How fair trade is helping smallholder coffee farmers succeed
Photo courtesy of Barista Magazine
Fair Trade USA is the leading fair trade certifying body in North America, operating globally alongside the European-based Fairtrade International. Colleen Anunu, Fair Trade USA’s Senior Manager of Supply Chain, reflects on some of fair trade’s achievements and challenges, with a focus on the coffee sector. She also explains how Fair Trade USA and Oikocredit are teaming up to reduce price risks for coffee farmers.
What has fair trade achieved for smallholder coffee farmers since its inception in the late 1990s?
Fair trade has been key to helping the many farmers who have limited access to resources invest in long-term quality and productivity and build resiliency in the face of global threats like climate change. According to Fair Trade USA’s assessment, coffee producers around the world benefited by about € 315 million (US$ 370 million) from fair trade’s minimum price and premium from 1998 to 2016. This has enabled them to strengthen their organizational capacity and democratic decision-making, train their members, promote financial literacy and female empowerment, and support community development projects.
How has fair trade generally, and Fair Trade USA in particular, developed in recent years?
Fair trade has become a stronger and more vibrant presence in global trade, linking companies and consumers worldwide. Thousands of brands and products from farms and factories in more than 70 countries are now fair trade certified. Fair Trade USA has played its part, such as by helping develop markets for fair trade clothing and sea food and encouraging the sale and promotion of fair trade produce by towns and universities.
How is climate change affecting coffee growers? How can fair trade help?
Climate change is having a major impact through rising temperatures, the spread of diseases and increasing land pressure. Coffee leaf rust has ravaged Central America, devastating crops in El Salvador, Mexico, Guatemala, Honduras and elsewhere. The disease peaked in 2014 but two years later was still affecting the size and quality of coffee harvests. Fair Trade USA developed a Rust Response Fund to finance growers for replanting. Many cooperatives are devoting most of their available resources to replanting, maintenance and training. Fair trade’s minimum price and premium provide crucial support for growers’ livelihoods in the face of climate change.
What is the role of social lenders like Oikocredit in supporting economic sustainability for coffee producing organizations?
Social lenders like Oikocredit have a key role. Their money makes it possible for higher-risk producers in vulnerable locations to market their coffee. Oikocredit’s agricultural finance supports an innovative ‘triangulation’ mechanism by generally providing coffee producers with around 60% of the finance for each contract, after which the buyer repays the loan to Oikocredit.
Fair Trade USA, Oikocredit and others have launched a price risk management project for Latin American coffee cooperatives. Can you tell us more about this project?
Coffee contracts can disadvantage smallholder cooperatives because buyers and roasters need to fix prices in advance. When a cooperative has accepted a lower price from a buyer than the current rising market price, it cannot buy as much coffee as planned from its members. The price risk management project* aims to increase partners’ capacity to hedge against coffee price volatility and reduce farmer livelihood risk. Operated by Oikocredit on behalf of the Inter-American Development Bank, Keurig Green Mountain, Catholic Relief Services and Fair Trade USA, the project trains and lends to producer organizations, enabling them to insure themselves against potentially damaging coffee price movements.
What are some of the main criticisms of fair trade, and how is Fair Trade USA addressing these?
Sometimes we hear from buyers and roasters that fair trade is expensive, especially when the coffee market is well below the fair trade minimum price of $1.40 per pound. Our research has shown that in a low market the fair trade minimum price covers operating costs and depreciation, while producers use the premium to offset rising costs and achieve long-term viability. The premium is the additional money paid above the minimum price that farmers and workers invest in projects to improve their businesses and communities.
Another thing we hear is that fair trade isn’t doing enough. But as powerful and transformative as fair trade can be, it’s not meant to be the only solution to every global problem. Instead it aims to level the playing field for the most vulnerable actors in the supply chain, and to create shared value. It helps producers implement best practices and access critical resources and trainings, and it supports farmers and workers in addressing their needs on their own terms. Fair trade is part of a much bigger, multi-stakeholder solution to the major challenges we face – hence Fair Trade USA’s focus on cross-industry partnerships, like the one with Oikocredit and others involved in the price risk management project.
*You can find more on the joint price risk management project via Oikocredit’s website, here.