonymously in a blend; a café can look the part and serve unremarkable coffee. When you meet the word, ask which sense is intended.

In more depth: Third wave and specialty coffee · Coffee grading and quality

Certifications and sustainability claims

From published standards or research

Certifications are audited standards, and they certify different things. Fairtrade applies mainly to smallholder cooperatives and sets a minimum price, with an additional premium paid to the cooperative for community or business investment. Organic certifies how the coffee was farmed: without synthetic pesticides and fertilisers, under the rules of the market where it is sold. Rainforest Alliance certifies farm practices against environmental, social and economic criteria and does not set a minimum price.

None certifies flavour. Each costs money and administration to obtain, which some small producers cannot afford even when they farm to the same standard. A certified coffee is not necessarily better for people or planet than an uncertified one bought through a long-term relationship at a good price — and an uncertified claim is not checkable in the same way.

Faced with a sustainability claim, the useful questions are plain ones. Sustainable in what respect: income, labour conditions, deforestation, carbon, water? Who verified it? Is a price or a premium stated? Does the claim cover the whole product or one ingredient? Vague claims are not always false, and they are not evidence.

In more depth: Coffee certifications explained · Coffee sustainability claims · Coffee authenticity and fraud

Practise with a tool

Cost-per-cup calculator

Your task. Enter the price and size of a bag you buy and your usual dose to find the coffee cost of one cup. Then double the bag price and look at the cup cost again.

What to notice. The coffee in a home-brewed cup costs little even at a high bag price. A large difference in what a producer is paid can be a small difference per cup — which is the arithmetic behind paying more for well-sourced coffee.

Exercise: What does that logo actually require?

Objective. Replace a general impression of a certification with what its published standard says.

You will need

  • A bag of coffee carrying a certification mark, or a product page that names one
  • Internet access

Keep the same

  • Read the certifier's own published standard, not a summary by a seller

Procedure

  1. Write down what you assume the mark guarantees.
  2. Find the certifier's current standard for coffee.
  3. Look for three things: whether it sets a minimum price, what it requires on labour and environment, and how compliance is audited.
  4. Compare what you found with what you assumed.
  5. Read CoffeeHQ's certifications guide and note anything it adds or that you would correct.

What to notice

  • Does the standard guarantee a price, a premium, a practice, or an audit?
  • Does it apply to the farm, the cooperative, or the supply chain?
  • Does it say anything at all about how the coffee tastes?

Reading what you found

Certifications certify different things, and none certifies cup quality. A coffee without a logo is not thereby worse on any of those dimensions — certification costs money, and many small producers sell on direct relationships instead. The useful habit is to ask what, exactly, is being claimed and who checked.

What this cannot show

  • Standards are revised. What you read is the current version, not the one in force when the coffee was grown.
  • A standard describes requirements, not outcomes on a particular farm.

A protocol for you to run. CoffeeHQ has not run it and reports no result from it.

See all practical exercises

Work it through: "Ethically sourced"

Two bags cost the same. One carries the words 'ethically sourced' and a picture of a farmer. The other names a cooperative, states the price paid for the green coffee, and carries no logo.

Reasoning it out

  1. 'Ethically sourced' has no definition and no auditor. It may be true; it cannot be checked.
  2. A named cooperative can be looked up.
  3. A stated price can be compared with the market price at the time.
  4. The second bag has made claims that could be shown to be false, which is what makes them worth something.

What to do

Neither bag is proved good or bad. But only one has given you anything to verify. Preferring checkable claims to reassuring ones is the whole of the skill, here and in Level 14.

Coffee sustainability claims

Check yourself

Answer in your head first. Nothing is scored and nothing you open here is recorded.

  1. 1. What is a differential?

    Show the answer

    The amount added to or subtracted from the futures market price for a particular coffee.

    It reflects origin and quality relative to the benchmark contract.

    Back to “How coffee is priced”

  2. 2. Which of these certifications sets a minimum price?

    • Organic
    • Fairtrade
    • Rainforest Alliance
    Show the answer

    Fairtrade.

    Organic certifies farming methods; Rainforest Alliance certifies practices without a price floor.

    Back to “Certifications and sustainability claims”

  3. 3. What does an importer do that a roaster would otherwise have to?

    Show the answer

    Finance the coffee in transit, handle shipping and customs, store it and sell it in small quantities.

    Removing an intermediary moves that work; it does not remove it.

    Back to “The chain”

  4. 4. True or false: a high retail price shows that the farmer was well paid.

    Show the answer

    False.

    Only the farm-gate price shows that, and it is rarely published.

    Back to “How coffee is priced”

Reference for this level

Where the facts in this level come from

  • International Coffee Organization trade and production statistics — International Coffee Organization (ICO)
  • Fairtrade International coffee standard — Fairtrade International
  • Rainforest Alliance sustainable agriculture certification standard — Rainforest Alliance

Sections are labelled with the kind of claim they make. How CoffeeHQ uses sources, and what each one is relied on for, is set out in the source and evidence policy.

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