What is Direct Trade Coffee?

What is Direct Trade Coffee?

If you have had any exposure to specialty coffee, you’ve probably heard some terms get thrown around without a firm understanding of what they mean. Within the specialty coffee world, a comically long list of acronyms and industry speak can sometimes feel like trying to learn a new language. Do you know why? Terms like Direct Trade, for instance, do not have an exact meaning. Direct trade relationships between roasters and producers are unique; each is ideally structured to benefit the people producing and drinking the coffee.

Direct Trade, Direct Sourcing, or Relationship Coffee are all terms used to indicate partnerships where roasters buy green coffee beans as directly as they can from coffee producers. Because no official organization regulates or standardizes what these designations entail, we asked specialty coffee roasters how they define their direct trade partnerships. What we found is that the trade partnerships don’t all look the same, but in all cases, it came down to forming partnerships defined by the following values:

  • Transparency & traceability
  • Long-term sustainability
  • Ensuring that producers are making living wages

Some roasters, such as Alma Coffee Roasters, own their farms, some work directly with farmers and importing partners like Zoka Coffee, and others work directly with farmers and work to import it themselves, like Red Rooster in Floyd, VA. With all of these variations of the direct trade structure, the designation is not defined by an outright set of rules and regulations but by how well these values are upheld throughout the sourcing process for the betterment of the coffee, the producers, and the consumer.

What is Conventional Trade Coffee?

Most coffee consumed worldwide is bought and sold on the global commodity market. This is your gas station, generic store brand, diner, and office coffee. Coffee produced worldwide that is not deemed specialty grade is viewed as an interchangeable product sourced from various places and farmers, mixed together to standardize flavor, and sold at the lowest possible price. In conventional trade supply chains, many players are involved in getting coffee from farm to cup, and with each step, quality and transparency can be lost. Because of this convoluted journey, there is no way to trace your conventionally traded beans back to where they came from, who grew them, or how much those producers were paid.

graphic of the typical supply chain of conventionally traded coffee by MistoboxThe typical supply chain of conventionally traded coffee

The price of this coffee is highly variable as well. The New York Coffee Exchange sets the market price for coffee, and as that price ebbs and flows over time, coffee farmers are at the mercy of the market. Because of this volatility and uncertainty in the price, it’s difficult for farmers to predict profits and plan for the future. Even if prices were as high as they were in 2012, much of that money goes to the other people involved in the processing, transporting, and storing of the product before producers ever see it.

Line graph of Commodity Market prices for coffee in the last 10 years. Source: Macrotrends

Commodity market prices for coffee from 2012-2020 Source: Macrotrends

None of this is to say that all conventionally traded coffee is inherently bad, but only to provide insight into the traditional supply chain and the vulnerability of coffee producers across the globe. Alternative trade agreements, such as Direct and Fair Trade, seek to stabilize pricing and provide full transparency to ensure the people doing the hard work of producing coffee are fairly rewarded.

Commodity market prices for coffee from 2016-2024 Source: Macrotrends

Direct Trade Coffee and Transparency

The heart of true Direct Trade partnerships is transparency and traceability. These agreements seek to shorten the supply chain by working directly with producers and the companies that import the coffee to ensure complete visibility from farm to cup.

Jesse Rabe from Ruby Coffee Roasters says of their direct trade partnerships: “We have a number of sourcing relationships where we directly negotiate prices and quantities with the farmers themselves, and we have other relationships where we connect to farmers through the work of our export and import partners in some coffee-growing countries. The important thing to us is that we know what the farmer is being paid for their coffee as it leaves the farm, and we know how that farmer is being supported: either directly by us or by our sourcing partners who help complete the chain”.

Olympia Coffee Roasters in Washington have developed their own in-house sourcing standards called Fair For All, which requires them to annually publish the quantities and prices paid for every coffee they buy, the length of the relationship with the producer, and the cupping scores for each coffee which determines the price.

