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Does Fair Trade Coffee Lift Growers Out of Poverty or Simply Ease Our Guilty Conscience?

Is the Fair Trade movement just a marketing scheme or does it truly provide a living wage for coffee growers?
 
 
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How many times a day do you consume a food produced by a subsistence farmer on the other side of the world? Whether it's chocolate, coffee, tea, sugar or bananas, most Americans regularly enjoy inexpensive tropical foods, but far fewer actually think about the effects on the people or the environment where those products are grown. The Fair Trade movement represents one attempt to change this by reminding consumers that their lifestyles rely on faraway farmers and laborers and offering them an opportunity to ensure their purchases come from farmers paid a fair price.

At least, that's what consumers believe when they consciously select Fair Trade products. Is the consumer truly raising subsistence farmers out of poverty by buying Fair Trade? Or is Fair Trade just a marketing scheme to ease our guilty consciences as we exploit people of the developing world?

While a number of products are now certified Fair Trade, the first one introduced into the United States -- coffee -- is also one of the most widely available. Fair Trade means more than just a fair price to the coffee grower; it also means the growers are organized into democratically run cooperatives. Often (but not always) the cooperative model extends into the U.S. where roasters of Fair Trade coffee are also worker-owned cooperatives. Yet, nowadays even Wal-Mart -- the very embodiment of everything Fair Trade values oppose -- sells Fair Trade coffee.

As it turns out, Fair Trade-certified coffee is not all equal, even if all Fair Trade coffee pays growers more than the market price. Clearly the philosophies of major retailers like Starbucks, Wal-Mart and Smucker's (which sells Fair Trade coffee under its Millstone brand) differ from those of grassroots activists like the founders of Just Coffee in Madison, WI who went into the coffee roasting business specifically to help improve the lives of Mexican coffee growers they met in Chiapas.

Starbucks, for example, announced it would begin selling Fair Trade coffee the day before a planned national day of protest against the company. For any publicly traded company, increasing returns to shareholders is the bottom line and Fair Trade coffee only plays into that if it can help a new market segment or generate positive PR. Just Coffee, on the other hand, operates as a worker-owned cooperative that pays its workers a living wage and health care benefits and also pays coffee growers well above the minimum fair trade price.

Despite the certification program and the often intimate relationship between growers in the Global South and roasters in the Global North, it's not easy to quantify how the Fair Trade price translates into improved quality of life. Coffee comes from countries on several continents, each with its own currency and economy. Thus, a living wage in Ethiopia may not be a living wage in Peru, or vice versa.

Also, the grower may not sell his coffee in the familiar form we think of as coffee beans. Coffee is harvested in the form of a cherry-like fruit and then the flesh is removed to reveal the coffee bean (which is actually the seed of the fruit). The grower may sell coffee in the cherry, but the market price for coffee is for the beans. To get from the cherry to dried green (unroasted) coffee beans, the coffee must be depulped, washed or rinsed, and dried on patios or in mechanical dryers, dehulled, and graded.

This further confuses any attempt to translate coffee prices paid by roasters into prices, incomes and quality of life for individual growers. Even the term "grower" is not without nuance; are we referring to the owner of the land where the coffee is grown or the laborer who grew or picked the coffee, and is that person one and the same or not?

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.

For a consumer, buying Fair Trade coffee does not necessarily mean spending more money. Starbucks sells its coffee (including its Fair Trade options) for $9.95 to $11.95 per pound. In comparison, Peace Coffee (a worker-owned cooperative in Minneapolis, MN) sells Fair Trade coffee for $10.95 per pound or $11.95 per pound for decaf. Just Coffee sells its coffee for about $10 to $12 per pound in 12-ounce packages, or less if you buy in bulk. Equal Exchange, which sells Fair Trade coffee nationally, prices its coffee higher -- from $11 to $14.67 per pound -- in its 12-ounce and 10-ounce sizes but sells it for as low as $9.40 per pound in five-pound bags. In other words, if you are already buying specialty coffee, buying Fair Trade will not make a difference for you financially, but it will make a difference for the people who grow your coffee beans. (In fact, if you buy espresso drinks in coffee shops, buying Fair Trade coffee to brew at home is a bargain in comparison.)

