The Chains That Bind

Updated July 28, 2018; Added addendum.

When I started this new chapter in my coffee career, my first interaction with smallholder farmers was an eye-opener, even life-changing. It was life-changing in that I saw, up-close and personal, a completely different way of life from my own. My cultural perspective is formed from being a white male born and raised in a developed, first-world nation that has a serious case of consumerism*.

From that perspective, I see people who seemingly have less than I do, who have to work harder in life than I do and the temptation is to step in and “help them.”  That temptation is borne from the assumption that they want the same life that I have and that I somehow know what is better for them.

But to date, every smallholder farmer I’ve met has been happy! They have been proud of their lives and proud to invite me into their homes and to share their coffee or sit around their fire and share their food. It has truly been a humbling experience and an opportunity to grow and mature not only as a “coffee guy” but as a person in general.

lunch around the fire

Given that they are happy with their lives, does that mean I should do nothing and let things continue as they are?

In Star Trek, there is something called the Prime Directive.

“The Prime Directive, used in four out of five Star Trek-based series, prohibits Starfleet personnel from interfering with the internal development of alien civilizations1.”

I think that is a pretty good directive.  Civilizations should progress at their own pace as long as they are not being exploited as a result of their comparative lack of sophistication.  But therein lies the rub.  Are the farmers being exploited?  Could they benefit more if their methods were more sophisticated?

Coffee is a commodity that is largely produced by developing countries2 and largely consumed by developed countries3.  The supply chain needed to get the coffee from the farm to the cup can be quite complicated.  At the beginning of the supply chain the coffee is a raw material that still needs to be roasted before it becomes a consumable product (discounting the green coffee drink fad).  Before it can be roasted though, it first has to be processed by a mill, which will take a raw cherry and process it into an un-roasted coffee bean.  It is then usually bought by a trader/broker/exporter who will then resell it and ship it overseas to the next buyer.  That buyer may be another trader/distributer/importer who then will resell it again to a roaster, who will eventually roast it and sell it to either a retail customer or to a wholesale customer who will sell it yet again.

Farmer → Mill → Exporter → Importer → Roaster → Retail/Wholesale Customer → Retail Customer

Granted, there are cases where roasters trade directly with the farmers, but this level of interaction is still relatively rare in the grand scheme of things and thus is more the exception than the rule.  But it is getting more common.

But back to that long supply chain.  Each link in the chain needs to make a profit.  With each additional link in the chain, the price to purchase the product increases.  If there are multiple traders in the chain ”up stream” from a roaster, that coffee will be more expensive for the roaster and he will have to increase his selling price to make up for that increase in cost.

So far in this hypothetical, over-simplified scenario, I do not see anything “unfair” for the farmer.  The farmer sold a product at a fair price at the beginning of the supply chain and the farmer is now out of the equation.  His involvement in the chain is done and the chain’s responsibility to him is satisfied.  Granted, there is a large disparity between the price paid to the farmer for a raw material and the price paid to a cafe for the final, consumable product, but all of the money that makes up that disparity did not go straight to the roaster — it was spread along the entire chain each time the coffee changed hands in its journey from seed to cup*.

The supply chain is critical in getting coffee from its remote, mountainous, tropical point of origin all the way to our cup. Each link in that chain fulfills a logistical need and is financially compensated for that need. Each link adds both value and cost and without those links, the likelihood of us having a great cup of coffee is reduced.

The coffee supply chain binds the coffee market together, making its existence possible.

Addendum

In the scenario I laid out above, I did not discuss the various challenges farmers face in trying to sell their coffee, especially smallholders on their own i.e., without a co-op. These challenges are real and definitely should be addressed and that can be done through farmer education, business training, etc. The point of the story is that by-and-large, each actor in the chain is able to participate rationally and be compensated for their contribution. Too often people make a false equivalence between the profit made for selling a raw material (the green, un-roasted coffee bean) and retail price of the final, consumable product (a latte).

This argument is so common and so easily misunderstood (and taken at face-value), that its perpetuated by people who should know better. The argument goes something like this;

Three dollars and fifty cents for example a cup of coffee in Starbucks in New York, the producer in, say, Costa Rica or Honduras, or El Salvador, or Uganda, or Cameron, or Kenya, or Colombia receive less than five cents. Three dollars fifty and the producer receives less than five cents.

Not only is this a comparison of a net profit to a retail price, but it also doesn’t account for currency differences, cost-of-living differences, the fact that a latte also has milk in it, the cost of transporting the green coffee from origin to final destination, the cost to roast it, the cost to extract it, so on and so forth.

I am certainly not arguing that farmers have it great and the system is perfect. We have a lot of work to do and there is plenty of room for improvement at the production side of the chain. But if we’re going to be successful in tackling this challenge, we must be fair and honest in identifying and quantifying what the problem really is.

1. http://en.wikipedia.org/wiki/Prime_Directive
2. http://en.wikipedia.org/wiki/List_of_countries_by_coffee_consumption_pe’r_capita
3. http://en.wikipedia.org/wiki/List_of_countries_by_coffee_production


Michael C. Wright

Michael is an American expat living in Singapore where he writes about many things coffee-related. A roaster by trade, Michael is also a licensed Q Grader and an Authorized SCA Trainer (AST).

Updated