Direct trade
How specialty roasters buy coffee from known producers through “direct trade” and “relationship coffee”, why no law defines these terms, how the coffee still moves, and what studies found about prices and benefits.
Across the chain: Sustainability
Contents
In brief
- No regulator or third-party certifier defines direct trade, so it has no single definition or set of rules.1
- “Direct” coffee usually still passes through an exporter, and often an importer.1,3
- In a 2018 Colombian study, relationship-coffee producers had better access to credit but no significant difference in farm-gate prices.5,6
- In a 2018 study of three Indonesian communities, key individuals captured the benefits of relationship coffee, reproducing local inequality.7
- In the EU, sustainability labels for social or environmental characteristics must rest on a certification scheme or a public authority.12
What direct trade means#
Direct trade is a way of buying green coffee used by specialty roasters. The roaster buys from a known producer, cooperative or exporter in the producing country.2 A coffee trade textbook chapter says that some of these buyers even buy directly from individual farmers.2
According to that chapter, these buyers want to know who produced the coffee and how much that person was paid.2 Third-wave roasters often call this kind of purchasing direct trade.2 The wave labels are explained in Eras and waves of coffee.
“Relationship coffee” is a close term. A 2018 study defines it as long-term partnerships between coffee buyers and smallholders, based on product quality.5 Another 2018 study links it to the direct engagement of roasting firms with producer communities.7 Both stress a long-term relationship, not a single purchase.
Who defines it#
No law and no certification scheme defines direct trade. A 2020 systematic review states that no third-party certifier regulates the practice.1 It therefore has no single definition and no fixed set of rules.1 No regulator’s definition was found for this entry either (as of October 2026).
The review found that a few companies sought third-party audits or trademarks for the term, with mixed success.1 It also reports that some pioneering companies have reduced or dropped their use of the term.1
The review sorts the practice into two types.1
- Relational direct trade: a direct and long-term relationship between roaster and producer, built on mutual trust.1
- Transactional direct trade: a “hands off” form with little engagement, in which the producer alone bears losses from unforeseen events.1
Unlike a certification scheme, direct trade carries no standard or third-party audit of its own.1 The schemes that do are compared in Certifications and labels.
How the coffee moves#
The sources consulted suggest that direct trade shortens the path of information more than the path of the coffee.1,3 The 2020 review states that other actors are still needed in producing and importing countries.1 A 2017 discussion paper on the third-wave market makes the same point: even direct trade involves exporters and importers.3
The textbook describes how such roasters buy. They buy free on board (FOB) at the port of export and organise freight and insurance themselves.2 They import their own containers and normally have logistics, buying and quality teams.2 Conventional roasters rely almost exclusively on importers and want delivery to the port nearest their plant.2 What FOB means for cost and risk is explained in Incoterms for coffee.
Smallholders face productivity and transaction constraints that keep them out of higher-value markets.4 A 2015 study argues that intermediaries are needed to connect them with specialty roasters.4 It studied three such “connective businesses”.4
Export itself follows the rules of the producing country. Ethiopia, for example, widened the right to export directly in a reform described in a 2018 report of the US Department of Agriculture.8 Details are in the Deep dive.
- Producer. May sell at the farm gate to a local buyer.10
- Local buyer. A middleman who comes to the farm with ready money.10
- Exporter. Ships the coffee out of the producing country.1,3
- Importer or trading house. Conventional roasters buy almost exclusively from the importing trade.2
- Roaster. Wants delivery to the port nearest its plant, or to the plant itself.2
- Producer group. A cooperative, exporter or individual producer whose identity the roaster wants to know.2
- Exporter. Still needed; who may export depends on the producing country’s rules.1,8
- Shipment bought FOB. The roaster organises freight and insurance itself.2
- Importer. Often still involved; drawn dashed because some roasters import their own containers.1,2,3
- Roaster. Normally has its own buying, quality and logistics teams.2
- Direct relationship. Direct communication and close collaboration between roaster and producers, over the long term.1,11
What studies found#
Few studies have measured what direct trade changes for producers. The 2020 review of 95 publications reports no measured price or income outcomes and states that direct trade still lacks studies on its real benefits.1 Three studies give field evidence.
Colombia. A 2018 study compared smallholders in a relationship-coffee programme with non-participants.5,6 Participants used more sustainable resource management practices and had better access to credit.5 They were also better informed and more optimistic about the coffee business.5 The study found no significant difference in farm-gate prices.5
Indonesia. A 2018 study looked at three coffee-growing communities on Sulawesi, Bali and Java.7 Relationship coffee gave producers opportunities to upgrade.7 But key individuals in the communities captured these benefits.7 The authors conclude that it reproduced local inequality rather than reducing poverty.7
Guatemala. According to a 2017 discussion paper, most farmers interviewed wanted more direct connections with the market.3 Its author describes the shift of power towards producers as tenuous.3
No study consulted for this entry measured household income under direct trade against a comparison group. How value is shared along the chain is covered in Who earns what along the chain.