The benefits of Fair Trade for the grower extend beyond money. One perk of growing coffee (compared to other export crops) is that coffee requires a shade canopy, often provided by food crops that the growers themselves can eat. Thus, growers are able to produce their own food and participate in the cash economy with their coffee revenue, instead of doing one at the expense of the other.

Those who have visited or studied Fair Trade coffee growers say that the Fair Trade certification really has no down side. Growers always receive a price above the market price for their coffee and they also benefit from participating in democratically run cooperatives and the projects like schools or clinics the cooperatives finance.

Additionally, Fair Trade coffee growers sometimes get access to cheap credit, allowing them to hire extra labor for the coffee harvest and reap a greater payout as a result of harvesting more coffee than they could by themselves. Lastly, Fair Trade coffee growers ideally have long-term relationships with the First World coffee roasters who buy their coffee. For example, Equal Exchange, a worker-owned cooperative that pioneered Fair Trade coffee in the U.S., tests all of its coffee for quality. When coffee quality is substandard, Equal Exchange does not buy it, but because they operate with a goal of helping the grower cooperatives prosper in the long term, they provide feedback to the growers so they understand how to improve their coffee's quality in the future.

Even if Fair Trade provides only benefits to growers with no down sides, the question of whether the Fair Trade price is high enough to give consumers what they pay for is unclear. Some feel that Fair Trade coffee is simply a market in which the price is set just high enough to give consumers a warm fuzzy feeling for helping subsistence farmers but low enough so that consumers (and roasters) still buy the coffee. Is that how it should be? It's essentially a question of whether it's best to make a small difference for many coffee growers (by pricing Fair Trade coffee so Wal-Mart, etc., sells it and mainstream consumers buy it) or a big difference for a few coffee growers (by pricing Fair Trade coffee high enough to truly provide a living wage for growers but potentially alienating major retailers and thus many consumers from the market).

For a consumer, the choice is clear: buying Fair Trade is the way to go. However, consumers should be aware of the nuances within the Fair Trade market in order to make the most ethical choice (and hopefully enjoy some delicious coffee, too). First of all, make sure the coffee you buy is actually Fair Trade-certified, as corporations looking to undercut the Fair Trade movement will sometimes market their coffee with various ethical-sounding certifications. (For example, Sara Lee, one of the world's four major coffee buyers, markets some of its coffee as UTZ certified -- a certification with relatively weak standards.)

Also, buy from a company with a significant dedication to Fair Trade instead of one that sells only a token amount of its coffee as Fair Trade. It's true that any coffee sold with the Fair Trade logo meets the program's standards, but some criticize large companies like Starbucks for its failure to establish long-term relationships with grower cooperatives. Fair Trade does not go very far to help farmers if they are paid Fair Trade prices one year and then dropped the next. Companies committed to selling Fair Trade will be much more likely than those that sell only a token amount to actually subscribe to the Fair Trade values. A quick visit to a Fair Trade coffee company's Web site is often all you need to know that the company is invested in helping the lives of the coffee growers, as many Fair Trade coffee companies visit the growers and post pictures and descriptions of the coffee growers' farms on their Web sites. (Some even invite members of the public to join them on delegations to visit grower cooperatives.)

All in all, Fair Trade may not provide the simple, clear-cut assurance ethical consumers desire to know that coffee growers are receiving a fair price, but it does offer consumers a way to ensure that coffee growers are paid a price at least slightly above the market price for coffee.

Jill Richardson is the founder of the blog La Vida Locavore and a member of the Organic Consumers Association policy advisory board. She is the author of Recipe for America: Why Our Food System Is Broken and What We Can Do to Fix It..
 
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