The Commodification of Coffee: The Bigger Picture

Followed by petroleum, coffee is the most valuable international trade. In the US, we drink on average 300 million cups per day. Except, we never really consider the bigger picture of this good we often indulge in. Sustainability in coffee means different things to different people—but the main focus for everyone involved is a healthy succession of the coffee industry (from famers to consumers and everyone in between).

Usually the value of a consumer good is determined by supply and demand. That would mean how much farmers grow and how many people are willing to purchase the good in cafes, restaurants and around the world—thus defining the price. But this is not how it works with the coffee industry.

The interesting thing about coffee production is the fact that it has remained out of the hands of large agri- businesses. Coffee has mostly maintained its production through small, independent farmers. More than 80% of the world’s coffee production has been exported from developing (periphery) countries to developed countries, thus creating a huge wealth disparity between the producers and consumers. (The person consuming the coffee is almost always better off than the person producing it). In our capitalistic commerce, we like to see the price of coffee (from producers) extremely low so there is a large profit margin. But, this means that the lower the price, the less money the coffee-farming families are making.

We examine the commodity analysis chain of coffee in order to make visible the intermediaries between producer and consumer and help understand where the power lies in the commodity chain.

The global commodity chain of coffee is broken down into 7 steps:

  1. Producers
    1. Earn a few cents per pound for coffee
    2. Vital export for many developing countries
  2. Middlemen
    1. Buy coffee from producers
    2. Upgrade the quality/value of coffee before selling it to someone else
    3. Often tried to eliminate because the middleman UNDERPAYS the producer
  3. Exporters
    1. Transports the coffee out of producing country and sends off to importers to be sold in retail
  4. Importers
    1. Works with exporters in transporting coffee from middlemen to roaster
    2. Largest coffee producer/exporter is Brazil. The US is the world’s largest importer. (US’s largest food important and second most valuable commodity after oil).
  1. Roasters
    1. This is where the coffee bean turns into a roasted bean coffee product
    2. This is what produces the flavor of coffee
    3. Largest margin in commodity chain
    4. This is where price increases (different types of beans/roasts)
    5.  Retailers
      1. This is where you get your coffee.
      2. Dunkin Donuts and Starbucks are two of the biggest retailers in coffee.
      3. Retailers are responsible for generating demand for commodity through marketing and advertising
  1. Consumers
    1. This is us, the people who are purchasing the coffee from the retailers
    2. Consumers pay upwards more than 2000 percent more per cup of coffee than producers earned for making it. (THIS IS A HUGE DISCONNECT and UNEQUAL EXCHANGE.

This large chain allows for the development of major disconnect when it comes from producer to consumer. Understanding where the coffee comes from and breaking down this chain allows us to see how the power lies in the middle of the chain and is completely lost when it comes to the producers.

Since evaluating this conventional coffee chain, we see that the producers are losing big time. This is where the idea of Equal Exchange Fair Trade Coffee was developed.

Fair Trade promotes sustainability in the coffee industry as a whole (focusing on the producers). The idea of fair trade helps empower less developed countries that are losing out in this commodity chain. It makes sure that the producers will receive a fair price for their good and helps educate them to run a more successful business in the global market. It helps make the invisible, visible. It ensures the there is an equal exchange for their good and guarantees a fair price, and direct trade rather than going through all of the middlemen.

The developed countries like North America, Europe and Australia are the ones consuming the most coffee. Periphery (or less developed countries) like Africa, South American, Central America and Asia are the countries that are producing the coffee.

  • What classes are shaped through this commodity production, distribution and consumption?
    • Small scale farmers
    • Consumers buy coffee for much more than producers earned for growing it
  • What classes benefit and how? Which ones lose and how?
    • Consumers
  • Has social mobility been enhanced through globalization to this commodity sale?
    • Consumers and producers are at opposite ends of spectrum.
    • Producers make almost nothing
  • What have capital and labor gained (and lost) through this commodity production?
    • Development of Fair trade
    • Periphery countries lose
    • Educate the producers so they understand equal opportunity in the field

In Edward F. Fischer’s piece, “Third Wave Coffee” he discusses coffee as a commodity and how it effects those who produce it. He refers to his piece as “Third Wave Coffee” because Fischer discusses how coffee has had “three waves” of consumption in our culture.  Coffee has come and gone as a popular commodity and heavily effects those who are producing it and buying it. Coffee has turned intoa commodity that can satisfy all aspects of the socioecnomic ladder. But– it’s producers are seeing major reprecutions of this growing commodity. Stuctural changes are needed in order for the producers of this commodity to not see a major loss in the economic benefits of this commodity.

http://popanth.com/article/third-wave-coffee

Marquardt, Katy. “Brewing Profits, A Cup At A Time.” U.S. News & World Report 145.11 (2008): 55-58. Academic Search Complete. Web. 20 Nov. 2014.

Reavis, Cameron, Locke,. 2010 “Fair Trade Coffee: The Mainstream Debate.” MIT Sloan Management, August 27. Retrieved Nov 23, 2014 (https://mitsloan.mit.edu/LearningEdge/CaseDocs/08%20069%20Fair%20Trade%20Coffee%20The%20Mainstream%20Debate%20Locke.pdf).

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