Price Disparity in the Marketplace

Consumers benefit from current coffee prices; farmers… not so much. Many hardworking coffee farmers struggle to feed their families and have to pull their children from school due to lack of funds. A $4.25 latte or $15.95 bag of beans may seem like a lot, but the reality is that these prices are often far below what it costs farmers to produce the coffee. In other words, coffee farmers are losing money on their crops.

We want to highlight the price disparity in the marketplace and explain how Direct Trade helps make coffee farming more sustainable. We’d also like to be transparent in regards to what we pay for our Direct Trade coffee.

Consumers Benefit from Current Coffee Prices; Farmers… Not so Much

In the coffee marketplace, the balance of power is tipped in favor of those who buy coffee, not those who sell it. This is partly because coffee grows year-round, and the same plants yield multiple harvests. So while supply and demand of coffee may fluctuate, the actual coffee crops aren’t as flexible. What do farmers do when they encounter the uncertain prices of the coffee marketplace? They cut costs, resulting in a vicious cycle that not only affects the farmers, farmworkers, and their families, but also the final product.

When dealing with rapidly fluctuating prices, farmers reduce labor costs by hiring fewer farmworkers. As a result, coffee farmers rely more on chemicals than laborers to maintain crops. Farmers may also cease making improvements on their farms and focus less on meeting certification standards. As farmers cut costs, they produce fewer beans, and farmers and farmworkers alike work and earn less. When this happens, folks often don’t have enough money to feed themselves and their families. They may have to pull their children out of school to help out around the farm. These are the unfortunate consequences of the current state of the marketplace.

But what would the marketplace look like if prices were less uncertain? Say a farmer is confident the price they’ll be paid for their coffee is enough to cover the cost to produce the coffee. They’d want to find ways to increase production and improve the quality of their beans. If coffee prices were more sustainable, farmers could hire more laborers and pay them fair wages. Best of all, less price disparity in the marketplace would mean stable incomes for farmers and farmworkers, allowing them to feed their families and keep their children in school.

Direct Trade Makes Coffee More Sustainable

When it comes to price disparity in the marketplace, cutting out the middlemen between the roaster and the farmer — a.k.a. Direct Trade — provides ample benefits. In a Direct Trade agreement, the roaster directly pays the farmer above-market rates for coffee. The best part? Ditching the middleman provides savings that roasters pass back to the farm. Plus, roaster and farmer develop a long-term relationship that lasts through multiple harvests, providing stability in an ever-fluctuating market. We see how Direct Trade benefits the farmer. But did you know it also benefits the roaster? As the farm invests in new equipment and enhances the quality of its beans, the above-market rate remains the same. Direct Trade is more sustainable for everyone.

However, there are two problems that may arise with a Direct Trade agreement. First, not all Direct Trade deals are beneficial to farmers. For example, if cutting out the middlemen only leads to minor savings, a farmer in a Direct Trade agreement may be stuck with a fixed price long-term that isn’t any better than market price. Secondly, there are very few regulations surrounding Direct Trade. Just about anyone can claim their coffee is Direct Trade without consequence. Since Direct Trade is more time-consuming than your average business model, there are those who readily co-opt the name without putting in the time and effort to truly engage with the sustainable business model.

When done right, though, Direct Trade shows that the roaster cares about coffee and the folks producing it. Plus, there is more to Direct Trade than paying farmers a fair price. Fair Trade coffee is the name for that agreement. With Direct Trade, both the roaster and farmer are committed to helping each other long-term. Whether it’s the roaster helping the farmer renovate their farm to ensure the highest quality of bean, Direct Trade demonstrates a genuine commitment to paying farmers well and improving the quality of your cup of coffee.

What We Pay For Our Direct Trade Coffee

The current market price for coffee as of this article’s publishing date is $.92 per lb. However, we here at Durango Coffee Company pay farmers much more than that for their quality coffee beans. To obtain the highly-rated Costa Rican Las Lajas Perla Negra and Las Lajas Red Honey, we pay between $4.85 and $5.85 per lb., almost five times the current market price.

We pay farmers $4.10 per lb. for the Guatemala Retiro del Quisaya natural process, washed process, and Guatemala La Merced. We also pay $5.00 per lb. for our Kenya Mwiria coffee and $3.75 for our Brazilian Santa Luzia Para Ela beans that support women. Plus, we have an exciting new Direct Trade shipment coming in soon for which we’ll pay the farmer between $3.27 – $21.00.

Mindful consumers who support roasters committed to a sustainable and ethical way of getting quality coffee are worth their weight in gold. However, we should keep in mind that the world is full of other consumers buying coffee below production costs. The coffee industry at large could stand to be reformed by consumer demands for more equitable options.