Commodity Grade Coffee
Coffee, when treated as a commodity, is defined as a uniform product that is interchangeable with another coffee of the same type. This makes up the majority of coffee consumed around the world. Commodity coffee is traded on the New York Coffee Exchange, and the price is set on the world market without regard to intrinsic coffee quality.

Commodity coffee offers neutral or negative flavour attributes without provenance, which means buyers switch to the lowest price offer on the market with no commitment to long-term relationships.

Volatile pricing means farmers cannot plan for their future.

Speciality Grade Coffee

The Speciality Coffee Association (SCA) defines Speciality Coffees as those with positive flavour attributes, and which are assigned a score of 80+ based on numerous attributes which contribute to the taste. These evaluations are based on fixed criteria which are used through the speciality coffee industry. At Union we only buy and source Speciality Grade, 100 per cent Arabica, and select our coffees through a careful quality evaluation which includes tastings (cuppings) and farm visits.

Speciality grade coffee production needs more investment than commodity coffee, as it is often grown on higher altitudes with steep slopes which are difficult to clamber up. Care and attention to detail is required through the season. Hand-picking is needed to select perfectly ripe cherries. Processing must be carried out with exceptional care. Yield is lower as low quality and defects are removed.

There are different approaches to buying coffee. We describe some of the more common ones here.

CONVENTIONAL TRADE
Most of the world’s coffee is traded by speculators. Commodity prices are set according to a formula known as the New York 'C' Contract market and the price fluctuates as contracts change ownership many times. In this conventional trade the coffee passes through many hands: farmers sell to middlemen, who sell to exporters, who then sell to brokers and traders. Finally the coffee is sold to importers in the consuming country. In this long supply chain traceability is lost and the farmer receives a very small share of the final price.

Trading untraceable coffee poses a risk to human and labour rights. To undertake due diligence in those areas it is necessary to know where the coffee was grown.

CERTIFICATION
There are many certification schemes for coffee. Some may appear similar but each may place a particular emphasis on environmental, social or economic factors. The best known is Fairtrade which sets standards and trading conditions for smallholder coffee cooperatives to provide access to export commodity markets. The key aspect of Fairtrade is setting a minimum baseline price of USD $1.40/lb for green coffee, or the world market price if this is higher. In addition, a USD $0.20/lb social premium is paid. Standards are set to ensure that the conditions of production are socially, economically, and environmentally responsible.

Fairtrade Labelling Organisation is the certifying agency providing guidance, but not implementation on the standards. Fairtrade coffee can be bought from a broker or importer, and the roaster might not have a relationship with the cooperative. Estate farms and individual smallholder farmers are not eligible for this model.

DIRECT TRADE COFFEE
During the last decade, as a response to periods of low world market prices, speciality coffee roasters wanted to demonstrate ethical practises represented by showing provenance and traceability of their coffee. Importers and traders supplying these roasters responded by coordinating communication between farmer and roaster and creating alternative trading initiatives frequently referred to as “Direct Trade” coffee buying. These initiatives are important because many roasters do not have the resources to create and manage their own direct supply chain. There is no commonly agreed definition of Direct Trade coffee, and the term is used to cover many different practises with varying degrees of price transparency and of participation by farmers in direct price negotiation.

Direct Trade can imply a long-term trading relationship, but often this can be just a one-time purchase. Standards to ensure that conditions of production are socially, economically and environmentally responsible may or may not be part of this relationship. Despite the inherent implications of ethics related to Direct Trade models, this is not always the case. To take up an authentic programme of direct trade takes a significant commitment from the buyer, and costs can be prohibitive.