2019 Olympia Coffee Roaster Transparency Report

Similarly, Onyx Coffee Labs in Springdale, Arkansas, publishes precisely what they paid for each coffee, along with comparisons to the Fair Trade minimum and the commodity market prices. As this kind of radical transparency becomes more common in the specialty coffee industry, it empowers us, as consumers, with the information we need to understand the true costs of coffee better when the market is not artificially manipulating it.

image of pricing breakdown for Southern Weather Blend c/o Onyx Coffee LabPricing breakdown for Southern Weather Blend c/o Onyx Coffee Lab

Traceability is vital to the roaster and the consumer to ensure fairness along the supply chain, but it also benefits the producers. “I’ve heard many times that producers like to know where their coffees are going [which is information they lacked in the past], “ says Colectivo Coffee. When the farmer knows where their coffee is going and who is drinking it, they can get more direct feedback on how their hard work affects the coffee. 

Michael Van Tuyl, Head Roaster at Panther Coffee Roasters, says, “we are able to keep a conversation going with the goal of best serving the final consumer. Our green [coffee] buying team is in direct communication with the producer(s), and we talk about quality and goals for the future throughout the year. If we find that, for instance, there were drying issues in coffee preparation which led to off-flavors a few months down the road, we can address these issues directly with the producer and find solutions.” Transparency leads to improvements over time that allow producers to make a better product and negotiate better rates for it.

Direct Trade and Sustainability

Another key value that defines roasters' direct trade partnerships is fostering the long-term sustainability of the people, communities, and land that produce coffee. Jon Dolin, the Co-Owner of Barefoot Coffee Roasters, cites this as a large part of their trade directly with farmers.  “[We get to] understand sustainable practices and other initiatives at the farm level that improve the environment and workers’ lives,” said Jon.

Harry & Leticia Hutchins, owners of Alma Coffee, also know this firsthand. As 5th generation coffee farmers, they are as direct as you can get, sourcing from their farms in Honduras, and have expanded their operations to buy coffee from their neighbors. “With so many coffee farmers abandoning their farms, direct trade is the only way they will continue caring for their coffee and encourage their future generations to continue the family legacy.” In Honduras, Harry and Leticia see the pressure farmers are under to convert their land from growing coffee, as they have for generations, to other more profitable land uses like cattle grazing because of the fall of coffee prices in the last few years. Cattle grazing is particularly devastating to the environment because it requires complete clear-cutting of all vegetation, limiting biodiversity and leading to erosion of fertile soil. Specialty coffee farmers who practice sustainable farming methods, like Alma and their neighbors, can earn a living while protecting the biodiversity of their homes and the traditions of their families.

Beautiful view of Finca Terrerito, an Alma Family Farm in Honduras.Beautiful view of Finca Terrerito, an Alma Family Farm in Honduras

Beyond the economic pressures to convert their farms to more profitable land uses, coffee farmers face several other challenges, such as poor growing seasons, political instability, and logistical and transportation barriers. It’s only with sustained direct trade partnerships that come with a guaranteed buyer for each harvest year after year that farmers can think beyond survival and plan for their futures. Jose Lepe, the  Director of Sourcing and Quality Control at Sightglass Coffee, calls this Relationship Coffee. “Having a direct relationship with Sightglass allows producers to reinvest continuously on their farm. With the premiums paid, they are able to renovate the farm, upgrade their processing equipment, or expand.” If farmers know they have a reliable buyer for top-grade coffee in 10 years, they can justify making more sustainable choices for long-term gains.

Direct Trade and Living Wages

The last value defining a direct trade partnership is ensuring that producers earn living wages. “The coffee market is in crisis with prices below the production costs. We need to do our part to make sure that coffee farmers actually want to continue to grow coffee. They need to make a living wage so they can continue to produce the high-quality product we’ve come to rely on,” says Haden Polseno-Hensley, Co-Owner of Red Rooster Coffee in Floyd, VA.

When purchasing conventionally traded coffee, very little of what you pay makes it back to the people who did the truly hard work of producing it. I had the privilege of helping this spring with a coffee harvest in Colombia, and I can assure you it is the hardest physical labor I have ever done. For a day of crouching and bending over on a 45-degree incline carrying all of my coffee in a bin on my hip, I had picked enough to earn myself $3.25. The talented pickers earned themselves between $8-10. Let me assure you that even the thriftiest of families in Colombia will struggle to raise a family on $10/ day for seasonal work.

