SEATTLE, Washington – In the last few years, the presence of fair trade coffee in the United States has exploded. Local cafes have started offering the product and some universities have even restricted coffee supplies to fair trade only. However, though many people think their extra out of pocket costs are going to ensure the living wage of a farmer in South America, fair trade coffee is actually now attributing to increased poverty due to low prices.
In Central America, Peru and Mexico, approximately 30 million 132-pound bags of beans are sold every year, but in this country, poverty among coffee farmers is the most severe. The current price for each bag is about $110, while the head of the Peruvian Chamber of Coffee and Cacao estimates that at least $130 per bag is needed to offset costs in the short term, while $160 per bag would sustain the farms in the long term. Such a discrepancy in price makes one wonder if $3 for a cup of coffee from Starbucks is really that steep after all.
As opposed to fair trade farmers, the market dictates non-fair trade farmer’s prices. As the price of coffee goes up, so do prices. Fair trade farmers are guaranteed a profit of at least $1.40 per pound for following strict labor and environmental standards as dictated by NGO Fair Trade International. However, according to Kenenth Lander, founder of THRIVE Farmer’s Coffee, many of the farmers who need the additional income the most are not offered prices above $1.40 per pound. “A majority of these farmers are based in rural regions of developing nations, so those who grow it are not given a fair wage because they are not connected to anyone near the consumer,” said Lander.
The price of coffee for December is expected to decrease event further, dropping an additional two percent to a mere $1.015 a pound. According to the Wall Street Journal, December’s price will be the lowest trade on ICE Futures U.S. exchange since 2006. This year alone, prices have fallen nearly 30 percent.
Despite the lower prices, many coffee retailers are not lowering prices. Most Americans are oblivious to the market price of coffee, and thus, continue paying prices they see as normative. Some retailers, including Starbucks, have actually increased prices. This situation benefits retailers and coffee farmers who can produce below market prices, but leave fair trade farmers with little price flexibility in a cycle of poverty.
Many have recognized the contribution of the fair trade industry, primarily in helping bring awareness to the economic conditions of global coffee farmers, but have abandoned buying from fair trade sources because they see it as a flawed model. Peter Giuliano, co-founder of Counter Culture Coffee, has stopped purchasing fair trade coffee due to its failure to live up to promises of reducing poverty.
Critics of the fair trade model that has flourished in the past decade are few, primarily because of the model’s worthy mission, but dirt-cheap prices have exacerbated its flaws. Organizations such as TechnoServe are developing new models, focusing on quality production and farm management to increase farmer’s ability to grow a quality product and find better buyers. As alternative models evolve, it is important for consumers to remember that fair trade is not a panacea for the economic woes of coffee farmers, but can be improved if pressure is administered to improve the system.
– Jamison Crowell
Sources: Stanford Social Innovation, The Nation, Market Watch, Christian Science Monitor, The Reporter, Huffington Post