Setting the Price... Part 2

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For example, several Ethiopian farmers said that when it was time for them to sell their coffee, buyers from the city offered them the New York commodity rate, far below the market rate for their specialty coffee. Because of the lack of technology and knowledge, these farmers are constrained by the prices set by the middlemen buyers.

These buyers then sell the coffee beans to larger distributing and retail companies at a higher price. Since the handful of buyers work together and the coffee growers generally have very little savings and cannot afford to wait for better prices, the growers are in a vulnerable position. The buyers know this and take advantage of the situation.

To compound problems even further, buyers often feign benevolence by offering farmers loans at exorbitant interest rates. Banks refuse to give the financing that these farmers need in order to build homes and schools, which is why the farmers become extremely dependent on the buyers. This means that farmer are often subject to the whims of their buyers. However, coffee farmers aren't totally without hope: Co-operatives offer a more level playing field for the coffee farmers.

Coffee waiting to be exported

A co-operative (co-op) operates as an autonomous, democratic enterprise for coffee farmers. The economic, educational and healthcare needs of all members and their families are its top priorities. Each member jointly owns a share of what is collectively earned. By pooling their resources together, farmers can negotiate better terms and prices for their raw coffee beans. Tadesses group is an example of this type of arrangement.

Whereas co-ops help an individual coffee farmer to improve his or her way of life, the industrial scale farm is the opposite. The main goal of industrial farms is to provide lower costs of coffee with high levels of efficiency in production. This results in cheaper prices for the buyers, but at a high cost: the welfare of the individual farmer. To compete with the cheaper prices offered by industrial farms, co-ops lower their own prices for the sake of generating revenue for their members.