Direct-trade claims on bags and menus#
“Direct trade” on a bag or menu is a claim by the seller about its own buying. No certification stands behind the term itself.1 The 2020 review lists misuse of the term to sell products among its limitations.1
In the EU, a “sustainability label” is “any voluntary trust mark, quality mark or equivalent, either public or private, that aims to set apart and promote a product, a process or a business by reference to its environmental or social characteristics, or both” (Article 2(q) of the amended Unfair Commercial Practices Directive).12 Since 27 September 2026, “displaying a sustainability label that is not based on a certification scheme or not established by public authorities” is an unfair commercial practice in all circumstances (Annex I, point 2a).12 A roaster’s own direct-trade seal would probably count as such a label. That is our reading of the text; no court decision on it was found.
Written statements about how coffee was bought fall under the general ban on misleading commercial practices.12 The rules, and the Swiss and other national rules, are set out in Sustainability claims and greenwashing rules. This entry is not legal advice.
Definitions in the research literature#
No shared definition exists, so studies define the term for their own purpose.1 The table lists the definitions used by the sources consulted for this entry.
| Term | Definition, in short | Source |
|---|---|---|
| Direct trade (trade textbook) | Third-wave buyers’ name for purchasing from exporters, cooperatives or individual farmers, with knowledge of who produced the coffee and what they were paid | 2 |
| Direct trade (systematic review) | A market arrangement of specialty coffee actors that shortens the supply chain; proposed by the review after finding no single definition | 1 |
| Relational direct trade | Direct, long-term relationship built on mutual trust | 1 |
| Transactional direct trade | Low-engagement form that seeks to eliminate intermediaries; the producer alone bears losses from unforeseen events | 1 |
| Relationship Coffee Model | Long-term partnerships between coffee buyers and smallholders based on product quality | 5,6 |
| Relationship coffee (Indonesia study) | Direct engagement of roasting firms with producer communities, linked to specialty demand | 7 |
| Direct trade (operations model) | A roaster’s sourcing practice for specialty coffee that relies on direct communication and close collaboration with growers | 11 |
| Connective business | An intermediary that makes direct-trade relationships between smallholders and specialty roasters possible | 4 |
Reference values: what the studies measured#
| Study | Setting | Design | Prices | Other findings |
|---|---|---|---|---|
| Hernandez-Aguilera et al., 2018 | Colombia; smallholders of a cooperative in Cauca against non-participants6 | Household survey with propensity score matching6 | No significant farm-gate price difference5 | More sustainable practices, better access to credit, better informed5 |
| Vicol et al., 2018 | Sulawesi, Bali and Java, Indonesia7 | Three case studies of livelihoods and local agrarian dynamics7 | Not reported in the abstract read | Benefits captured by key individuals; local inequality reproduced7 |
| Borrella et al., 2015 | Three intermediary businesses4 | Cross-case study4 | Not reported in the abstract read | Intermediaries needed to connect smallholders with specialty roasters4 |
| Guimarães et al., 2020 | 95 publications in English and Portuguese, up to May 20201 | Systematic review1 | No measured price or income outcomes1 | Contributions and limitations, see the chart below1 |
| Fischer, 2017 | Guatemalan producers and the US third-wave market3 | Survey, in-depth interviews and focus groups3 | Not used here (Tier B) | Power shift towards producers described as tenuous3 |
The Colombian study states that participants may have received price premiums indirectly, through their cooperative.6 A farm-gate price comparison would not show such payments. The study also notes that its matching method rests on an assumption that cannot be tested.6
Who carries the risk#
In the sources consulted, direct trade does not remove price, quality or delivery risk; it moves it between buyer and seller, and where it lands depends on the contract.
Fixed prices before harvest. According to a coffee textbook chapter, forward contracts agreed before harvest tell producers and exporters what price they will receive and can serve as collateral for working capital.10 If a cooperative signs at a set price and market prices then rise, its members are tempted to sell to passing middlemen with ready money.10 The cooperative may then default on its contract; the chapter calls such defaults rare.10
Quality and yield. A 2024 operations-research model studies a roaster that contracts a grower’s area before harvest.11 In the model, the roaster buys only coffee that meets the contracted quality specification.11 It is a model whose numerical examples use assumed parameters, not a field study.11
Low engagement. In the review’s transactional type, the producer alone bears losses from unforeseen events.1 High search costs, language and cultural barriers, quality and supply risks and weak or informal contracts are among the limitations the literature names.1
Capital. The textbook describes investor-owned coffee companies whose suppliers finance their inventory for long periods.2 According to it, this model quickly eliminates direct buying from producers, small exporters and independent traders with limited capital.2
Contract terms themselves are covered in Green coffee contracts, and fixed versus exchange-linked prices in Differentials.
