From crisis to record highs: A look back at 25 years of coffee trading

Samuel Brülisauer

In early February 2025, many in the coffee sector stared at their screens in disbelief: the stock market price for Coffee C Futures – a composite index for Arabica green beans – had climbed above four dollars for the first time ever. The situation is even more extreme for cocoa, whose steep rise in prices resembles the shape of a hockey stick. For decades, a tonne had rarely commanded more than 3,000 dollars; between spring 2024 and summer 2025, it oscillated around the 9,000-dollar mark.

This extraordinary development poses unfamiliar challenges for many actors in the industry. But it’s certainly good news for farmers, even if far from all of them are benefiting. At the same time, most farmers still feel it’s unfair that their income depends on the global stock market. The older generation, in particular, remembers all too well how prices can plummet – and the drastic consequences this can have.

The collapse of coffee prices

When Néstor Osorio, then director of the International Coffee Organization, spoke at the World Summit on Sustainable Development in Johannesburg in August 2002, the price of green coffee beans had been in the doldrums for two years. Between April 2000 and December 2004, the global price of coffee remained below a dollar, even hitting an all-time low of under 50 cents in autumn 2001 – far too low to sustain a coffee farmer’s livelihood.

The low prices – and their impact on producer countries and the 125 million people whose income depended mainly on growing coffee – posed “a threat to sustainable development,” said Osorio. The Millennium Development Goal of halving poverty by 2015 risked becoming an even more distant prospect.

But how did it come to this? Attempts to account for the historic collapse in prices focus on three main reasons:

• First, the nature of coffee growing. Coffee plants (and also cocoa trees) take at least two to three years to bear their first fruits – and several more years to reach full productivity. This results in a significant supply-side delay in responding to market signals, leading to greater price volatility than with fast-fruiting crops. Coffee farmers are often forced to sell even when prices are low. When prices do rise, the farmers cannot benefit in the short term, as it takes several years to increase production. This lag often turns a short-term shortage into a glut, leading to another drop in prices.

• Second, the collapse in the late 1980s of the International Coffee Agreement, a 1962 agreement between coffee-producing and coffee-importing nations. The end of the agreement led to a global surge in production as more countries began growing coffee – and a subsequent collapse in prices. The resulting crisis caused hundreds of thousands of smallholder coffee families in developing and transition countries to lose their livelihoods.
   
• This development was closely linked to a third reason: the growing market concentration of roasters. By 2001, the five largest corporations controlled nearly 70% of the coffee trade. This gave them the power to play the various actors off against each other – not only the producing countries, but increasingly also the international traders, national exporters, and even retailers – thereby securing profits for themselves.

As the fair trade movement grows, companies follow suit

However, the coffee crisis – and its globally documented impacts, including farmer poverty, indebtedness, and migration – also gave rise to a countermovement. Coffee became the symbol of the “Fair trade, not free trade” movement, whose supporters took on the cause themselves in the absence of state support. Pioneering work was done by the Max Havelaar foundations created in the late 1980s and early 1990s in The Netherlands and several other Western European countries, including Switzerland. Building on their work, the fair trade movement grew steadily and, through its Fairtrade certification scheme, succeeded in leaving its niche at the start of the millennium. 

With its core promise of paying producers a minimum price as well as a fixed premium on top of the market price, Fairtrade certification offered a welcome alternative. Other certification schemes such as Organic or UTZ (now part of the Rainforest Alliance) soon followed.

The success of these certification schemes didn’t go unnoticed by the large-scale roasters, who had to act fast in the face of growing consumer awareness. But instead of allowing independent bodies to interfere in their business and paying for the privilege, Starbucks, Nespresso, and others chose another path: that of launching their own programmes.

Programmes such as Starbucks C.A.F.E. Practices or Nespresso’s AAA Sustainable Quality Program enabled them not just to guarantee (and, above all, communicate) some degree of sustainability. Having their own programmes also allowed them to tailor the production of contract farmers’ coffee plantations to their specific needs, for example in terms of varieties and quality. In return, the farmers received a combination of training, production inputs, and small premiums. This paid off – not least due to evolving consumer behaviour.

Specialty coffee and direct trade

Starting in the mid-2000s, coffee became a lifestyle drink. This shift was significantly influenced by Starbucks, which introduced living-room-style cafés and was to definitively transform coffee culture. Consumers, especially in North America, began to reject standard supermarket coffee. A new movement was born – that of specialty coffee – which sought out distinctive characteristics and sophistication in coffees, much like connoisseurs do in wine.

But more than that: the rise of “single origin” meant that coffee went from being an anonymous raw material consisting of an unknown blend of beans that appeared on the shelves every year – to a product that was closely linked to the producers, their country, and their (hi)story. This celebrated “terroir” – the idea that the environment strongly influences the flavour of the product.

For roasters wanting to meet this demand, the obvious solution was to change the way they sourced their beans. Instead of going through the conventional channels – typically, large international coffee traders – they sought to establish direct contacts and trade relations with cooperatives or individual coffee farms at the source.

While this shift to direct trade wasn’t primarily motivated by ethical concerns, it did lead to various improvements for coffee farmers – including greater appreciation of their work, opportunities for differentiating their products in the market, and a better negotiating position.

At the same time, direct trade facilitated the development of long-term business relationships between buyers and sellers, including mutual dependencies and a new basis of trust. The “embedding” of trade relations in human interaction meant that needs and hardships were also taken into account. From WhatsApp enquiries about the well-being of families, to advance payments and joint investments, direct trade relationships continue to offer an alternative to pure commody trading. But some things haven’t changed: the coffee sector is still dependent on the stock market and its fluctuations which, in the worst case – as happened 25 years ago – could plunge countless smallholder families into poverty.

And where do we stand today?

In 2024, a consortium of various NGOs and coffee actors published the “Grounds for Sharing” report. The report presented new calculations for the German coffee market and published the earnings of each actor along the supply chain. The result was sobering: For an 8-Euro packet of coffee, a farmer earns just about 2 Euros on average. But they’ve already had to spend three-quarters of these earnings before harvest, to pay for labour and production inputs – not including unpaid family labour. This leaves them with a net income of 41 Euro cents, or some 5% of the retail price – less than half of what they earned in the 1990s.  

The record highs don’t change the report’s main conclusion: that coffee producers typically have only limited insight into and control over the marketing of the end product. This means they have little chance of obtaining a fair price for their coffee. In the absence of concrete mechanisms for the fairer distribution of value added, the underpayment of smallholders ultimately affects the economic sustainability of the entire sector.

But what could such mechanisms look like? Our team at CDE investigated this. In a large survey of more than one hundred coffee and cocoa companies and cooperatives, we observed an astonishing range of pricing models. These include revenue sharing or jointly agreed fixed prices that systematically take into account production costs. Some coffee cooperatives and producers can now also market part of their production as roasted coffee themselves – albeit only in their country of origin so far. 

While still the exception, such innovations point the way forward. After all, even 25 years on from the coffee crisis and the development of various sustainability strategies, the overwhelming majority of this popular pick-me-up is still sold at prices directly based on stock market prices in New York or London – rather than on the costs of living and production in Villa Rica or Moyobamba.