Millions of people worldwide begin their days with coffee. Here in the United States, many people willingly spend five dollars for a coffee drink at retail coffee shops, while connoisseurs may spend dozens of dollars per pound of select coffee beans. Since 1995, coffee consumption in the United States has increased substantially (Buzby and Haley, 2007), paralleled by the rapid expansion of retail coffee chains, including Starbucks, a chain that expanded from less than 500 locations in 1992 to over 16,000 locations and nearly $10 billion in sales in 2009 (Starbucks Corporation, 2009; Thompson and Strickland, 1999.). Despite the popularity and profit associated with coffee consumption, coffee growers often do not receive a competitive wage (Valkila, 2009, p. 5). The global coffee industry is structured in a way that means coffee farmers often have no choice but to accept whatever price intermediaries such as wholesalers and roasters are willing to pay. Frequently, coffee farmers earn only a tiny portion of the money consumers spend on coffee in the Global North, while wholesalers, roasters, and retailers earn much larger portions (Francis, 2006).
The Fair Trade movement is an effort to improve the income of farmers in the developing world by linking socially conscious consumers in the Global North with producers, distributors, wholesalers, and others who engage in socially progressive farming in the Global South. Fair Trade aims to provide producers in the Global South with a stable and fair price for their commodities, create more positive agricultural labor practices, develop democratic and empowering producer cooperatives, and promote environmental sustainability (Hanson and Terstappen, 2009, p. 4). Fair Trade is an attempt to build more direct links between consumers and producers that provide the latter with greater benefits from the marketing of their products than conventional production and trade have allowed, while breaking down the traditional alienation of consumers from the products they purchase (Murray, Raynolds, and Taylor, 2006, p. 7). Coffee is a commodity on which Fair Trade organizations have focused considerable effort to improve farmer incomes. According to Laura Raynolds, “Research suggests that in alternative food arenas—such as Fair Trade, organic, local, regional appellation, and slow foods—products, trade relations, and enterprises are differentiated and legitimated according to conventions rooted in personal trust, attachment to place, and social and ecological welfare concerns” (Raynolds, 2009, p. 2). In other words, consumers often purchase Fair Trade foods because they trust that the higher price they pay directly supports their social justice principles, including equitable incomes for farmers. The purpose of this paper is to assess: Does fair trade coffee improve the lives of the coffee producers?
What is Fair Trade?
To better understand Fair Trade coffee, it is necessary to have background on how coffee is moved from the farm to the consumer. Coffee is a plant cultivated only in tropical regions. Significantly, most coffee-growing countries are developing economically; many people in these countries experience profound poverty, which can contribute to environmentally unsustainable farming practices.
There are two primary coffee varieties—Arabica and Robusta. Farmers in Latin America, Ethiopia, and Kenya have historically cultivated most of the Arabica beans that are generally considered of higher quality and sold to specialty markets at slightly higher prices than robustas. Brazil, Vietnam, and Uganda produce most of the world’s Robusta coffees (Bacon, 2005, p. 10). According to the International Coffee organization, the top four coffee-producing countries are Brazil, Vietnam, Uganda, and Colombia. These countries are the top exporters of the Robusta variety of coffee bean, which is used primarily to supply large producers of low-cost roasted coffee, including brands such as Maxwell House (produced by Kraft), Nescafé (produced by Nestlé), and ButterNut (produced by Sara Lee). In contrast, Arabica beans are used to produce the higher-cost coffees sold by most retail cafés.
Arabica beans are the focus of Fair Trade initiatives, because consumers have shown they are willing to pay a premium price for Arabica coffee. Since Arabica coffee is already a high-value commodity, many coffee retailers and roasters have focused on developing value-added Arabica markets. The success of Fair Trade initiatives depends upon the willingness of consumers to pay more for products that are explicitly labeled as providing social benefits, such as poverty eradication. As with other forms of social marketing, the higher price of Fair Trade goods does not necessarily denote higher quality, but adds value by enabling the consumer to purchase social benefits. Capitalizing on the increased concern of consumers in the developed world for the working conditions in developing countries, as well as the potential of free trade to marginalize poor producers worldwide, social marketing allows consumers to choose products based on how these are produced (Basu and Hicks, 2008, p. 3). In fact, the largest and fastest-growing share of Fair Trade certified coffee is now being sold by ‘‘market-driven” firms which are primarily motivated by increasing market share rather than by promoting the Fair Trade mission, which has proven an effective social marketing strategy. With its mainstreaming, Fair Trade coffee has become an increasingly important product for giant coffee retailers, like Starbucks, Procter and Gamble, and Nestlé, and supermarkets, like Tesco and Costco. These market-driven companies source their coffee from commercial importers and may roast their own beans (Raynolds, 2009, p. 7).
