Commodity Coffee And The C-Price
The Emergence Of Specialty Coffee
Commodity vs. Specialty Coffee: How Do They Differ?
How Is Coffee Traded?
What About Coffee Certifications?
Advice To Consumers
There's never been so much interest in specialty coffee as there is now. You'll find a growing number of coffee shops and roasters throughout the UK (and beyond) defining themselves by their commitment to specialty coffee, and, in a way, their opposition to what people call 'commodity coffee'.
Keep reading to find out what the differences are between commodity and specialty coffee.
Commodity Coffee and the C-Price
In the same way as oil or gold, coffee can be traded as a commodity. And while it’s not actually the second most traded commodity worldwide as some have claimed, coffee as a finished product is incredibly popular and consumed almost universally — representing a huge global industry.
The price for coffee as a commodity is known as the C-price, which is influenced by principles of supply and demand rather than quality considerations. This means that commodity coffee is treated as a uniform product and has neither negative or positive quality attributes.
In a way, the C-price is the minimum price for coffee and many see the biggest flaw of this is that this price does not reflect the hard work farmers put into the whole coffee producing process. In some cases, the C-price isn’t even enough to cover the basic cost of production and many producers will suffer dramatically when the C-price drops.
The market prices of commodity coffee can vary according to a range of factors, such as the weather conditions in countries that produce beans. However, the coffee beans themselves, including their taste and quality, do not affect the world market price.
Tip: It isn’t always the case, but you’ll often find that instant coffee products rely on commodity coffee to achieve profits. Certain supermarkets and large coffee chains may also sell commodity coffee to consumers. A clue for spotting commodity coffee is when you can’t find a country of origin or if the origin is an entire country rather than a region, cooperative or individual farm – as is more common with single origin specialty coffees.
The Emergence of Specialty Coffee
As defined by the Specialty Coffee Association (SCA), specialty coffees are those with a score of 80 or above based on several different attributes. The beans are tested extensively for their aroma, flavour, mouthfeel, acidity levels, and more.
More broadly however, the specialty coffee industry is a kind of reaction to, and evolution of, the way things worked before. Concerns about the fair treatment of farmers as well as a drive for better quality are guiding principles in specialty coffee.
Generally, specialty coffee beans are of much higher quality and less likely to have defects than commodity coffee. The highest-scoring specialty grade coffees typically offer certain traits including flavour complexity, balanced body, and distinctive tasting notes.
The specialty coffee industry is a kind of reaction to, and evolution of, the way things worked before. Concerns about the fair treatment of farmers as well as a drive for better quality are guiding principles.
Commodity vs. Specialty Coffee: How Do They Differ?
Most of us have either bought or drunk commodity coffee at various points in our lives. This may have been in the form of instant coffee from the supermarket or even at a restaurant or café. Its popularity comes down in part to its low price point, and how easily accessible it is.
And while there’s no shame in having done so, knowing the clear pros and cons to commodity coffee may influence your future decisions when it comes to the kind of coffee you buy.
There’s an inherent quality difference between specialty and commodity coffee beans. Coffee, when treated as a commodity, is defined as being a homogenous product, meaning that it is interchangeable with any other type of coffee. When traded on the New York Coffee Exchange, its world market price is determined without any real consideration of quality.
In contrast, the role of quality assurance is integral to the production process of specialty coffee. A lot of time and resources go into growing the coffee beans, and picking the best coffee cherries. The achievable yield with specialty beans may be lower in volume, but this is compensated for by the higher prices they will achieve on the market.
Although the industry is making progress in terms of prices and selling practices, the majority of commodity coffee is produced by farmers who have not been compensated fairly for their work. Or, who risks losing money when the coffee price falls too low or they have not been able to produce high enough volumes.
Regardless of the quality of the coffee produced, growers will get paid the same for their goods in the commodity market. On the other hand, with higher prices paid for coffee of higher quality, the specialty coffee industry makes it more likely for farmers to be fairly compensated for their work.
Having said this, thousands of farmers worldwide still rely on the commodity coffee industry for their livelihoods and not all farmers would be able to make the transition to specialty coffee, whether it’s due to a lack of initial resources or because their land and climate is not optimal for the production of high quality specialty coffee.
