Coffee Review Australia

In 2006, global green coffee exports totalled USD$11 billion, up from a low of USD$5.1 billion in the wake of a global price collapse in 2002.¹ Since this collapse, coffee consumers have become increasingly aware of the idea of fair trade certification as a means of addressing poverty amongst third world coffee farmers.  This article presumes that the reader is familiar with these arguments² and attempts to explore the intersection of fair trade certification and coffee quality.

Coffee Trade and Fair Trade

It is incorrect to say that there is one market for coffee, setting one single price.³ Much coffee is traded on commodity exchanges, but, even there, coffee of different types fetches different prices.  The New York “C” commodities market might be of little interest to consumers whose sole interest is quality, but its influence in the world of coffee is huge, as high prices for high quality coffee traded off the exchange may still be expressed to be with reference to the relevant “C” price, in US dollars per pound.

The simple principle of supply and demand exerts a huge influence on commodity coffee prices.  It is an unfortunate feature of coffee that the tree takes around five years to deliver worthwhile harvests.  Boom cycles are caused by shortage of supply, such as when Brazil experiences frosts, often triggering farmers to plant coffee.  Bust results five years later when there is an over supply.⁴ The 2002 “coffee crisis,” in which green coffee prices plummeted to as low as USD$0.45/lb, is widely attributed to a dramatic increase in coffee production by Vietnam.⁵

Fair trade’s key promise is the guarantee of a minimum price for green coffee, on top of which a fair trade premium of USD$0.10 is added.⁶ Determining whether this makes the farmer better off is not a straightforward proposition.  A relevant comparison price must be found.  “C” prices are available from the ICO.⁷ For example, in April 2009, Colombian mild arabicas traded at an average of USD$1.91/lb – higher than the relevant fair trade minimum of USD$1.25/lb.  Conversely, in the same month Brazil natural arabicas traded at $US1.01/lb – lower than the relevant fair trade minimum of USD$1.20/lb.⁸ After comparing these prices, one must subtract the costs of certification – beyond any relevant fees⁹, farmers may incur costs in putting in place structures to meet the Fairtrade Labelling Organisation’s requirements.¹⁰

Fair Trade and Coffee Quality

There has been little focus on how fair trade coffee actually tastes.¹¹ Some academics theorise that fair trade certification actually results in lower quality coffee.  The argument is that if fair trade certification guarantees the farmer an attractive price, the incentive to produce higher quality coffee so as to obtain a higher price in markets other than the commodity market disappears,¹² especially if the practical effect of the fair trade minimum price is often to set a maximum.  The guaranteed price also encourages further production, exacerbating the over supply problem, lowering prices for non-fair trade certified coffee, decreasing the reward other farmers.¹³ Industry experts have adduced figures that suggest that the fair trade minimum is insufficient to produce coffee meeting the SCAA quality-based definition of ’specialty.’¹⁴ For example, at this year’s SCAA exposition, K.C. O’Keefe of Jungle Tech Peru presented a thought-provoking workshop in which the farmer’s costs of producing SCAA specialty coffee were USD$1.23/lb to USD$1.32/lb for small, medium and large farms in Peru, El Salvador and Guatemala, respectively.¹⁵ Adding dry preparation, export costs and origin profit took the figure up to USD$1.55/lb to USD$1.64/lb.¹⁵

From Theory to Practice

In 2008, TransFair USA announced the first ever fair trade coffee cupping competition, to which all ten Brazilian certified cooperatives submitted samples.¹⁶ Competition scores exceeded the cut-off for SCAA specialty coffee and the top lot fetched prices that were multiples of the fair trade minimum.¹⁷ However, in the same year, coffee in the Brazil Cup of Excellence competition scored noticeably higher and the top lot fetched consequently higher prices.¹⁸

In our own review of four coffees, Coffee Supreme’s fair trade organic blend stood out, delivering a rich, smooth espresso with brown sugar sweetness and hints of liquorice – Very Good.  As a cappuccino, the blend was milder than expected, combining with the milk to produce a pleasant custardy flavour – Good.  I suspect that ageing the coffee a few more days may have improved its presence in milk.  Reviewers could not recommend the other coffees reviewed, with taste notes ranging from dirt and lemon to animal/rancid fat and even a simple “wrong.”

Conclusions … ?