Export rules at origin#
Who may sell abroad is set by the producing country. In Ethiopia, a 2018 report of the US Department of Agriculture describes a reform approved by parliament in the July before the report.8 It allowed washing stations, mills and producers with more than 2 ha of coffee, producing at least 1 t per hectare, to export directly.8 They no longer had to sell through the Ethiopia Commodity Exchange (ECX).8 Commercial farmers and cooperative unions could already export directly before.8
The report states that the change broadened the number of companies that can export higher-value, traceable coffee.8 No study consulted for this entry measured its effect on prices paid to producers. Rules in other producing countries were not consulted for this entry.
Price transparency data#
No study consulted for this entry checked prices that buyers publish themselves against contracts, so such prices are not used here.
The Specialty Coffee Transaction Guide, run by a team at Emory University, collects contract data from data donors on a confidential basis.9 It reports FOB prices because most export contracts report them consistently.9 Its first data brief notes that FOB prices tell only part of the economic story, and that its data donors are not necessarily representative of all specialty buyers.9 The brief lists the length of buying relationships as a question the data could address, but does not answer it.9 How the guide’s prices relate to the exchange is explained in How a coffee price is made.
What the literature discusses#
The 2020 review coded 95 publications: 56 academic (theses and articles) and 39 technical (opinion articles, books and chapters).1 It searched five academic databases plus the SCA website and one trade magazine.1 The chart shows how often each theme was mentioned. A publication can mention several themes.
Data table
| % of 95 publications mentioning the theme | Source | |
|---|---|---|
| Contribution: relationship and coordination | 90.5% (86) | 1 |
| Contribution: origin and sustainability | 85.3% (81) | 1 |
| Contribution: quality and product differentiation | 81.0% (77) | 1 |
| Limitation: implementation and monitoring | 53.7% (51) | 1 |
| Limitation: conceptual and regulatory | 49.5% (47) | 1 |
| Limitation: accessibility and transformation potential | 41.1% (39) | 1 |
Under accessibility, the review notes that high initial investments limit who can take part: medium-sized producers have been the main beneficiaries, while small ones face barriers.1 It also notes that downstream actors keep power over quality and pricing.1 The 2017 discussion paper calls the disintermediation of direct trade symbolic as much as logistic.3
Open questions#
- Income effects. No study consulted for this entry compared household income under direct trade with a matched comparison group.
- Indirect premiums. The Colombian study suggests premiums may reach producers through their cooperative rather than the farm-gate price; no study consulted measured this.6
- Scale. No source consulted for this entry measured how much of the world’s coffee is bought under direct trade, with any shared definition.
- Relationship length and price. The Specialty Coffee Transaction Guide names this as a question its data could answer; no published answer was consulted.9
Key studies#
Hernandez-Aguilera et al., 2018 – The Relationship Coffee Model in Colombia. Compared smallholders selling under a long-term, quality-based buying relationship with non-participants, using matching to account for differences between them. Participants used more sustainable practices, had better access to credit and were better informed, but farm-gate prices did not differ significantly.
Vicol et al., 2018 – Upgrading for whom? Three case studies of coffee communities on Sulawesi, Bali and Java, Indonesia, where roasters engage directly with producers. Relationship coffee created upgrading opportunities, but key individuals captured the benefits, and local inequality was reproduced.
Guimarães et al., 2020 – Direct trade: contributions and limitations. A systematic review of 95 academic and technical publications on direct trade in specialty coffee. It finds no single definition and no regulator, proposes relational and transactional types, and groups the limitations into implementation, definition and access.
Borrella et al., 2015 – Connective businesses. A cross-case study of three businesses that link smallholders with specialty roasters. It argues that productivity and transaction constraints keep smallholders out of higher-value markets without such intermediaries.
- Price benefit for producers: publications cited in a 2020 review describe direct trade as letting producers capture more of the profits or maximise their income1; the one matched comparison consulted for this entry, in Colombia, found no significant difference in farm-gate prices.5,6
Coffearium (2026). Direct trade. Coffearium – The open coffee compendium. Retrieved 4 November 2026, from https://coffearium.org/entries/direct-trade/
@misc{coffearium2026-direct-trade,
author = {{Coffearium}},
title = {{Direct trade}},
year = {2026},
howpublished = {Coffearium -- The open coffee compendium},
url = {https://coffearium.org/entries/direct-trade/},
urldate = {2026-11-04},
note = {Retrieved 4 November 2026}
}Entries are updated when the evidence changes; the retrieval date tells your readers which version you used. Changes are listed in the Change log.