With higher prices paid for coffee of higher quality, the specialty coffee industry makes it more likely for farmers to be fairly compensated for their work.
There are no doubt opportunities in this industry for farmers to earn an above-average salary, but it can also mean a less predictable income, for example, if the quality of the yield is not as high as anticipated or if experimental processing methods aimed at satisfying the desires of roasters and coffee buyers abroad leads to unpleasant flavours or defects.
The Arabica coffee plant (the species of choice for the majority of specialty coffee producers) is also more susceptible to diseases and pests than the Robusta plant.
When it comes to the ethics of coffee, it is again clear that there are some key differences between commodity and specialty coffee. Many coffee companies are beginning to focus only on specialty coffee because of the benefits it can bring to farmers and the environment the coffee is grown in.
Commodity coffee market prices fluctuate and can be very low at times, which means that, at times, farmers are paid less than the cost of production. Of course, this is not always the case, but it raises the question of how ethical commodity coffee can be when this is a possibility.
One of the trademarks of commodity grade coffee is that buyers will switch to the offer with the lowest prices on the world market. In short, this means that long-term relationships between farmer and buyer are rarely fostered, and farmers are also not guaranteed financial security.
How is Coffee Traded?
Direct communication between the farmers and roasters and, on occasion, importers/exporters. This establishes an ongoing relationship between the two parties.
Coffee that has been grown and traded in a way that strives to ensure fair wages for growers and greater provenance transparency for consumers.
The Relationship Model
Similar to Direct Trade, relationship trading is based on regular communication between farmer and roaster, with no middle men.
Coffee that has been directly traded is becoming increasingly popular as specialty coffee roasters want to practise an ethical supply chain and be transparent about the traceability and provenance of their coffee.
There is no strict definition of Direct Trade, and no standardising body as there is with other coffee sourcing models. This means that there is room for both interpretation and cynicism. Some roasters believe that the involvement of ‘middle men’, such as importers, goes against the principles of directly traded coffee, while others see it as a way to allow roasters to access high-quality and sustainably produced beans.
Most people associate the phrase ‘fairly traded’ with the Fairtrade Certification Scheme, but not all coffee roasters who take part in the fairly traded coffee model work with the Fairtrade organisation. The term refers to coffee that has been produced and sold to a certain standard, in order to provide a standard minimum wage for producers. Different companies may have different standards, but this involves greater traceability and higher prices for the producer.
The Relationship Model
The Relationship Model describes an ongoing and transparent line of communication between every party in the coffee supply chain. The aim is to empower smallholder farmers and allow them to benefit from each part of the coffee sourcing process.
What About Coffee Certifications?
There are a few certification schemes out there you’ve probably seen at some point — some put in place to protect biodiversity and the environment, and others to ensure the welfare and livelihoods of growers.
There are multiple organisations able to certify coffee as Fair Trade, including Fair Trade International and Fair Trade Certified. The purpose of these companies is to verify certain coffee producers as being ethical, and ensure that farmers are compensated with a reliable income.
For a coffee to be certified as organic, it must meet a set of rigorous international standards, from how the coffee is grown to how it is packaged. Some of the guidelines include using only natural substances to grow the plants, and only using organic products and equipment to process the beans.
When you spot the Rainforest Alliance seal on a packet of coffee, it signifies that the coffee has not been produced in a way that causes harm to the biodiversity of the area. As well as protecting the environment, Rainforest Alliance certified coffee works to uphold the rights of the farmers.
Advice to Consumers
When buying coffee, it can be difficult to understand exactly how ethical or fairly traded it is, even if you're buying from a specialty coffee roaster or café.
There are a couple tell-tale signs of a high-quality specialty coffee, however. Our advice would be to look out for clues that point towards traceability and transparency of a coffee’s origin. These include things like the name of a producer, farm, cooperative or processing station, and specific region within a country.
The truth is, commodity grade coffee isn’t going anywhere. This is both because of the fact that so many producers depend on it for their livelihoods, and because so many people around the world love drinking it (whether because of its low price, convenience, or in some cases, its taste).
Nevertheless, knowing what specialty coffee is and buying coffee that benefits the producers, not just the companies selling it, can make a big difference in our eyes.