Fair Trade USA® is committed to using our model to help farmers stay on their land and earn a decent living while improving their communities and creating a brighter future for their families in the volatile industry that produces America’s favorite drink. Since inception, we have been keenly aware of the connection between the migration to the United States and the inability of coffee farmers and workers to make a sustainable living in the industry, especially when market prices are low.
As Kevin Sieff points out in his June 11 Washington Post article ‘The Migration Problem is a Coffee Problem,’ the past few years have been some of the most difficult for many Latin American coffee farmers. The C Market price has dropped from around $2 per pound of coffee in 2014 to $.89 in 2019, and small-scale farmers are unable to cover even the most basic costs associated with production.
A very similar pricing crisis existed when Fair Trade USA opened its doors in 1998. While we are deeply saddened to see the same type of crisis happening again, our model, which was created in partnership with farmer organizations, advocates, and the industry, was designed for both the highs and the lows of the market. Fair trade supports coffee farmers facing low market prices in two main ways: The Fair Trade Minimum Price and Community Development Funds.
Fair Trade Minimum Price
When cooperatives sell their coffee on fair trade terms they receive, at minimum, $1.40 per pound for their coffee. For organic coffees this rises to $1.70 per pound to account for extra labor costs. Producers can earn well above this minimum price based on quality and other factors, this price floor was intended for moments specifically like this when the commercial market fails them. Being part of a cooperative often gives small farmers the strength in numbers to improve their quality or convert to organic and demand higher prices for their beans.
Community Development Funds
On top of the minimum price (conventional or organic), Fair trade producer groups receive $0.20 per pound to invest into their communities and production as they see fit. This allows producers the flexibility to make decisions tailored to the needs of their specific situations. It also supports investments in quality that help groups negotiate above the standard market price. Our own research shows that around 50 percent of all investments are focused on productivity and quality improvement projects.
Together the Fair Trade Minimum Price and Community Development Funds are generating tens of millions of dollars in additional income each year for coffee farming communities. When the market dips to crisis levels, these additional funds are a literal lifeline for these farmers and their families.
There are a couple of nuances in this article that we’d like to call out and correct:
- Just because a cooperative is Fair Trade Certified™ doesn’t mean that it sells all of its coffee on fair trade terms. The article discusses Rodrigo Carillo’s cooperative, which is part of a large organization that only sells a small share of its production on fair trade terms. In this case, farmers are unfortunately going to see less of a benefit from fair trade. Therefore, it's especially important for brands and consumers who are concerned about this issue to ask for Fair Trade Certified coffee.
- The fact that cooperatives aren’t selling all their coffee on fair trade terms is also the reason why it isn’t as easy as “just raising the Fair Trade Minimum Price.” Producers fear that by raising the price, they will lose market share. Currently, it is assumed that only around 35% of all available Fair Trade Certified coffee produced globally is sold on fair trade terms.
- The article mentions that a $.40 per pound difference between the Fair Trade Minimum Price and the price the farmers are actually paid is going to an export company. While it may sound alarming, this is what’s known as the free on board (FOB) price and is also how the C-market price is measured, meaning that all of the business costs associated with getting the product to market are covered, including quality control and transportation. In the case of fair trade, the export company is the cooperative, which is owned and managed by the farmers themselves.
Coffee price volatility is hard on all coffee farmers, even those that are part of fair trade cooperatives. Our organization has spent the last year galvanizing the industry in favor of coffee farmers - attempting to build awareness for this crisis, increase purchases of Fair Trade Certified coffee, and support farmers on the ground. Creating deep and lasting change is going to take much more than fair trade; it will require collaboration from the entire industry.