Coffee pickers in Manizales, Colombia weighing the cherries picked in one morningCoffee pickers in Manizales, Colombia weighing the cherries picked in one morning

 Jeff Babcock from Zoka Coffee in Seattle sheds more light on the economic impact: “They’re getting two to three times more (with direct trade) than on the open market for their coffees.  Let’s say the break-even cost is about $1.50, and the open market is usually in the range of $1.60 to $1.70 (right now, the market is down, so the open market price is even lower—between $1.00 and $1.60). But with our relationships, we pay the same amount every year.  Regardless of what’s going on in the economy or the world, we still pay the same year after year ($3.25 to $7 for single origins).  Direct trade allows farms to become more profitable, re-invest, innovate, and live a more successful middle-class life".

Is Direct Trade Always Direct?

What you’ve probably gathered by now is that there are as many types of direct trade partnerships as there are options of coffee to try in our store (a lot). Coffee can be sourced from their own farms, and they sometimes work directly with a single farmer or a co-op of producers. Sometimes, roasters use importing partners who work with farmers to buy coffee directly from farmers. Each roaster has found ways that work for them to source the best quality coffee ethically. Still, because no universal standards define a Direct Trade partnership, one must always research what a company’s standards are when claiming to be direct trade. Like any other term that isn’t an official designation like USDA Organic or Fair Trade Certified, some brands can use the term for truth-stretching marketing ploys. Be assured that when our roasters claim Direct Trade, they source with transparency, sustainability, and living wages for producers in mind.

Why do Roasters Use Importing Partners?

Most roasters need to use importers to import the coffee they’re buying directly from farms they’ve contracted with, and some use importing partners to source their coffee. Metric Coffee, for example, buys mostly through direct-to-farmer relationships. Still, the coffees not purchased through those networks rely on select importing companies that provide complete transparency and meet their direct trade standards to help. Why can’t all coffee be bought from farmers directly? “Beyond the obvious of language, social, and cultural differences, really great relationships take time, energy, and resources to build in a sustainable way,” says Colin Frew, Roasting and QC Manager at Metric. Small-batch specialty roasters are primarily small businesses; not all have the resources and time to take trips and build relationships with coffee producers on three continents while trying to manage a business with employees in the US.

“When we can’t make it to farmer regions, like Sumatra, because the trip is so difficult, and we buy in a small volume, we buy through trusted importers. Some good importers help us to find great coffee.  We have built solid relationships with them over the years and we trust them.  In Africa, there can be some corruption and exporting challenges in buying direct so we use an importer to help the relationship.  We visit African farms and choose our coffees, but the importer helps ensure we get what we ordered to the states,” says Jeff Babcock of Zoka Coffee in Seattle.

There are other circumstances, too that may require importers to facilitate some direct trade relationships as in the case of Panther Coffee Roasters. “Since most smallholder farmers cannot export their own coffees and we do not have an import license so, we work with import companies to move the coffee and manage logistics,” says Head Roaster Michael Van Tuyl. Working with importers that share the same Direct Trade values can help small roasters connect with small farms they may not have been able to otherwise.

What to Look for When Buying Direct Trade Coffee

Direct trade partnerships can be equitable, empowering business arrangements between roasters and coffee producers. Whether a roaster is calling it Direct Trade, Direct Sourcing, or,‘Relationship Coffee, all that matters is that you, as the coffee buyer, understand what that means to the roaster and producers and have answers to the following questions:

  • Can the roaster tell you what farmer or co-op grew the coffee?
  • Does the roaster use an importer to source and contract the coffee? If so, why did they choose to source through an importer?
  • How long has the roaster had a relationship with the producer or importer of the coffee?

None of the above should be viewed as “gotcha questions,” but instead, conversation starters to learn more about the relationships that have been formed between roasters and producers to bring the coffee you’re drinking to life. Trading directly with producers is not an easy endeavor. Still, for our roasters, it ensures that they’re ethically and sustainably sourcing the same coffees year after year to see improvements in the quality of life for the people involved and the quality of coffee we get to drink. We very much appreciate their hard work.