[Know nothing about fair trade coffee? Start here]
Coffee lovers with a socio-enviro conscience — Here’s some good news! Starting June 1, 2008, fair trade coffee co-ops will get a 5 cent per pound raise. Fair Trade Labelling Organization (FLO), the international organization that oversees fair trade certification, made the decision to raise prices late last year, after much argument and fanfare in the fair trade community.
This decision brings the base price per pound of fair trade coffee to $1.25.* That means fair trade coffee co-ops will get $1.35 per pound of conventional coffee ($1.25 fair trade minimum price + mandatory 10 cent social premium). For organic coffee, fair trade coffee co-ops will get $1.55 per pound ($1.25 fair trade minimum price + 10 cent social premium + 20 cent organic differential).
Now, you may be a bit confused. After all, didn’t fair trade co-ops get $1.31 an lb for conventional coffee before? Shouldn’t a 5 cent raise mean $1.36 an lb? To get the deets, I called Kim Moore, Director of Business Development for Coffee and Hot Beverages at TransFair USA, the nonprofit that confers the fair trade certification label in the US. Apparently, the minimum price actually differed by a few cents — from $1.19 - $1.21 — depending on the country until now. As of June 1, 2008, however, the price will become a uniform $1.25 a pound in all countries.
The minimum price for fair trade coffee’s long been a divisive issue in the fair trade community, mainly because the figure wasn’t adjusted up for many years, despite inflation. TransFair USA itself was pro a price adjustment, even noting its disappointment with FLO’s Feb. 2007 decision not to raise minimum prices.
All that noise got some action going. In June 2007, the social premium for fair trade coffee officially went up from from 5 to 10 cents, and the organic differential raised from 15 to 20 cents, bringing the total price paid per pound of coffee to $1.31 conventional and $1.51 organic.
That, however, wasn’t enough for some serious fair trade companies. Just Coffee, for example — which opted out of the TransFair USA certification system a few years back alleging a “watering down” of fair trade standards” — wasn’t happy that the base price remained intact: “the mimimum price is still $1.21 for fair trade coffee. The idea with the “premium” is that it should be “extra” cash leftover after producers are paid for the value of their coffee and labor to be invested in community infrastructure.”
So, along with other Cooperative Coffee members, Just Coffee chose to pay $1.56 minimum per pound starting mid 2006 (all of Cooperative Coffee’s stuff’s organic). In April 2007, Equal Exchange — a diehard fair trade co-op in the US– started paying a minimum of $1.36 per lb for conventional coffee, $1.56 for organic.
As you can see, now the FLO minimums and the minimums set by the super-fair trade companies are more or less converging. It seems, by and large, that the super-fair trade companies have succeeded in pushing FLO in their direction.
Of course, not to be outdone, Just Coffee announced in its newsletter this month that “we want to give you a heads up that there will be some price increases coming for early 2008.” :P Considering the fact that FLO’s next review of this minimum price won’t happen until June 2010, Just Coffee has plenty of time to come out with its new higher-than-FLO standards, as the it generally likes to pride itself in doing.
I haven’t heard any of the major fair trade companies in the US come out with statements about FLO’s decision. However, UK companies seem happy with the raise. Sarah Dryden at the New Consumer quotes various UK coffee companies supporting FLO’s decision. US companies — Feel free to weign in with your opinions in the comments.
* Unless otherwise specified, I’m referring to washed green (unroasted) arabica coffee, which is the category the vast majority of fair trade coffee in the US falls under.
[Crossposted on Viropop]
Another nickle? I just checked the International Coffee Organization website, they say the market price for Colombian arabica is $1.39. So the free trade price is still higher than the fair trade price, even with the increase? Since fair trade coffee sellers sell for a couple bucks more per pound than the rest, why don’t they make the price $2.35, send an extra dollar to farmers and still skim a buck off the top for themselves.
Comment by David K — January 9, 2008 @ 3:40 am
David,
Great question. The minimum is just that - a minimum. We write most if not all of our contracts above the minimum and our worker owned coop business model works with the modest goal of a 2-3% net income. The other key part that the minimum price discussion misses is pre-harvest financing. The pre-financing that we and other committed fair traders like Just Coffee provide is arguably more important than increases in the minimum price as it allows farmers to hold onto more of their coffee to turn into their coop and thereby gain more income and for buyers it means sharing the risk - the true spirit of fair trade.
