Fair Trade Coffee – The Impact of Fair Trade Coffee

How much are you willing to pay for your coffee? Two fifty a pound? Five dollars a pound? $7.99 a pound? How about $20 a pound for Hawaiian Kona or Jamaican Blue Mountain? How much do you think the coffee in your $3 cup of Starbucks is worth on the world coffee market? How much of it do you think went into the grower’s pocket? Go on, take a guess. And while you’re thinking about it, read on to learn a bit about what Fair Trade coffee means to the people who grow it.

You might remember Juan Valdez, the happy Columbian coffee farmer who became the face of the Colombian coffee farmer in 1959. He was the brainchild of a New York advertising agency representing the National Federation of Coffee Growers, the first democratically run federation of coffee growers devoted to fair trade. Established in 1927 to “build the prosperity of the Colombian coffee farmer”, the Colombian Coffee Federation (FNC) is wholly owned by the farmers themselves. For 80 years, it has led the way in guaranteeing a fair price to Colombian farmers for their product. Its representation of the cafeteros of Colombia has not always been perfect, but it has always been progressive, and has always aimed toward ensuring that Colombian coffee growers receive the fairest price for their product.

At last count, the FNC represents over 500,000 small coffee farmers in Colombia. It is a private commercial entity that is wholly owned by its members. The Federation holds no government sanction, nor is it given any government protection. Free competition from other coffee buyers is one of the tenets to which it has always held. It operates as a coffee buyer, guaranteeing a certain price for the beans that it buys from members. Its promotional efforts – remember Juan Valdez? – have virtually guaranteed that Colombian coffee can command premium prices on the world market. Profits made from the sale of FNC coffee are returned to the farmers in the form of education, assistance, infrastructure and community improvements. In addition, a portion of the profits in any year is set aside in a reserve fund from which cafeteros can be paid for their product in years when the world market price for coffee drops. No matter what the market conditions, the FNC will always buy a farmer’s coffee – but the farmer has no obligation to sell to the FNC. He can sell to any one of nearly 100 shippers or cooperatives operating in Colombia.

What has this meant to the small coffee farmers and growers, the cafeteras of Colombia and their families? For starters, about five cents of what is paid per pound of coffee is earmarked specifically for social betterment projects in the communities where those farmers live. FNC funding has built schools, roads and hospitals. It has funded irrigation and clean drinking water. It has pioneered ways to help cafeteras grow better coffee, grow coffee sustainably and get the best price for their coffee. As an example, the Federation has funded a communications network that includes free phones that can be used by thousands of farmers across Colombia to check the FNC’s price for coffee today. This allows them to make informed decisions when dealing with other buyers who may be offering a better price.

The Federation also maintains a staff of 1,000 traveling coffee consultants who work with farmers to implement the best growing practices, solve problems and increase the quality and productivity of their farms. The organization also encourages and assists farmers in diversifying their crops so that they are less affected by the volatile fluctuations in the world coffee market. Thanks to the educational, promotional and societal impact that the FNC has had on the market for Colombian market, Colombian cafeteras enjoy a higher standard of living than the coffee growers of most other nations.

Back to that cup of coffee. The amount of coffee in that cup probably cost the shop about 6 cents. The grower of that coffee receives less than one percent of the price of soluble coffee on the market – about .06 cents. That’s $.0006. In order to make even one cent, the coffee grower would need to grow and sell enough coffee for almost 1,700 cups of coffee bought at the local coffee shop. For most coffee growers, that means operating at a loss year after year.

Fair Trade may not be perfect. There are many who would argue that removing price controls and allowing farmers to compete openly would eventually reduce the number of farmers who are trying to sell, driving supplies down and demand – and consequently prices – up. The problem with this reasoning is the human cost, which is astronomical in a market that supports millions of families worldwide.