Shop for Coffee
Shop for Coffee
Guide to Bean Prices
Brief Guide to Green Coffee Bean Prices
A brief guide to how coffee is sourced, and why it winds up at the retail price it does. We hope you enjoy reading it.
All our coffees are Grade A, “triple-sorted”, which means the farmer has process two sortings to remove any defectoves or foreign particles, and we do a final inspection. Most other green sold on the web are single-sorted coffees and the sellers do not do a full inspection themselves.
How we source coffee:
Coffee is generally purchased from a commodities trader, or through Fair Trade, or Direct Trade.
The majority of coffee produced in countries where coffee is a big export is sold to collectives, agents or cooperatives, who then may sell to brokers that will transport it out of the country. Each time the coffee changes hands it raises the price 35%, and none of that goes to the farmer.
Direct Trade means retailers like us become direct importers and go through all the very difficult steps to buy direct from the farmer and assist them to ship to us. There are no middlemen. The farmer sets the price with us to be what he NEEDS, no matter what greedy speculators might be doing to the commodities prices.
If a green bean seller doesn't state that they use Direct Trade, they don’t. They buy from brokers. This includes Fair Trade certified coffees.
How does this break down, and how much does the farmer make?
We've tried to break this down into charts to make everything straightforward. (Of course, this necessitates some simplification.) Every farmer's situation is different, but we have used a "typical" farmer for these examples.
For those who do not want to read more detail, here is the simple formula to use:
Website Retail Price x .34 = price paid to the farmer if using Direct Trade.
Website Retail Price x .19 = typically the price paid to the farmer if it is NOT Direct Trade.
Example 1: Our website price for Grade A Arabica of $8.95 x .34 = $3.04 paid per pound to the farmer.
Example 2: Other non-Direct-trade website price of $6.95 x .19 = $1.32 paid to the farmer.
Most farmers pay the equivalent of about $1.10 per pound to produce Specislty Grade coffee to run their farms and pay their help. So if they are getting under $2 a pound for their coffee, they may going hungry a lot, their children have no access to higher eductation, they have no medical care, etc. They actually need at least $1.00 profit just to exist without being in constant debt, and be able to take care of their families and workers.
The decision about where to buy your green beans is a powerful tool for doing some good in the world. When you support Direct Trade, you offer the people who created your coffee the same opportunities for health and happiness you want for yourself and your families. Doesn’t that make a cup of coffee taste more delicious?
Why we believe in Direct Trade and do not believe in Fair Trade.
Although Fair Trade is a nonprofit company, it costs money to obtain licenses and participation. While the concept is great, it is based on providing producers with a decent margin over the market commodity price. It does not guarantee them a profit or even that they will break even.
Want to know more about pricing? Keep reading! HEre's the long version:
The farmer in most countries has a cost basis of about $1.10 per pound. He has to maintain a large amount of land, employ many pickers and handlers, pay for milling, pay taxes,and cover the expenses of new seedlings, fertilizer or soil enrichment, utilities. etc.
(This is based on the single pound price, the margins go down with larger weights because the handling costs go down. This is a gross oversimplification but works out to be very close most of the time. The other 66% percent of the cost is eaten up with shipping, importing costs, packing, warehouse space rental, labor for handling and shipping to retail customers, credit card fees, etc.)
If the farmer sells to a local coop or collective, they pay only part of the money and often loan him the rest, because oif course he had to pay everybody and everything before he sold the finished green beans. The collective or whoever starts the process up the chain. Eventually the coffee is sold and the collective or agent comes back and pays the farmer. Alas, his payment is often somewhere around $1.20 per pound, either before or after deductions advanced to him, often at 30% interest. He barely covers his cost and hoped for a better year next year. His children will never attend school about a few grades, medical care is lacking, as are all the niceties of what we associate with a fair and decent lifestyle.
Selling Direct - Direct Trade
When a farmer is lucky enough to find a buyer who is the actual end user or retailer, he will do much better. Although any direct buyers will try to bargain him down, most (like us) pay him the going Specialty Coffee rate. This might be $3 a pound. There are no middlemen. The farmer gets his money early, so he doesn’t have to borrow at userous rates. He makes enough profit to send his kids to secondary school, eat well, get medical care and have a good lifestyle, not only for him but his family, extended family, and his pickers and workers. He can invest in the future with new crops or land and equipment. Life is good.
We only buy coffee on Direct Trade.
When you see other websites offering green coffee at $5.95 a pound or cheap prices, keep in mind the usual markup for a coffee retailer:
34% is the cost of the coffee itself, about 30% is overhead like credit card fee,s ultilities, rent, shipping and importing, duties and fees, etc. Thena about 20% goes to his labor - people who operate the retail business, packing the coffee, shipping it, performing customer service, etc.
So, here is how to figure out if the company you are buying from is paying the farmer fairly for his coffee:
Use the 34% figure to know what the person who sold the beans t the retailer got paid. Then take out any 35% commissions per broker.
Example: Retail $5.95 from a website where the owners do not buy in Direct Trade from the farmer himself : $5.95 x .34 = $2.02. Then if there was even one broker, deduct 35%, which takes the $2.02 figure to $1.31. That is the maximum paid to the farmer. His family is probably often hungry and his kids and workers have a dim future ahead.
Example: $8.95 retail on our website. We buy direct, so multiply $8.95 x .34 and get $3.04, which is what we generally pay on average straight to the farmer. Of course, some coffees like the Robustas are less expensive because the harvests are bigger and easier to process, so the retail is less and the farmer’s cost is quite a bit less, so $6.95 for a Robusta is equal to $8.95 for Arabica.
At $3.04 per pound, the farmer prospers, his children may even dream of college, they have medical care and life is good. As it should be.