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Fair Trade Coffee Klatching

by Arthur Montague

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QUESTION: Statistics indicate that the production capacity of the Fair Trade certified producer cooperatives is substantially higher than actual Fair Trade sales.

Does this variance between capacity and sales mean that much of these crops are not fairly traded?

RESPONSE: Admittedly, the market for Fair Trade coffee is much smaller than the production capacity of the registered cooperatives. On average, cooperatives sell only a portion of their coffee on the Fair Trade market and channel the balance through conventional markets. The cooperatives are generally able to manage the export themselves, which means the conventional sales will still be more direct than using the normal routing through local middlemen. That some of their coffee is Fair Trade, with a guaranteed price, also provides the cooperatives with some leverage in their dealings with other markets.

The current Fair Trade registry includes 164 cooperatives, representing 500,000 members and their families. This represents a production of 78.7 million kilograms for 1999. Of that coffee, 12.5 million kilograms or 22% was sold on the Fair Trade market. The percentage varies enormously from country to country, and even from one cooperative to another.

Some of the factors that influence how much a cooperative can sell as Fair Trade are the quality of its coffee, the contacts it has developed with buyers, the popularity of the coffee origin it sells, and many more.

The slowing down of sales growth of coffee overall in some European countries has caused a bottleneck in the system, and the world is looking to North America, particularly the US, for the next wave of expansion. In Canada, sales of certified Fair Trade coffee have grown tremendously since 1998, increasing from 22 metric tons sold to 150 metric tons for the year 2000.

QUESTION: More and more consumers are linking personal health to broader environmental and economic issues. Growing concern about labeling of genetically modified food is a case in point.

Does Fair Trade certification address environmental concerns and their relationships to economic interests?

RESPONSE: Fair Trade certification deals indirectly with environmental issues by involving the cooperatives in a dialogue on integrated development and sustainability. More specifically, cooperatives often have developmental goals that encompass issues of economic, social and environmental sustainability. Cooperatives are encouraged and supported to adopt measures to improve quality, and to apply production and processing techniques which respect the specific ecosystems and contribute to the conservation and sustainable use of natural resources in order to avoid as much as possible, or even totally, the use of chemical inputs.

In the case of bananas, minimum and process criteria are more defined, with the view of prohibiting certain chemicals and regulating use of others.

Environmental questions are dealt with less in the certification process than in the relationship that develops between the FLO and the producer cooperatives. In practice, however, almost all Fair Trade coffee is grown under shade cover on small farms where traditional growing and harvesting methods are used. In this context, FLO encourages producers to invest in organic methods, rather than chemicals, to improve production.

In the case of coffee, environmentally sound practices do lead to a higher quality product and thus a better return for the farmer.

QUESTION: Foods certified organic are experiencing a phenomenal demand among consumers, close to 20% increase annually and no end in sight. In 1994, Starbucks indicated it has no interest in promoting organic coffee. Now they can barely get enough.

To what extent is Fair Trade coffee also certified organic?

RESPONSE: As of February, 2001, nearly 41% of the cooperatives on the FLO register are either already certified organic or in the process of becoming certified organic.

Organic coffee is the fastest growing niche within Fair Trade, representing 28% of 1999 actual sales, up from 19% the previous year.

Since organic coffee fetches an important premium even on the conventional market, organic certification allows producer cooperatives to further expand their sales opportunities.

QUESTION: Fair Trade certification is a value added that ultimately is paid by the consumer. That suggests need for a buoyant economy and a continuing, somewhat upscale, market for Fair Trade coffee.

Will Fair Trade coffee and other Fair Trade products, therefore, remain a niche product or will there ever be a time when Fair Trade products will be accessible to lower income consumers; in short, benefitting poor consumers as well as poorer producers?

RESPONSE: The price difference between Fair Trade and conventional coffee depends on the quality of the coffee, the form in which it is sold and the difference betwen the world price and the Fair Trade minimum price. Being Fair Trade certified is, then, only one determinant of price.

In Canada and to a large extent in the United States, Fair Trade coffee has mostly been considered a specialty product and priced accordingly. At the same time, the scope of origins and products has gradually expanded to include more mainstream origins and blends. Several certified Fair Trade coffees are sold in supermarkets at mid-range prices and appeal to an increasing portion of coffee drinkers.

There are limits, however, as to how low retail prices can go. The world price is currently 60 cents (US) per pound, whereas the minimum price for Fair Trade coffee is 126 cents (US). In practice this means that Fair Trade coffees cannot be priced as low as a typical supermarket blend sold by a multinational. Some of the Fair Trade coffees are currently priced in the $5.00 per pound retail price range, which is fairly accessible. When coffee is sold by the cup, the difference in price between Fair Trade and conventional evaporates to a mere four or five cents per cup.

AUTHOR'S NOTE: If this isn't everything you ever wanted to know about Fair Trade certified coffee, you can learn a lot more from the TransFair website at www.transfair.ca. Where can you purchase Fair Trade certified coffee? Check the website for an outlet near you.

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