Comment by scott p — January 9, 2008 @ 12:29 pm
David K. — You do bring up an important point re: the rising market price of coffee, but I also wanted to note that you’re also comparing two different things here. The fair trade min price is the figure that goes to the farmer co-op, where as the $1.39 figure you’re referring to is the sum that goes to someone or some company much higher in the supply chain. Outside the fair trade system, the farmer co-op would receive only a portion of that $1.39 once it trickles down.
Comment by Siel — January 9, 2008 @ 4:03 pm
The problem with talking about minimum pricing standards is that fair trade pricing is hardly helping the farmers make a fair wage. Studies suggest that a family farming full time in mexico, producing fair trade coffee has a net loss of 2,000 usd per year. So unless the minimum pricing structure addresses the fact that fair trade is failing farmers we might as well stop calling it fair (i know transfair has lots of anecdotal evidence of fair trade working but every study done on fair trade shows that it fails, just not as much as conventional). One study suggest that just to get a family to food security fair trade pricing would have to increase by 1 dollar per pound. To make this problem the USD is falling against almost every foreign currency and this is causing further problems for the farmers, the increase in FLO’s pricing is basically making up for a week USD, which is really great for European Fair Trade Roasters who saw their price per pound shrink by 20 percent in the last few years. What Just Coffee is trying to do is create a new relationship based model that really helps farmers and pulls them out of poverty, FLO and Transfair on the other hand are really good at growing the label and making us feel better about the coffee we drink. I’m skeptical about Just Coffee’s ability to influence change in the current Fair Trade system and some folks have suggested that they get out of Fair Trade completely and work on a new model, but for now it seems that they are at the forefront of pushing Fair Trade to actually mean something.
I pulled most of my data from Dan Jaffee’s book called ‘brewing justice’ which was published by UC Press.
J-ROD
Comment by j-rod — January 9, 2008 @ 4:23 pm
Thanks for the info. I’ve always wondered what the actual price farmers received for coffee, fair and free trade. For fair trade the money gets filtered through the co-op, and for free trade through the middlemen. What do they actually get in the end? I’ve heard some farmers only sell a portion of their crops to fair trade roasters as there’s not enough demand, and the rest on the open market. I’d be curious to know what an invidiual farmer makes from each source. That way you can compare the same coffee, same country, same farmer and see just how much more fair trade offers in the end.
J-Rod, thanks for the reminder about the weak dollar. You’re right, the dollar’s lost more strength than the fair traders have increased their dollar prices.
Comment by David K — January 9, 2008 @ 7:31 pm
This is from the Just Coffee website where they map out the supply chain. It is pretty interesting. Because the coop is one that is receiving the 156 for organic and 135 for conventional.
http://justcoffee.coop/map/supplychain
Comment by j-rod — January 10, 2008 @ 8:21 am
Hello,
Thanks Siel for the article and the props.
A few quick comments:
1) We are currently talking with several of our producer partners to get a better handle on what individual farmers are getting from their co-ops when we buy coffee from them. We’ll get that info to ya’ll as soon as we get it. Keep in mind that where a traditional intermediary is just another hand in the supply chain outside of the grower communities, co-ops are owned and controlled by the producers themselves. Money staying with the co-ops is invested in their communities in several ways.
2) even better than JC single-handedly trying to push standards including price forward, the $1.61 a pound to paid this year is a Co-op Coffees policy that was set in Xela, Guatemala during a meeting with growers in 2005. This means that there are over 20 other roasters in the US and Canada that have also committed to raising the bar in this way.
3) J-Rod, thanks for all of the insightful comments. One thing I want to point out though is that coffee growers will never be pulled out of poverty by fair trade if their only activity to obtain cash is growing and selling coffee. I know that goes against what some of the FT marketing says, but it is true. The relationships that we are trying to build and (hopefully) money in social premiums from FT contracts can help farmers diversify out of dependence on coffee and get into some other cash generating strategies that they have better control of.
Great discussion, as usual!
-Matt
Just Coffee Co-op
Comment by mateotemprano — January 12, 2008 @ 1:22 pm