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Coffee — The Daily Global ConnectionLesson 7 of 17

Follow the Money: Bean to Cup

Goal: After this lesson you can trace how money is split along the coffee supply chain and how much reaches the farmer. Subject: Economics | Run time: about 7 minutes

Quick recall

Last time we sat with two hard truths about coffee and labor. Two quick questions. One: name one labor system that built the old coffee trade. Colonial plantation labor, worked by enslaved and forced laborers under colonial rule. Two: who did the hardest hands-on work of growing and picking coffee, then and now? Farm workers and farming families, often the people paid the least for it.

Why this matters

You pay about four dollars for a bag of regular coffee. Picture that four dollars cut into slices, one slice for each pair of hands the beans pass through on the way to you. Here is today's question. Of all those slices, how big is the one that goes back to the farmer who grew it?

The idea

Start with how big this thing is. Coffee is the world's second most traded agricultural commodity (Specialty Coffee Association, 2024). In 2024 the global coffee market was worth somewhere between 245 and 269 billion dollars, and the specialty slice of that, the higher-end stuff, was about 101.6 billion dollars on its own (Specialty Coffee Association, 2024). About 25 million farming families depend on this one crop to live (Specialty Coffee Association, 2024). That is who we follow when we follow the money. Two plain definitions first. A supply chain is the whole chain of people and steps that move a product from where it is made to where it is used. For coffee, that chain runs farm, then export, then import, then roaster, then the shop where you buy it. The second term is value-added processing. Every time someone does work to the beans that makes them worth more, like roasting green beans into the brown beans you know, they have added value, and they take a cut for it. So let's trace one four-dollar bag through the commodity system, the regular kind. I want to be honest about these numbers. They are an illustrative industry composite, a model built from real data collected by the International Coffee Organization, Fair Trade USA, and the Specialty Coffee Association (Fair Trade USA, 2023; International Coffee Organization, 2024; Specialty Coffee Association, 2024). They are not one real receipt. They are what the typical split looks like. At the farm gate, the price is about a dollar and twenty cents a pound. That is the farmer's slice, for growing, harvesting, and the first wet processing (Fair Trade USA, 2023; International Coffee Organization, 2024). Then the exporter handles grading and shipping and the price climbs. The importer handles customs and warehousing and it climbs again. The roaster does the roasting and blending and packaging, which adds the most value of any single step, and the price climbs the most there. Then the retailer puts it on a shelf and sells it to you for about four dollars (Fair Trade USA, 2023; International Coffee Organization, 2024; Specialty Coffee Association, 2024). Here is the punch line. In that commodity system, the farmer, the person doing the hardest, most weather-exposed, most skilled work, captures only about 30 percent of what you pay (Fair Trade USA, 2023; Specialty Coffee Association, 2024). On a four-dollar bag, that is roughly one dollar and twenty cents. The other 70 percent gets split among everyone after them.

Picture it

Picture a single coffee bean leaving a mountain farm and starting a long walk toward your kitchen. At every stop, a hand reaches out and takes a coin. The farmer gets the first coin and only the first coin. By the time the bean reaches your shelf, most of the coins are gone, taken by the people who shipped it, stored it, roasted it, and sold it. The farmer is at the start of the line, and the start of the line gets paid the least.

Remember this

The fact to carry out: coffee is a huge global business, worth 245 to 269 billion dollars a year and supporting 25 million farming families, but in the ordinary commodity supply chain the farmer keeps only about 30 percent of the retail price, roughly one dollar and twenty cents on a four-dollar bag (Specialty Coffee Association, 2024; Fair Trade USA, 2023). Hold onto that 30 percent. The next two lessons are about who is trying to change it.

Quick check

Quick check. On a four-dollar bag of commodity coffee, about how much money reaches the farmer, and is that a big share or a small share of the price? About one dollar and twenty cents, which is roughly 30 percent, the smallest share in the chain (Specialty Coffee Association, 2024; Fair Trade USA, 2023).

Key Takeaways

  • Coffee is the world's second most traded agricultural commodity, a 245 to 269 billion dollar market in 2024, with specialty coffee about 101.6 billion of that (Specialty Coffee Association, 2024).
  • About 25 million farming families depend on coffee to make a living (Specialty Coffee Association, 2024).
  • A supply chain is the whole path from farm to cup, farm, export, import, roaster, retail, and value-added processing means each step that makes the beans worth more takes a cut (International Coffee Organization, 2024).
  • In the commodity system the farmer captures only about 30 percent of retail, roughly one dollar and twenty cents on a four-dollar bag, shown here as an illustrative industry composite (Fair Trade USA, 2023; Specialty Coffee Association, 2024).

Sources

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Follow the Money: Bean to Cup · ElementaryMBA