It can be difficult to understand how coffee is priced because as consumers, we interact with it in so many ways. A 12-ounce bag of whole beans might cost triple the amount of a brick of pre-ground coffee. One shop might charge a dollar for a cup of coffee while another down the street charges $3.
How coffee is priced is complicated. Unlike many of the goods and services we consume, coffee’s value is always in flux and there’s not always a linear relationship between all the things that go into producing coffee and its final price. Instead, a coffee’s price is often determined by a number of factors — here’s a quick, introductory look at some of those items.
The C Market
Coffee — before it’s roasted — is a commodity, or a raw ingredient. A commodity can be a source of energy like gas and oil, or an agricultural product like bananas and sugar. These items are bought and sold on what’s called a commodities market, or the C Market (the “C” in C Market is short for “centrals,” not “commodity’).
According to an article published by Sustainable Harvest, “one of the primary functions of the C Market (or any commodity market) is to standardize the trade of coffee and set the rules for trading.” So on any given day, you can check the C Market price for coffee, and any coffee sold through the C Market will be bought and sold at that price.
Two things to note here: firstly, most specialty coffees are sold outside of the C Market. The C Market doesn’t differentiate between coffees, so for those folks looking to sell their coffee based on outstanding quality, they’ll look for buyers willing to pay more. Although many of the coffees you see in specialty shops are bought outside the C Market, that doesn’t mean the C Market price doesn’t influence how they are bought and sold — and the fact that this price is visible and readily accessible means prices can be adjusted all the time based on the C Market fluctuations. It’s not like printing a menu and being stuck with the prices because it’d be more costly to reprint new menus and change the prices, an economic theory literally called “menu costs.” Some certification programs use the C Market price to establish a minimum floor or to determine a premium for coffees.
Secondly, the C Market is incredibly volatile. If you check the C Market price today, it’ll be different than it was yesterday, which can be difficult when you’re buying a product (green, unroasted coffee) that won’t be shipped or roasted for months. This is an incredibly simplified way to describe a really complicated process, but there are tons of sources that go deep on how coffee is bought and traded.
You might have seen articles about how the price of coffee is higher than ever — these articles are referencing C Market prices and their tendency to move up and down unpredictably. We won’t touch too much on the validity of these pieces right now. Yes, it’s true that prices are up, but coffee has a history of being undervalued.
History of coffee pricing
There’s a lot of lore about how coffee was first discovered. You might have read a story about a goat herder named Kaldi who noticed his goats acting strangely after eating cherries from an unfamiliar plant. However, what’s clear is that, once coffee became popular, its spread followed common trading routes and its cultivation depended on introducing coffee trees to colonized countries.
Coffee is primarily grown in countries that were once colonized, so there’s a history that extends for hundreds of years of extracting resources and undervaluing the work that farmers do. A project led by the team at Junior's Roasted Coffee in Portland, Oregon, called “Ask Me About The Cost of Production” attempts to highlight some of the realities of coffee farming, including the fact that many farmers do not make enough to cover the cost of growing coffee, let alone make any sort of profit.
There’s still a ton of work to do to rectify the disparities in coffee pricing, but a surprising tool in the fight to promote farmer wages is social media. Because the coffee chain is so long, it can be hard for consumers to see where their coffee comes from, or for farmers to see where their coffees end up. Social media provides a window for both parties, allowing consumers to ask better questions and understand where their coffee comes from and for farmers to directly see the value of their coffees.
Labor costs
If you’re drinking a cup of coffee right now, it’s likely that anywhere between 30 to 40 people were involved in getting that coffee to you.
Almost every specialty coffee is hand-picked, meaning someone went up to a coffee tree, evaluated whether or not a cherry was just ripe enough to pick (a very specialized skill in its own right), picked it, put it in a basket, and carried it to be processed. And that’s just the beginning of a coffee bean’s journey.
Unlike many specialty items, coffee goes through multiple transformations that are incredibly labor intensive. Coffee must be picked and processed, stored and shipped, evaluated and roasted, and then made and served to you. Items like beer and wine are labor-intensive in their own right, but don’t require as many hands to get to you.
Each of these people not only need to be paid, but also possess a specialized skill set that allow them to do their jobs well – you wouldn’t want to drink coffee from a roaster who didn’t know how to operate a roasting machine, and you wouldn’t want a coffee that was picked by someone who didn’t know the difference between under- and overripe cherries.
And the way a business is structured can also affect the final price of a coffee. If two roasters buy the same coffee at the same price, and one is in a high-rent city or area, they might have to price their coffee higher than their colleagues in different areas. Or, if the business is a wholesale-only roastery versus a chain of cafés, or if they’re buying organic and local products, etc… We could keep naming factors, but the bottom line is that hundreds of factors, both big and small, can affect the final price of a cup of coffee.
This is a very rudimentary overview of some of the factors that go into a coffee’s price, and we want to clarify this not because anything we’ve discussed here is simple — rather, it’s because we’re still having very complicated discussions about how coffee is priced.
For example, every year, the Specialty Coffee Association (SCA) hosts an event called Re:co, where leaders and thinkers across industries come together to discuss big ideas that affect the coffee world. Think of it as caffeine-fueled version of TED Talks — folks take the stage and give short presentations on things affecting the future of coffee.
Usually, these talks cover a variety of topics, but in 2019, the SCA decided to focus on one thing: the coffee price crisis. “In August of 2018, the commodity futures price of coffee dropped below US $1.001 per pound,” a report released by the SCA states, “a price well below the cost of sustainable production for the majority of coffee farmers — for the first time in 12 years.”
Personally, I’m excited for conversations about pricing to center and focus on farmers. A paper by Vera Espíndola Rafael argues that increasing consumption of coffee within coffee-producing countries could lead to higher wages for farmers. Many roasters are looking at the work done by Junior's Roasted Coffee as a way to think about their own pricing structures and publish things like transparency reports and coffee costs on their website.
We’re still a long way from coffee prices being equitable and fair, but understanding how they are made and determined is an important step along the way. I hope the next time you drink coffee, you’re warmed and intrigued by the dozens of hands that worked to get that coffee to you.
