Understanding the Fair Trade Coffee Market

Next to oil there is nothing as sought after as coffee.

Next to water there is no other drink as in demand as coffee.

So why are coffee producers struggling to stay in business when they have a market that is growing?

The Reality of Small Coffee Farms Around the World

Small family run coffee farms produce a great percentage of the specialty coffee around the world yet only make a cash income between $500 – $1000 per year. This is barely enough to sustain the coffee crop!

The rest of the coffee we enjoy is produced by large coffee plantations whose workers often toil under abysmal working conditions and are poorly paid. Coffee pickers in Guatemala for example, have a 100-pound quota to pick in order to get the minimum wage of less than $3 per day, those who don’t make quota, don’t even get the minimum wage.

How the Coffee Market Operates

As a top commodity on the world market, you would think there would be good money in the crop. But as you may learned in Economics 101 the commodities market is volatile. Trading prices are based on betting on the future of supply and demand and can fluctuate like the weather. While large coffee plantations and organizations can, for the most part, grow in this sort of economic climate, the small farmers and producers struggle to maintain their operations. Through the years many have failed and the unique specialty gourmet coffee they supply is often endangered of being lost forever.

According to The Global Exchange Organization

“Most small farmers sell directly to middlemen exporters who are commonly referred to as coyotes. These coyotes are known to take advantage of small farmers, paying them below market price for their harvests and keeping a high percentage for themselves. In contrast, large coffee estate owners usually process and export their own harvests that are sold at the prices set by the New York Coffee Exchange. However, extremely low wages ($2-3/day) and poor working conditions for farmworkers characterize coffee plantation jobs.”

Even with the ever increasing demand for gourmet and specialty coffee with coffee houses opening in every town, and the introduction of gourmet specialty blends to all levels of society that coffeehouse chains such as Starbucks have created, the small coffee producers had no protection against prices set by the extremely volatile commodities market. Something needed to be done to save the small coffee producers around the world.

The Answer: Fair Trade Coffee Beans

The Fair Trade Coffee Movement got started in the 1950’s as the Alternative Trade Organizations (ATOs) began promoting equitable and direct trade between Europe and the US with third world coffee producers.

Fair Trade Certification was the brainchild of Max Havelaar. In 1988 he proposed that the certification include the larger coffee roasters, who would guarantee to trade a portion of their total coffee volume on Fair Trade terms. The idea took off and there are now Fair Trade Certifications in 17 importing countries.

In 1997 the Fair Trade Labeling Organizations International (FLO) was created by the 17 importers to establish criteria and evaluate coffee roasters and farmers who had undergone the formal application process, and ultimately give approval to be certified as a Fair Trade Coffee. This certification carries requirements for both the coffee roaster and the coffee grower.

Fair Trade Coffee Certification for Roaster or Buyer

Any roaster/buyer who adheres to the following criterion can apply for the right to use the Fair Trade Labeling system:

1. Purchase price is fixed according to the FLO International guideline.

                Guaranteed floor price of $1.26/lb washed

                For Arabica, NY “C” Market + US$, .05/lb

                For Certified Organic, a premium of US$, .15/lb over the top FLO International price

2. Roaster/buyer to facilitate growers access to credit.

The roaster/buyer must facilitate the producers with access to credit for up 60% of the value of the contracted coffee at Fair Trade conditions, at regular international interest rates, from the beginning of the growing season to the shipment of the washed beans.

3. Roaster/buyer and Producer Contracts should be from 1 to 10 year duration.

Long term relationships between the buyers and the producers are key to maintaining the Fair Trade viability.

Fair Trade Coffee Certification for Producer

The FLO maintains a Coffee Producers Registry which represents democratically founded organizations for small farmers. The registry organizations are bound by the following terms:

  1. Members are small scale producers of coffee that are not dependent on hired labor or are managing their farm mainly with themselves and their family as the labour force.
  2. As an organization the members participate in the decision-making of general strategies, destiny or additional resources and any results from operating in the framework of the Fair Trade Certification.
  3. Secure management and administrative transparency through effective control by the members and its Board to minimize the risk of fraud and the provision of the necessary instruments to be able to act adequately in case of fraud.
  4. The organization adopts a philosophy based on the concept and practice of solidarity.
  5. Political, racial, religious or sexual discrimination is neither practiced nor tolerated.
  6. The organization is open to new members.
  7. The organization is independent of all political parties and guarantees against becoming an instrument of any political party or interest.
  8. The Organization shares the FLO International principles and general objectives inscribed in the Producer’s Register.

We Think That the Fair Trade Coffee Agreement Creates Better Coffee

The thing about Fair Trade is that the buyers and sellers are bound by fair and equitable agreements. Through the elimination of middlemen, the farmers can produce top quality coffee without the fear of financial ruin through credit that costs more than the coffee pays. Having access to credit, the small farmers can maintain and improve their crop and equipment, plus invest in developing sustainable coffee production.

The buyers are insured against the loss of production of coffee to farms being lost to alternate crops.  We, the consumer, get the benefit of helping the small farmers improve their lives and we get the incredibly delicious specialty coffees they produce.

Browse all of our Fair Trade coffee beans today and start supporting the small coffee farmers around the world.