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Coffee, Commodification, and the C-Market

Posted by Jeremy Williamson on

As you may have heard, the C-Market price for coffee has fallen to a fifteen year low in the last month. As of writing this post, the C-Market price for a pound of coffee is $.98 USD. This is below the cost of production for many of the types of producers that we work with. The C-Market is a complex system of seemingly arbitrary inputs of supply, demand, and speculation that drives the price that the majority of coffee growers receive for their coffee. I think it is important to remember that this has not always been the case. While coffee price volatility has been an unfortunate reality in coffee for as long as colonialism, there have been certain institutions that have mitigated price volatility in our fairly recent past. One institution that has been largely forgotten in our modern specialty coffee paradigm is the International Coffee Agreement (ICA).

The ICA was created post-World War II as an agreement between the major coffee producing countries (led by Brazil) and the major coffee consuming countries (led by the United States) to control quotas in order to ensure a fairly consistent price for producers, while also providing a fairly affordable price for consumers. The incentive for the United States to collaborate with what was essentially a cartel (very similar to what OPEC is for oil) was that as a result of the ICA, the United States had access to predictably affordable coffee to be consumed by its exploding middle class. An additional advantage to participation was the opportunity to show that capitalism could be a force for good in regions (especially Latin America) that were seen as particularly susceptible to that pesky communism hooplah. Fast-forward to the late 1980s, and you have communism on the rocks, and free-market idealism gaining significant standing in the West. This culminated in 1989 with the Reagan administration pulling out of the ICA, which caused the wholesale collapse of the agreement. The collapse of the ICA led to an even more pronounced collapse in coffee prices, which reached lows of $.49/LB by 1992.

Prices eventually rebounded, but the volatility of the “market” driven approach of the C-Market has continued to adversely affect producers, and has led to unwise speculative behavior on the part of both investors and coffee roasters. At Olympia Coffee, we combat the commodification of coffee in a few major ways:

  • We have set a high floor for the purchase of all of our coffee. All of Olympia Coffee’s offerings meet our Fair For All standards of being purchased for at least $3.50 (FOB). This means that no matter how low the C-Market dips, we will honor our commitment to paying fair prices to our producing partners.
  • We also set high quality standards for our coffee. Where commodities are binary (they either fit the criteria for a product or they don’t) we revel in the nuance and exploration of quality. We only purchase coffees that score 85+.
  • We have committed to developing long-term relationships with our producers. We see this as the major intangible that separates a commodity from a crafted good. If you have a longstanding relationship with a producer, it is much harder to be morally accepting of their exploitation.

In this trying time for coffee producers, it is important to maintain a historical perspective on the cyclical nature of coffee markets. There have been highs and lows to the C-Market, and this is likely to continue. Today’s very low prices are very likely to met in the near future with record high prices. This only enhances the need for a coherent set of standards for both quality of coffee and quality of life. This is our intention with Fair For All. In this way, Fair For All is a small, but fairly revolutionary approach to the trade of coffee, one that relies not on market signals, but on human beings.

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