Why Fair Trade Coffee Is The Solution
My intentions for writing this article are to give you a better idea of the coffee industry and the current issues that it faces. If there is anything you should take away from this article, it is that farmers are not being paid enough, which is why Black Ink Coffee Company believes in fair trade, sort of.
The coffee that you know of is traded on a physical market, and it is also one of many commodities traded on the futures market. Without getting into the specifics, a futures market works by buying and selling contracts before a set date. In regards to coffee, it would be the delivery date for the physical product. However, these contracts are usually liquidated before the delivery dates which means that people are just trading paper.
The most important futures contract for the coffee industry is the Arabica coffee futures contract, also referred to as the “C-Price”. This price sets the standard for the price of Arabica coffee because it directly correlates with the supply and demand of coffee. Another important futures contract is the Robusta coffee contract. These two types of coffee combined for more than 165 million bags of coffee produced last year.
For those of you that don’t know the difference, Arabica beans are known for their sweeter and softer tastes (like what we sell), whereas Robusta beans are a bit harsh and are typically used for their higher caffeine concentration (typically used for instant coffee).
Futures exist to essentially reduce risk of financial losses due to any price volatility. In theory, they are a good thing for investors. The problem however, is that these futures don’t have a minimum threshold which means the price can keep dropping, and that is what has been happening for some time now. Good for investors, bad for farmers.
As a result, farmers are not making enough money to cover their own overhead (costs to grow the crop). This leads to a chain reaction of negative outcomes such as poverty, the use of unhealthy and dangerous chemicals, or the farmer being forced out of the industry all together.
With farmers leaving the scene, the supply goes down. This higher demand for coffee naturally raises the price. However, coffee is not something that you can grow overnight. It typically takes 3-5 years to grow a sustainable coffee crop, which by that time, the price may have gone back down.
Buying fair trade coffee is a way of purchasing coffee outside of the physical market, at a higher price, which allows for the farmer to make a profit. This helps farmers stay in business, allows for them to focus on providing great quality coffee beans, ensures that dangerous chemicals aren’t being added to your cup of coffee and can create a personal relationship between the farmer and the roaster. This is why nearly 80% of fair trade coffee is organic and why we buy fair trade.
The only problem though is that it costs farms money to become Fair Trade certified, as well as the coffee roasters, importers and everyone else in the supply line. Unfortunately, this price to become a Fair Trade recognized institution is not always affordable for some. This essentially leaves the poor farmers remaining poor while the rich ones continue to get richer.