Change log
- – Indonesia study: benefits captured by key individuals (not "most of the benefits"); review: no measured price or income outcomes (not "almost no"); removed "minimum price" from what direct trade lacks; contested item no longer says "much of the literature" Reason: Verification against the abstract of source 7 and the full text of source 1
- – EU paragraph now quotes the definition (Art. 2(q)) and Annex I point 2a of Directive (EU) 2024/825 exactly Reason: The paraphrase dropped quality marks and overstated the label rule as a positive requirement
Sources
- AGuimarães, E. R.; Santos, A. C. dos; Leme, P. H. M. V.; Azevedo, A. da S. (2020). Direct trade in the specialty coffee market: contributions, limitations and new lines of research. Internext – Revista Eletrônica de Negócios Internacionais 15(3), 34–62. doi:10.18568/internext.v15i3.588 · other copies
- BNadelberg, E.; Polit, J. R.; Orjuela, J. P.; Ranitzsch, K. (2017). Trading and Transaction – Market and Finance Dynamics. In: Folmer, B. (ed.), The Craft and Science of Coffee, Academic Press, ch. 9, pp. 205–223. doi:10.1016/B978-0-12-803520-7.00009-8 · other copies
- BFischer, E. F. (2017). Quality and inequality: Taste, value, and power in the third wave coffee market (MPIfG Discussion Paper 17/4). Max Planck Institute for the Study of Societies, Cologne.
- ABorrella, I.; Mataix, C.; Carrasco-Gallego, R. (2015). Smallholder Farmers in the Speciality Coffee Industry: Opportunities, Constraints and the Businesses that are Making it Possible. IDS Bulletin 46(3), 29–44. doi:10.1111/1759-5436.12142 · other copies
- AHernandez-Aguilera, J. N.; Gómez, M. I.; Rodewald, A. D.; Rueda, X.; Anunu, C.; Bennett, R.; van Es, H. M. (2018). Quality as a Driver of Sustainable Agricultural Value Chains: The Case of the Relationship Coffee Model. Business Strategy and the Environment 27(2), 179–198. doi:10.1002/bse.2009 · other copies
- BHernandez-Aguilera, J. N.; Gómez, M. I.; Rodewald, A. D.; Rueda, X.; Anunu, C.; Bennett, R.; van Es, H. M. (2015). Quality as a Driver of Sustainable Agricultural Value Chains: The Case of the Relationship Coffee Model (AAEA 2015 Annual Meeting, selected paper 205650). Agricultural and Applied Economics Association (AgEcon Search).
- AVicol, M.; Neilson, J.; Hartatri, D. F. S.; Cooper, P. (2018). Upgrading for whom? Relationship coffee, value chain interventions and rural development in Indonesia. World Development 110, 26–37. doi:10.1016/j.worlddev.2018.05.020 · other copies
- AUSDA Foreign Agricultural Service, Addis Ababa (2018). Ethiopia Coffee Annual: Coffee Exports Continue at Record Levels (GAIN Report ET1820). United States Department of Agriculture, Foreign Agricultural Service (Global Agricultural Information Network).
- BSpecialty Coffee Transaction Guide research team (2020). The Effects of FTO Certification on FOB Prices for Specialty Coffees (SCTG Data Brief 1). Specialty Coffee Transaction Guide, Emory University (Goizueta Business School).
- BPerez, J.; Kilian, B.; Pratt, L.; Ardila, J. C.; Lamb, H.; Byers, L.; Sanders, D. (2017). Economic Sustainability – Price, Cost, and Value. In: Folmer, B. (ed.), The Craft and Science of Coffee, Academic Press, ch. 6, from p. 133. doi:10.1016/B978-0-12-803520-7.00006-2 · other copies
- AWebster, S.; Kazaz, B.; Gheibi, S. (2024). Direct Trade Sourcing Strategies for Specialty Coffee. Manufacturing & Service Operations Management 26(5), 1712–1729. doi:10.1287/msom.2021.0586 · other copies
- A(2024). Directive (EU) 2024/825 of the European Parliament and of the Council of 28 February 2024 amending Directives 2005/29/EC and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and through better information. Official Journal of the European Union, L series (EUR-Lex).
Tier A · authoritative · B · trade and expert · C · general. Supporting quotes for every source are in the data version of this entry. If a publisher’s site refuses access, try the doi link or “other copies”.
The literature for this entry was last searched on 24 Oct 2026. A statement that no source consulted for this entry shows something refers to the sources above; newer or missing work may exist.
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