Posted by Matthew on 1/27/2020 to Newsletters
‘Fair Trade’. You see these words on packaging, along with ‘Certified Organic’. It’s something that we all like the sound of, but what does it really mean? Coffee is such a big part of most every morning that we rarely stop to think about where it comes from, or who grows it. As the words imply, ‘fair trade’ means that farmers get paid a decent & fair amount for the coffee they grow. The fact that a fair trade program exists for coffee at all (there is none for, say, growing maize or beans) goes to show that there was an issue to be solved.
Coffee boom, coffee bust
Coffee is a boom-and-bust commodity. Among raw substances traded worldwide, coffee is big. There’s a lot of coffee trading going on within an industry that’s now worth more than US$200 billion per year.
But, if you take higher production costs into account, farmers’ incomes have actually decreased. About 125 million people around the world depend on coffee for their livelihoods, but many of the 25 million farmers who produce 80% of the world’s coffee on small farms have trouble earning a decent living.
A farmer typically has a good year when their region does not—as long as they personally managed to harvest a good crop—because scant coffee drives up the price. In a bumper year, the price per pound can be less than the cost to grow the beans.
Fairtrade effectively mitigates the boom-and-bust problem. Certified cooperative farmers receive the Fairtrade Minimum Price of $1.40 per pound for their coffee, plus a 30 cent premium for organic. The cooperative also gets 20 cents per pound to invest in community initiatives, a quarter of which has to be dedicated to improving the productivity and quality of their farms.
What does this mean for farmers?
Fairtrade gives farmers the ability to feed their families and the confidence to improve their farming equipment, techniques and yields every year. For 15 of the last 24 years, since the Fairtrade program was conceived in response to a severe market crash in Mexico, the global price of Arabica coffee fell below the Fairtrade Minimum Price. But farmers who subscribed to the plan still got paid!
Here are some of the things that the Fairtrade program enables:
• Local infrastructure investment: farmers contribute to their communities, which means wells for clean drinking water and schools for their children.
• Responsible farming: within the Fairtrade program, farmers must follow labour and environmental standards, which include less pesticide and herbicide use—good for farmers, good for the local ecosystem and good for those drinking their coffee.
• Better social services: cheap loans, technical training and improved healthcare.
Fairtrade is biggering
It’s big and getting bigger. According to the Fairtrade Foundation, coffee farmers cultivate crops on more than 1 million hectares worldwide, producing an estimated 541,250 tonnes of coffee. 183,780 tonnes of this coffee is sold on Fairtrade terms and 57% of this coffee is certified organic. These numbers are growing!
In the next decade, the global coffee sector will face more challenges, including economic, environmental, and reduced availability of land and labour. Luckily, the Fairtrade program is expanding apace, providing more security for more coffee producers.