Beginning June 1, fair trade coffee farmer co-ops will be getting an extra 5-10 cents per lb of coffee, bringing the total to $1.31 for non-organic coffee and $1.51 for organic coffee.
To be technically accurate, the fair trade minimum price did not increase; it’s the social premium and organic differential for fair trade coffee that are going up by 5 cents each. Though the current minimum price for fair trade coffee’s considered $1.26 an lb, this figure actually includes a minimum price of $1.21, plus a social premium of 5 cents. Similarly, while fair trade ORGANIC coffee currently gets a co-op $1.46 an lb, this figure includes the same minimum price of $1.21, plus 5 cents social premium, plus 15 cents organic differential.
Now, both the social premium and the organic differential are going up by 5 cents each. Thus, farmer co-ops will get an extra 5 cents for conventional coffee, and an extra 10 cents for organic coffee. This decision was made and announced a few days ago by Fair Trade Labelling Organization (FLO), the international organization that oversees fair trade certification.
TransFair USA, the organization that certifies fair trade products in the US, says the social premium is a “key and unique feature of the Fair Trade system. Farmers and farm workers decide democratically how to invest it, in projects ranging from infrastructure improvements to health initiatives to scholarship funds.”
This FLO announcement comes just a couple months after many activists and organization expressed outrage and disappointment about FLO’s decision not to raise the fair trade minimum price at that time. The fair trade minimum price itself will be reviewed again in October 2007.
Update, 3/23/07: Here’s Just Coffee’s take on the issue: “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.”
Update, 1/8/08: The fair trade minimum price for coffee goes up again!
why hasn’t there been any response to this in the fair trade blogosphere/listserves/messageboards? when there was not so great news out of FLO, everyone was up in arms. and now? what will it take for y’all to say something nice about FLO/TransFair/etc?
Comment by curious jorge — March 23, 2007 @ 9:53 am
The news has been on all the fair trade listservs I’m on and the FT blogs I read. If they’re not on the listservs and message boards you read, why aren’t you putting them on there? The content of listservs and message boards are dependent on the info its readers / writers supply (you). Instead of wondering, you might get to writing.
Comment by Siel — March 23, 2007 @ 4:03 pm
I just want to clarify something on your 3/23 Just Coffee update.
The minimum price paid FT producer groups is the total price…. Floor price plus the FT premium. There is nothing out there that I know of that says 1.21 has to be that floor. In a high C market a lower floor actually works in the producers favor, pending how a contract is written. In such cases the producer group will receive more of a premium so the total price equals the minimum price (1.26 for conventional… or in June 1.31).
I know this might come off a little confusing. However, my point is that FLO does not certify that a producer group receives a 1.21 floor… rather they certify that they receive a minimum total price.
Comment by e — March 24, 2007 @ 12:11 pm
Hey e — You’re correct, but I also don’t think that Just Coffee implied that the $1.21 is the one and only fair trade price — They clearly say $1.21 is the MINIMUM price in the quote I excerpted.
Comment by Siel — March 24, 2007 @ 12:25 pm
Perhaps I can be clearer in an example.
Right now you could say a FT coffee was sold for 1.26. (1.21 Floor Price plus 5cent FT premium).
However, this floor could be changed from 1.21 to a lower number.. let’s say 1.11. In this case the price paid would still be 1.26 (1.11 Floor Price plus 15cent FT premium).
So, 1.21 is not a minimum floor price.
I don’t mean to nitpick this detail. However, this is a powerful tool for producer groups to realize a higher price once a C market moves past the floor price. Not only does it lower that floor “trigger” price but they also realize a higher premium.
Comment by e — March 25, 2007 @ 5:46 pm
Hi e and Siel:
The minimum price has not been changed, the premiums have been changed. And that is a really good start. However, my point is that FLO did not boost the minimum price which is generally supposed to pay for the labor and cost of production for a coffee grower. Ask any grower and he/she will tell you that the cost of production is up since the pricing structure was last tinkered with. The premiums are to cover “extras” such as organic cert., FLO cert., infrastructure, etc. The issue is that if the cash that gets back to the individual grower is not enough to cover the basic cost of production, the premiums cannot serve their purpose.
Our hope at JC is that FLO will follow this up with a further increase in the minimum price and not just stop with the premiums. There is hope for this and people should continue to voice their opinions to FLO. Sound like splitting hairs? I agree, but we did not write the language and mechanics of the pricing structure, our friends at FLO did.
Peace and out…
-Matt
Comment by mateotemprano — March 26, 2007 @ 8:19 pm
If the current price, however it’s defined, isn’t doing what it’s intended and indeed advertised for, then clearly it needs revision. More importantly, though, if few people are purchasing fair trade coffee, it makes little difference what the floors or premiums are. Double-sided: keep the return at the level that compensates the growers, while keeping the retail price in line with what people are willing to pay.
Comment by Debbie — March 31, 2007 @ 12:48 pm