The ultimate goal of any and every coffee producer is to have direct access to the market to sell their coffee. The assurance that the coffee will be sold after harvesting motivates the  farmers to produce more quality coffee. Ultimately, it does not matter how much effort the farmer puts into coffee production, if there is no one to buy the coffee then the farmer will not reap any reward from it. 

In some origins, coffee trade is conducted by cooperatives on behalf of farmers. This typically applies to smallholder farmers who need the ability to market their produce. The cooperatives rely on bigger exporters and agents who tend to have business mindsets more than a concern for the producers.

This means that this form of trade has some drawbacks because some coffee producers usually end up receiving very little compensation for their coffee and are usually in no position to influence the pricing. What it all means is that the farmers will have to contend with whatever price the cooperatives set.

Additionally, great attributes such as fairness and ethical sourcing need to be better developed in these coffee sourcing methods. It is simply business as usual. Traceability is usually pushed to the back of the log as it is not a well-developed notion in this type of trading. Consequently, coffee producers with exceptional coffee tend to go unnoticed.

Objective of Coffee Direct Trade

The overall objective of having direct trade in any market is to bypass the power and price imbalances in conventional supply chains. Here, both parties -the buyer and the seller – are equal. Negotiations form the basis of pricing and the business is concluded once both parties agree on several terms and contracts are written down and signed.

In its simplest form, direct trade means the buying and selling of coffee between the seller and the buyer without involving third parties. But of course, that doesn’t really exist in the real world of trading. Therefore, direct trade in coffee means the producers deal directly with the buyers with some third parties providing related services such as warehousing and logistics.

Direct trade is the most preferred mode of sourcing for specialty coffee. The direct contact with specialty coffee producers gives the traders unrestricted access to the highest quality coffee. In modern-day direct trade, relationships form the basis of the transactions. This means the producer and the buyer cultivate a mutually beneficial relationship.

But what direct trade exactly means in the coffee sector still needs to be defined accurately. This is because of the wildly different coffee sectors in coffee origins and the different producer groupings such as cooperatives, large individual producers or even coffee collectives.

In most cases, direct trade coffee buyers start by selecting a certain coffee provided by large importers who source large quantities from all over the world. The buyers, who are often roasters and large importers, research the producers who grow that particular coffee and begin getting in touch with them.

Origin trips and farm visits often lead to the genesis of creating relationships with these producers and samples are obtained. After initial meetings and discussions, the trading contracts are agreed upon and signed and thus begins direct coffee trade. Through this, coffee is sustainably sourced and farmers are fairly compensated.

However, in the case of the smaller buyers who may not be able to go to the origins, there are marketing agents who are based in the origins and who may offer samples of a particularly interesting coffee. The small buyers would then buy micro-lots through the agents which is also considered a form of direct trade.

Benefits of Direct Trade in Coffee.

The biggest benefit to the parties involved in direct trade is the creation of meaningful relationships. This means that both parties have come into agreement and have agreed on the quality, price of the coffee and other terms that will lead to a meaningful business relationship.

With direct trade, farmers will have access to first-hand information on what is happening in the specialty coffee industry so that they can adjust accordingly. Fran Dan is a coffee producer and seller in Uganda and leads a coffee collective. He says, “It is the best way to go because farmers/producers have for long been cheated by unscrupulous middlemen”.

Traceability is another one of those crucial benefits that are afforded by direct trade. The coffee sourced through direct trade can be easily traced back to the originating farm and region. All the processes that were carried out on that particular lot of coffee is documented and easily traced back to the producer.

The benefits of traceability in the coffee value chain cannot be emphasized enough. Traceability and transparency are crucial cogs in the coffee value chain and determine how fair and just the industry is. 

Better coffee prices are guaranteed through direct trade. It is only through direct trade that a coffee producer can sit down at the negotiating table as an equal party and determine how much his coffee is worth. In the other systems, coffee producers are price-takers which means that, they are at the mercy of the coffee buyers to set the price.

Direct trade ensures that the coffee producer can have a say on how much they earn from coffee through bargaining and consultations. This ensures that farmers feel appreciated which creates the incentive for the producer to produce more, higher quality coffee.

Each time a coffee producer is assured of making a sale of their coffee harvest, they are motivated to produce even more greater quality coffee. Therefore, direct trade is a direct contributor to higher coffee production. It is only through qualitative production that quantity can be achieved, therefore the higher the quantity, the higher the quality.

Direct trade assures the consumers of fresh, high-quality, unadulterated coffee. The coffee is usually fresh and straight from the farms with no additives and assures them of top-quality, healthy, safe, products.

A great example of a successful direct trade involves Farmer Brothers D.I.R.E.C.T Initiative. The direct trade model has been successfully deployed in Rwanda and various Latin American origins. During this time, the initiative has been promoting food security through the establishment of community food gardens, which support the communities it serves.

There has also been an effort to promote diversification within the farms and some households have started raising cattle for milk and cheese production. The premium from the Direct Trade program has helped to promote those initiatives.

In Nicaragua, the greatest impact has been the households’ ability to save money or make investments which allows them to be prepared for “el tiempo del silencio” (the silent time), which is the off-season period when most producers have to go into debt to buy essentials and invest in their farms. Due in part of the efforts of this Direct Trade project, they have been some positive long-term effects.

Challenges facing Direct Trade in Coffee. 

As with all significant initiatives, direct trade is not immune to challenges and difficulties. Fran adds, “We are not having more direct trade because whoever controls finances sets the rules. Look at the Brazilian coffee industry, i know a Brazil farmer with crops of two seasons still in his warehouse and he is selling at his pace”.

Any coffee roaster or cafe owner would wish to have a fresh batch of coffee straight from the producers. Unfortunately, due to the complexities involved in the coffee supply chain, this is not always possible and they usually rely on big importers who also have to wait for some time before coffee can be shipped from the origins.

Lack of goodwill from the authorities who feel that direct trade may be taking control of the coffee trade away from them is another challenge. This hampers the progress of the trade and sometimes the levies are extremely high in a bid to restrict direct trade. The farmers are then forced to rely on the old-fashioned channels of selling their coffee with minimal returns.

Interference by some stakeholders who feel threatened by the empowerment of coffee producers is a serious challenge affecting the development of the coffee trade. When you employ the direct trade model, you eliminate the third parties and middlemen who have cemented their status as indispensable in the value chain. They don’t take the threat of direct trade lightly, hence some stakeholders may want to push back on it.

Sometimes the costs involved to deal in direct trade with coffee producers successfully are higher and this translates into higher prices for the cup of coffee that the consumers have to fork out. Fortunately, the extra cost is for a good reason and it ensures that there is fairness in the sector.

The Future of Direct Trade Coffee.

As consumers begin to be more conscious about where their food comes from, it will make direct trade even more desirable because, with direct trade, full traceability can be achieved. For a sustainable future in the coffee industry, farmers have to be fully integrated into the coffee value chain.

For direct trade to work, all stakeholders in the coffee value chain must take responsibility to actualize a free-flowing trade in which producers and buyers can thrive. Goodwill is a must if at all direct trade is to have a chance of being a success.

With the advent of Technology platforms such as AGnimble, direct trade has been greatly simplified because both the producers and buyers can collaborate and transact on a platform that is designed to bridge the gap by bringing all stakeholders in the coffee supply chain to work together.