Fair Trade Coffee – More Than Higher Prices

Fair Trade Coffee – More Than Higher Prices

In the past couple of years, the Fair Trade coffee movement has started to come in for its share of criticism. It was inevitable, really. The more visible a concept is, the more easily it becomes a target. After all, would anyone have noticed a girl shaving her head if her name hadn’t been Britney Spears?

The Fair Trade movement has become a big player in the international coffee market, and being big attracts examination and criticism. Much of the controversy and information about Fair Trade certified products – of which coffee is only one, but the most visible one – centers around buyers agreeing to pay a floor price for commodities that are Fair Trade certified regardless of the prevailing market price.

Where coffee is concerned, that floor price is $1.26 for coffee, with an additional 15 cents – $1.41 per pound – for coffee that is also organically grown. That’s the price that’s guaranteed to growers who belong to one of the many coffee cooperatives that are certified Fair Trade. This has been especially important over the last several years, when the market price for coffee beans has hovered between 40 and 50 cents per pound. For many growers, that market price doesn’t even cover their costs of production.

The Fair Trade concept extends far beyond the price paid for a commodity, though. In order to be certified Fair Trade and qualify for that price floor, growers have to commit to certain practices and beliefs. Among the principles and practices that are part of the Fair Trade coffee concept are:

Fair Wages

Being paid a fair price for their product allows Fair Trade coffee growers to pay a fair price to their workers. It means that they can feed their families and continue to grow coffee.

A Vote in Decision Making

Fair Trade coffee farmers must belong to coffee cooperatives that give them a voice in how Fair Trade premiums are invested. Those investments have included initiatives such as building schools, creating educational opportunities, rebuilding abandoned coffee factories to give growers more control over their end product.

Children’s Rights
The increased wages and the premiums paid for Fair Trade coffee allow families to make decisions in the best interests of their children. A number of studies that examined the results of Fair Trade coffee buying on villages in South America and Africa found that children whose families were part of Fair Trade coffee cooperatives had better access to education. Those studies also showed improved monthly food consumption, and more stable families.

Environmental Concern
Fair Trade pays a premium for coffees that are certified organic and shade grown. That encourages farmers to grow their coffees without harmful pesticides and fertilizers, benefiting both the consumers of the coffee and the environment.

Capacity Building

The fair trade movement hinges on the investment of part of the premiums from higher prices into improving the infrastructure of the community and the cooperative. In practice, that may mean giving technical and economic assistance to diversify crops, education on new farming methods or research to develop higher quality coffees.

Currently, fair trade coffee is at the center of a growing storm of debate about the fair trade movement itself. Fair trade coffee is, according to most market experts, the fastest growing segment of the specialty coffee market, with increases in worldwide sales from $50 million traded in 2000 to $750 million traded in 2006. As consumer awareness of fair trade issues has grown, major multi-national corporations have begun to step onto the bandwagon. I say “step” deliberately – corporations like Dunkin Donuts, Starbucks and Green Mountain Coffee are hardly jumping on the bandwagon. They are, in fact, doing little more than dipping their toes in the water. Even so, their dip makes up a disproportionate amount of the fair trade coffee sold each year. While Starbucks only buys about 1% of its coffee with the fair trade coffee label, its sales make up more than 10% of the global fair trade coffee market. At the same time, Starbucks contends, their CAFE program means that they actually pay higher than fair trade coffee prices for a great deal of their coffee.

Other specialty roasters are also stepping up the debate about Fair Trade certification as practiced by TransFair US, the entity responsible for certifying fair trade coffee and other products. Many of them charge that the organization has lost its original mission in its quest to expand the fair trade coffee market. Others point out that the stringent certification standards and stiff certification fees shut many small coffee farmers out of the market. This goes along with the contention by Starbucks and other roasters like Green Mountain Coffee that buying 100% fair trade coffee may actually be counter productive. They reserve the right to purchase coffee from growers who may not qualify for fair trade certification because their farms are too large to be included in a coffee cooperative, or because they choose not to join one. They make the point that many farmers follow fair trade practices without being part of a fair trade coffee cooperative for political or practical reasons.


Most interestingly, most of the coffee roasters who offer fair trade coffee offer it at prices at or below the prices paid for non-certified coffee. A big part of the reason, say many, is that the direct relationship between roaster and grower encouraged by fair trade cuts out the middlemen – the coffee traders and importers – who take their cut and inflate the prices that companies pay for their coffee.

In the end, there are no easy answers. The debate about fair trade coffee versus free trade prices tips back and forth, and much of it is largely hypothetical. While many economists decry fair trade coffee pricing as a crutch that will eventually rebound, or a scourge that lowers coffee prices for non-fair trade coffee, the opposite appears to be true in many cases. In areas with strong fair trade coffee representation ALL coffee growers receive higher prices for their product. And far from putting those premiums into increasing their production of coffee, the money goes to improving the quality of life for the entire community. Very often, the extra premiums are used to diversify the crops being grown by a farm in order to cushion the impact of coffee price fluctuations. To all appearances, the concept, if not the branding, of fair trade coffee is a win-win situation.