The roaster makes nearly all the profit, pocketing 60-70% of the retail price. This is unheard of in most other agricultural products.

Now I’ll listen to you when you can explain this fact, because it’s what distinguishes the coffee trade from trade in other commodities or for example from wine which is a clear example of a differentiated product whose value chain is closely tied to the producer.

With regard to your expert tasters if they are capable of even knowing the blends the roasters use for each segment of the market I’ll take my words back. Each country has its own preferences with regard to blend and roast and that information is not in the hands of the producing country.

The “expert tasters” I know personally, because I worked with them, simply don’t exist in real life because they don’t appear in your book?

What about people who spent decades trading (not “studying”) commodities, their opinion doesn’t count for you, unless they write a book?

What makes you think that there are no “expert tasters” in coffee producing countries?

Because there isn’t a coffee drinking culture similar to that of the importing countries.

What you need to do is compare coffee with wine. When I buy a bottle of wine I often know the exact vineyard it came from. When I buy coffee it’s only at the high end of the market that you even know what country it came from (the only ‘Appellation d’origine contrôlée’ we have in coffee is Blue Mountain).

Once again, I suggest you read Daviron and Ponte’s The Coffee Paradox. The authors have spent decades studying agricultural commodities.

The vast amount of coffee sold in Italy is sold by brand (Lavassa, Illy, for example) rather than as single origin coffee. The green beans are imported and it is the roaster who has the control and the knowledge.

Do you think poor people are per definition ignorant and stupid?

What makes you think that there are no “expert tasters” in coffee producing countries countries?

Poor people haven’t got any taste buds or what?

Farmers will “adulterate” good coffee if they have a price incentive to do so, but they will pick out all defects and handle the coffee extremely well, if the incentive goes the other way.

They know precisely the quality of what they sell, because they know what they harvested & pulped & how they handled it (fermenting, washing, drying,…).

With minimal extra inputs, farmers can produce gourmet coffees and they know it. It’s not rocket science, and all aspects are visible to the naked eye – unless you’re colour blind.

As recent as three years ago, Bugisu washed arabica was average quality mass produce. Now a significant share of the market is gourmet coffee, and thousands of (new) farmers are lining up to deliver the stuff.

Needless to say that this arrangement is highly profitable both for farmers & traders, without any aid money, government or “exchange” being involved.

People react to incentives. That’s all.

That is because he only has the knowledge to make a cursory check. Checks must be made at each stage in the process of handling, as the bean may deteriorate at any stage, and as far as taste goes you need expert tasters. The importer will buy based on the reputation of the seller, and where you have wide varieties in quality, as seems to be the case in East Africa, then the price will be discounted.

The point is that the longer the value chain the less transparent the information as to quality control is. Add to that the fact that most coffee producing countries are not coffee consuming countries and you have an informational assymetry that works to the detriment of the producer.

In expanding on #1, western academia mainly does not have practical experience not a real stake in trying to understand African (in this case Ethiopian) trade including little or no understanding of historical information, social impacts, and political implications. However, an academic can make a blanket statement on the lines of how Ethiopia’s economy is not liberal enough. This argument becomes increasingly challenged as one continues to factor in real life multipliers such as country history, geography, current political standings, religion etc.

#2 is pretty straight forward because this group is only interested in advancing their own political agenda and this could be a fair target to promote this agenda.

Bottom line is that in third world countries, the disparity between the rich and the poor is so vast that it would be virtually impossible for the poor to ‘catch-up’ with the rich, unless the government governs with a heavy hand, almost ‘controlling’ agro-businesses etc. This is needed to (1) protect the producers (farmers) from things such as price fluctuation (2) balance production surplus and defect across the land to diminish the inevitable effects of draughts (move crops from one location to another depending on need etc) (3) manage the export of a cashcow crop like coffee in order to tax it accordingly, protect its integrity and decrease the margin of “third parties” so that the profit is more at the hands of the producers.

In expanding on #1, western academia mainly does not have practical experience not a real stake in trying to understand African (in this case Ethiopian) trade including little or no understanding of historical information, social impacts, and political implications. However, an academic can make a blanket statement on the lines of how Ethiopia’s economy is not liberal enough. This argument becomes increasingly challenged as one continues to factor in real life multipliers such as country history, geography, current political standings, religion etc.

#2 is pretty straight forward because this group is only interested in advancing their own political agenda and this could be a fair target to promote this agenda.

Bottom line is that in third world countries, the disparity between the rich and the poor is so vast that it would be virtually impossible for the poor to ‘catch-up’ with the rich, unless the government governs with a heavy hand, almost ‘controlling’ agro-businesses etc. This is needed to (1) protect the producers (farmers) from things such as price fluctuation (2) balance production surplus and defect across the land to diminish the inevitable effects of draughts (move crops from one location to another depending on need etc) (3) manage the export of a cashcow crop like coffee in order to tax it accordingly, protect its integrity and decrease the margin of “third parties” so that the profit is more at the hands of the producers.

Farmgate prices on the coffee market in Uganda for instance move in tune with the NY or London prices,

and margins for traders & middle men are very thin ( of the 130+ exporters ten years ago, around 15 survived – the biggest 5 owned by multinationals softly lending cash when things go wrong, the rest is on life support).

Kenya did not liberalise the coffee market and farmer prices are much lower, therefore there’s a lot of kenyan coffee carried to the other side of mount elgon.

@Ashlihan Arslan: The value chain for washed arabica is the same everywhere in the world, so if Colombian, Ugandan & Rwandan farmers get much more cash for the same than yours, you’ll have to look at something else to blame.

By the way, it takes a trader less than 5 minutes to check the quality of coffee (parchment, cherries it takes one look) that farmers bring.

Most likely farmers are not adequately rewarded for the extra effort they put in. If they get a much better price for much better quality, you will be surprised how fast it goes.

I find it highly disturbing that on this blog dissenting opinions and criticism get removed.

I am still convinced that the posters of the above blog post have no idea what commodity trading involves or how it could improve a farmers’ life, let alone that they can detect flaws in it.

2. About farm gate prices: One of the main reasons for low farm gate coffee prices in Ethiopia is the long value chain and the discovery of “quality” far away from farmers along the value chain. New reforms eliminated one step, but the information problem is still there. However, there are plans to do quality control in the coffee regions (as opposed to only in Addis in Dire Dawa) and to improve the technology to better disseminate price information to farmers. How effective these policies will be is anyone’s guess…