Direct Trade Myths and Why Some Farmers Can’t Afford to Care About Quality

Creative Commons photo by Neil Palmer for CIAT

by Nora Burkey

Direct trade, albeit a fuzzy concept, is generally regarded as a positive and socially responsible practice in today’s coffee industry.

Buying directly cuts out the middleman — coyotes and cooperatives alike — so more money stays with the farmers. But what about another trend: Large transnational roasters that set up branch offices to buy directly from smallholders, eliminating the middleman buyer yet paying the same low price. This is as direct as trade gets, yet it brings up some serious concerns surrounding justice and sustainability.

In my experience, the number of coyotes involved in the coffee trade is diminishing. On the surface, this also seems like a positive trend for other green buyers and farmers. However, consider this anecdote about a coyote and farmer in Mexico named Emilio, as presented by Daniel Jaffee in his book “Brewing Justice.” Emilio earns one peso on each kilogram of coffee he sells, and this is before subtracting the cost of gas and other necessities. He’s also a coffee farmer with several plots, and he admits he does not know the C price, meaning, he’s equally as information-less as the farmers he buys from. He only knows what they tell him at the warehouse that buys his coffee.

(related: Sustainable Values Combined with Market Tools: A Future for Specialty Coffee)

Emilio may not be the norm for coyotes, and he certainly does not fit the traditional image of an opportunistic middleman. It can be argued that Emilio is performing, as Jaffee writes, a “vital function in remote communities,” including transportation. Some farmers even prefer the coyote’s services, because he will buy whatever coffee they have and he imposes no demands on quality. Much like the recent headline on instant coffee’s alarming popularity, I wonder if there shouldn’t also be an article titled, “Some Farmers Can’t Afford to Care About Producing High-Quality Coffee.” Why? It’s a lot of work, and quality-demand-free business from middleman buyers can be more consistent.

Michael Sheridan often writes of his attempts to organize small-holder farmers in Nariño, Colombia, and has found that some producers do not want to organize at all. Why? Sheridan notes a lack of market incentives to organization, and that the local market already produces enough incentives for people to continue growing coffee without organizing. Whether people want to believe it or not, organizations of farmers — Fair Trade among them — often come with significant quality standards, and a lot of farmers feel the compensation is too meager to justify the cost of compliance. Without organization, farmers are much more vulnerable to exploitation, but they’ll also never be accused of non-compliance. There is a freedom in that.

“Given the way risk and rewards are distributed in the coffee chain, it is not surprising to me that more smallholders are not committing to a quality-or-bust stance,” Sheridan writes. “In my experience, growers tend to share the market’s rewards for high-quality coffee with roasters but bear the risks of quality-oriented production alone. More equitable risk-sharing arrangements must be made if smallholders — those least capable of bearing risk — are to commit to filling the supply gap for extraordinary coffees.”

(related: NGO Consortium Calls Out Roasting Industry for Poor Efforts Toward Supply Sustainability)

Thus, in my estimation, the coyote becomes a vital part of the supply chain, willing to buy coffee that is more or less unsellable to any organization or anyone interested in quality coffee. We can’t successfully cut out the middleman before we address the problems that middlemen are currently solving, primarily the fact that not every producer finds enough value in high-quality coffee.

Vega Coffee is a new venture that aims to cut out as many middlemen as would seem humanly possible. The only ones they’re keeping are the ones to transport the coffee. Their goal is to train farmers in roasting, so farmers will collectively own their production and roasting operations, and then will sell roasted coffee directly to consumers in an online marketplace. This is reminiscent of Pachamama, a farmer-owned coffee company comprising five cooperatives in Nicaragua, Peru, Guatemala, Mexico, and Ethiopia, whereby the group of cooperatives outsource their roasting to Thanksgiving Coffee Company, but all profits from the sales go back to the five member cooperatives.

(related: Vega Coffee Piloting New-School Trade Model with Old-World Elements)

These kinds of farmer-focused examples are rare. In reality, the coffee chain is generally comprised of a motley crew of middlemen. Vega says that while farmers are paid less than $1 a pound for their coffee, specialty coffee companies are selling their coffee for upwards of $20 a pound. This is, unfortunately, not exactly true, because it actually gets a whole lot worse. One double shot of espresso is usually between 14 and 18 grams of coffee, and may be prepared with water, steamed milk, or by itself, at prices reaching $5 or more for a drink, and baristas expect, rightfully, a dollar extra for the work they’ve put into making it. The truth is, in fact, coffee in a retail bar is very often sold at more like $20 every 60 or so grams, with one pound being roughly 453.592 grams. That’s about $150 a pound.

At the same time, the industry has produced a lot of coffee-driven people, many of whom care a good deal about the taste of coffee and about the producers who grow it. In collaboration with farmers, companies have participated or created many give-back programs. Consider Green Mountain Coffee Roasters, a world leader in coffee development funding that also happens to pay for development by buying, roasting and selling coffee for a huge profit.

(related: Buy a Bag, Plant a Tree: A Roaster’s Model for Smallholder Sustainability Amid La Roya)

Should we pay farmers more? Absolutely. Should we support farmer-owned roasting? Totally. Should we support middlemen, too? I would argue that there are circumstances in which we should. There might be a space for the coyote, as there is a space for everything else that stands between a consumer and producer: That $20,000 espresso machine, hours of barista training, time spent on the sample roaster, absurdly generous amounts of milk and sugar, and any number of expenses that make up a coffee company’s overhead. Perhaps it’s not about feeling bad about how many people are a part of the supply chain, or how many folks make money off of the world’s coffee habits, but about making sure we provide a space for everyone who relies on coffee for survival to do their work better and with more just and sustainable approaches in mind.

If farmers do not want to produce better coffee because they are bearing all the burden of quality improvements, I am not sure I feel all the comfortable asking them to. Until we create better incentives for quality, coyotes will still play a vital role, and large transnational corporations will still find coffee farmers who would like to sell without going through the difficulties of organizing. Furthermore, middlemen wouldn’t carry such a negative reputation if at the end of the day producers still made a decent living. If the only thing that helps producers make more is organization and/or quality investments to please direct traders, two things some producers don’t always feel is worth their while, then our quality-focused, just trading initiatives are broken.

Whatever happened to paying people a living wage because it was just the right thing to do, and to stopping the market  from calling all the shots? Quality is not equivalent to justice; encouraging quality is only a means to facilitate justice. If it’s not facilitating justice well enough, we must find out why, and make steps to improve it. Otherwise, coyotes will continue to provide much-needed services, and even that is something we may not be collectively proud of at the end of the day.