There is a staggering array of diversity in coffee at every level – from farm to finance, from market to market, from bean to cup.  It would be ridiculous to think that an article of this length could come to any universal conclusions, but it is hoped that the reader is encouraged to approach the subject matter with an open, but critical, mind.

Featured Reviews

Fair Trade Organic Blend from Coffee Supreme

Coffee #09032 – Fair Trade Blend

Coffee #09033 – Fair Trade Blend

Coffee #09034 – Fair Trade Indian Single Origin

Thanks To

David Makin of Veneziano Coffee and Makin Espresso (Reviewer and Barista)

Nim Namasi of The Maling Room (Reviewer)

Veneziano Coffee, who generously provided facilities for this review, including a Mazzer Robur grinder and La Marzocco FB-80 espresso machine.

This article was published in BeanScene Magazine, Issue 3, June 2009.

Endnotes

1. Neumann Kaffee Gruppe Statistical Unit

2. See, for example, Fairtrade Labelling in Australia and New Zealand, BeanScene Magazine Issue 3, June 2009, page 68.

3. Many people arguing for Fair Trade coffee start from this very basic and incorrect premise, perhaps because it could be inferred from the one-liner “guarantees a better deal for third world farmers.” In fact, the FLO’s own description more accurately describes the initiative as a “safety blanket” for when market prices fall. Regardless, the fact that all coffee around the world is not one homogeneous commodity commanding a single price is fundamental to the exploration of the overlap between Fair Trade Certification and coffee quality.

4. Mark Prendergast’s excellent book Uncommon Grounds: the history of coffee and how it transformed our world provides an very readable historical overview of the boom and bust cycle of the coffee market over the past century.

5. Mark Prince, So You Say There’s a Coffee Crisis; Néstor Osorio, Executive Director of the International Coffee Organization, Lessons from the world coffee crisis: A serious problem for sustainable development, Submission to UNCTAD XI, São Paulo, Brazil, June 2004

6. Fairtrade Labelling Organisation International, Fairtrade Minimum Price and Fairtrade Premium Table, Current version: 09.04.2009

7. Web site of the International Coffee Organization

8. These comparisons take the market prices from the ICO web page, above 7, and compare them against the FLO’s minimum price table, above 6.

9. Information relating to the costs of producer certification can be obtained at this site from FLO-CERT, the body that administers the Fair Trade certification scheme. An interesting exercise is to compare the various costs with the price of coffee. For example, paying the 500 Euro application fee for certification for a small farmer organisation would require all of the proceeds from the sale of approximately five bags of coffee sold at USD 1.20/lb at the current prevailing exchange rates. As Green As It Gets is an organisation that seeks to alleviate poverty amongst coffee farmers through various means, including microfinance. In explaining why the organisation elected not to pursue Fair Trade certification, the organisation draws a comparison between certification fees an annual family income. As Green As It Gets has published a position paper on Fair Trade, available here.

10. Colleen E H Berndt and Frederic Sautet, Mercatus Policy Series, Policy Comment 11: Does Fair Trade coffee help the poor? Evidence from Costa Rica and Guatemala, page 22-24

11. I should point out that this is based on my impression of the many articles that I have read and experiences that I have had over the past several years – I have not actually counted how many times Fair Trade is mentioned with the word “quality” and without it! The point certainly does crop up occasionally, for one example, see Alex Singleton, The poverty of Fair Trade coffee, 23 February 2008, telegraph.co.uk blog. For more academic publications, see also Marc Sidwell, Adam Smith Institute, Unfair Trade, chapter 3; Sinclair Davidson and Tim Wilson, Institute of Public Affairs, New evidence of old concerns: Fair Trade myths exposed … again, page 3.

12. Berndt and Sautet, above 10.

13. Marc Sidwell, above 11, touches on this point at page 13.

14. For further information, contact the SCAA.

15. Economics on a Coffee Farm, lecture given by KC O’Keefe of Jungle Tech Peru at the 21st SCAA Exposition, Atlanta, 17 April 2009. Figures quoted with KC O’Keefe’s permission. (One of the highlights of my SCAA Exposition experience!)

16. Transfair USA, TransFair USA Hosts World’s First Fair Trade Certified™ Cupping Competition (Press Release), Oakland, 8 October 2008

17. Blog of the 2008 Fair Trade Certified Cupping Competition

18. 2008 Cup of Excellence Brazil: Winning Farms ; 2008 Cup of Excellence Brazil: Auction Results