Ethical coffee trading

We believe that coffee farmers should be able to make a decent living from growing coffee and that their workers should be treated fairly, but we do not believe that the Fairtrade system is the only or the best way to achieve this.

Large coffee companies base the price they pay for coffee on the C price, ie the price on the stock market which fluctuates daily. Because of these price fluctuations it is difficult for farmers to plan and know how much they will receive when the harvest comes.

Fairtrade guarantees farmers a price irrespective of the quality of what they produce. This policy can lead to overproduction which further lowers the stock market price, making things difficult for small farmers who are not part of the Fairtrade system and cannot afford to be.

Ethical coffee trading

Cup of Excellence

We think that a fair price should be negotiated for a coffee which reflects its quality and the needs of the producer. This price should be paid for the entire year’s crop and not fluctuate, based on the market price. High quality coffees are grown using varietals that taste better but yield less. Only fully ripe, defect-free beans are processed, improving quality and taste -- lowering yields and raising prices for the individual farmer in reward for his effort.

One of the champions of this new business model is a former commodity trader. Stephen Hurst was an executive director of coffee trading at Goldman Sachs for 11 years. He founded coffee importers Mercanta in 1996 and turned his back on the commodity markets. The Financial Times reports:

'“I check the price once a day,” he says, “because it is useful for me to know the bare minimum price that my producers might get.” Mercanta aims to supply speciality roasters with beans sourced directly from the growers. He deals only within the top 2 to 3 per cent of coffee production, prizes long-term buying relationships and – crucially – pays prices relative to the quality produced.

Last year, the average price paid by Mercanta across the entire spectrum of coffee origins, grades, and varietals exceeded minimum baseline Fairtrade prices by 20 per cent. Hurst is a passionate advocate for the 'Cup of Excellence' competition, which began in 1999 and is now run in nine coffee-producing countries, from Brazil to Rwanda.

Growers submit their best lots, which are tasted (“cupped” in the professional jargon) by an international expert jury. Winning lots are then submitted for an internet auction where they command stratospheric prices (often more than 10 times the minimum Fairtrade guaranteed price – the top lot in the 2008 auction in Guatemala fetched 75 times the going commodity rate).

“It is the absolutely highest echelon of quality coffee,” says Hurst. He is a past chairman of the competition and five of his eight staff at Mercanta are judges. “More than anything else it is a great opportunity for growers to meet roasters and talk about their coffee – it is a vast discovery programme for previously unknown coffee producers and regions.”'