Does Fair Trade Coffee Lift Growers Out of Poverty or Simply Ease Our Guilty Conscience?
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Despite these difficulties, we can begin to understand how the Fair Trade program affects growers. The market price of coffee fluctuates, but as an example, it was $1.40 per pound on January 18, 2010. Fair Trade coffee, on the other hand, goes for a minimum of $1.21 per pound plus a specified Fair Trade Social Premium ($.10 per pound) and an additional organic premium ($.20 per pound) if the coffee is organic. When the market price exceeds $1.21 per pound (as it currently does), then the Fair Trade coffee price rises to the market price plus the Fair Trade Social Premium (and the organic premium if applicable). Thus, Fair Trade organic coffee goes for at least $1.51 per pound, but with a market price of $1.40 per pound, the Fair Trade organic price becomes $1.70 per pound.
Outside of the Fair Trade program, black market buyers known as coyotes and "in country" brokers buy coffee from growers using the world market price as a guideline, although they generally pay below it. Some estimate that growers receive about 20 to 50 cents under the market price. Fair Trade growers, on the other hand, sell coffee through their cooperatives. The cooperatives retain some of the coffee price to pay for running the cooperative as well as for projects to benefit the communities (such as building schools or medical clinics) and pay the rest to the grower. As members of the cooperative, the growers have a vote in selecting what type of projects the cooperative takes on.
After the cooperative takes its cut, growers receive an estimated 20 to 50 cents under the price paid to the cooperative. The difference of course between the estimated 20 to 50 cents taken by coyotes and brokers and the money taken by the cooperative is that coyotes and brokers pocket their cut whereas the cooperative uses its money to improve the quality of life for its members. One risk to cooperatives is that when the Fair Trade price is close to the market price (as it is now), growers can often sell their coffee to coyotes and receive more money than they would by selling to the cooperative. Mike Moon of Just Coffee says, "Coyotes save the farmers some work by buying ANY quality coffee and often they purchase it in cherry or undried."
Moon notes that the growers he's visited typically manage about two to five acres, producing between 70 to 350 pounds of coffee. Based on the numbers above, the coffee would sell for $98 to $490 at the market price, $106 to $529 at the Fair Trade organic minimum price, and $119 to $595 at the current Fair Trade organic price. However, in each case, individual growers would slightly receive less than those amounts either due to coyotes or brokers paying under the market price or cooperatives taking a cut for operations and community projects. In recent years, when the market price of coffee dipped below $.50 per pound, the difference between Fair Trade and conventional coffee was much more significant: 70 pounds of coffee for $.50 per pound only nets $35 and even 350 pounds of coffee would only sell for $175 at that rate. Yet, while the difference between the market price and the Fair Trade price matters, what should matter more is the amount of money required for growers to live a dignified, if subsistence, lifestyle.
A while back, the worker-owners of Just Coffee began talking among themselves about the failure of the Fair Trade price to keep up with inflation. Finally, they approached a few grower cooperatives, asking if the Fair Trade price had eroded in value over the years. The growers agreed that it had, and Just Coffee set out to increase the amount they pay per pound of coffee -- initially to $1.91 per pound and eventually higher than that. Therefore, a grower producing 70 pounds of coffee would receive $134 and a grower producing 350 pounds would receive $669 -- much more than the current Fair Trade organic price. They told me they are able to do this because they have relatively little overhead. They buy coffee through Cooperative Coffees -- a green bean buying cooperative consisting of over 20 Fair Trade roasting cooperatives in the U.S. and Canada -- spend some money on coffee packaging and labels, spend some money on shipping, pay their workers wages and health care, cover their building, energy and equipment costs, and then take a modest profit. There's no CEO making a six- or seven-figure salary at Just Coffee.