Despite the global importance and value of coffee, coffee farmers often remain impoverished while coffee retailers profit. Fair Trade attempts to increase the share of profits gained by farmers, and Fair Trade initiatives mostly focus on agricultural commodities produced in the Global South and consumed in the Global North. Fair Trade is defined broadly as “a trading partnership based on dialogue, transparency and respect that seeks greater equity in international trade” (World Fair Trade Organization, n.d.). Using a set of international standards for both producers and traders, Fair Trade attempts to counteract the inequities associated with neoliberal economic and agricultural policies, and to minimize the impact of fluctuations of the market in commodities such as coffee, tea, and cocoa. Fair Trade initiatives often begin with small producers who establish cooperative associations to gain an edge in dealing with middlemen in the selling of coffee from farmers to consumers. Between farmers and consumers, there are several intermediaries in the global coffee economy, including exporters, wholesalers, importers, roasters, and retailers, each of which gain increasing profit relative to the farmers. Sometimes, farmer cooperatives are able to eliminate some of these middle stages by taking on additional roles. Indeed, a key part of the Fair Trade mission is to promote closer relationships between suppliers and buyers. Third-party organizations certify the income-sharing practices of participating farmer cooperatives, thus providing some guarantee to consumers that the higher price of Fair Trade coffee does contribute to more equitable business relationships. For farmers, participation in Fair Trade production often means a fixed and relatively high price premium, particularly noticeable and important during periods of price depression (Muradian and Pelupessy, 2005, p. 10).
In recent years, international coffee prices have declined to a hundred-year low when adjusted for inflation (Lyon, 2007, p. 3). During the 1990s and 2000s, coffee farmers were devastated by this price decline. Many Latin American producers who are not involved in Fair Trade production have abandoned their crops and land since the price they receive for coffee does not even cover the costs of production (Raynolds, 2002, p. 5). In contrast, Fair Trade agreements have helped reduce the income loss participating farmers experienced. For instance, at the height of this crisis, during the 2001–2002 coffee harvest, the cooperative Guatemalan Fair Trade farm group was paid US$1.41 per pound for Fair Trade coffee (Lyon, 2007, p. 4). At the time, this price was double that paid to non-members by local buyers. This higher price would have been impossible without Global Northern consumers who are willing to purchase Fair Trade coffee, even when the sale price is higher than that of conventional varieties. The higher income enabled members to continue repaying their debts, maintain their standard of living, retain their landholdings, and pay for their children’s education during a period in which many non-members were forced to sell their land and withdraw their children from school. Nonetheless, many cooperative members feel that the Fair Trade price, while higher than that for conventional coffee, remains inadequate (Lyon, 2007).
Is the Fair Trade Price Fair?
How does the price paid in the United States for a quality cup of coffee compare with the wage earned by a small coffee farmer? According to TransFair USA, a Fair Trade certifying organization in the US, the Fair Trade average price per pound was $1.69 in 2009, which was well above the minimum price paid to coffee producers globally (TransFair USA, 2009). This is the market rate, which is paid to farmers’ cooperatives. While this price is up to twice what farmers earn for non-Fair Trade coffee, it is important to remember that the small farmers who often participate in Fair-Trade cooperatives individually produce relatively little coffee. These farmers remain in poverty despite being connected to Fair Trade organic markets (Valkila, 2009, p. 7). Fair Trade coffee does improve the income of farmers across the world, though only marginally. Many farmers understand their experience with Fair Trade as providing improvement, even though they see their share of the global coffee economy as remaining unfair (Francis, 2006).
Additionally, even though many farmers’ groups want to be involved with Fair Trade production, it is often hard for producers to gain the attention of the largest coffee roasters who pay the highest prices for coffee. Market-driven companies like Starbucks are often criticized for their secrecy in product assessments, since it undermines cooperative efforts to create transparent price and quality specifications for their members. Transparency is central to trade relations with mission-driven and quality-driven buyers (Raynolds, 2009, p. 9). The proliferation of sustainable certification programs, including Utz Kapeh (now known as UTZ Certified which is a program that focuses on social and environmental aspects for coffee growers around the globe), Rainforest Alliance (which focuses on helping growers produce coffee plants with sustainability in mind), Fair Trade, organic, and Starbucks’ CAFE Practices (which guarantees that Starbucks will pay above market price for its coffee and directly improve the infrastructure of the producers’ plantations), has resulted in new opportunities, benefits, costs, and complications for small farmers and their organizations (Bacon, Mendez, Flores Gomez, Stuart, and Diaz Flores, 2008, p. 15). Many coffee buyers want to establish their own certification systems rather than relying on independent certification organizations, a strategy that can reduce the ability of farmers to pursue the types of production and marketing they envision. In such cases, however, coffee roasters or retailers can challenge certification norms directly by setting up “captive certification” programs that may mimic public-standards-based certification yet dispense with key aspects that are considered undesirable. In these instances, firms challenge the public character of production space and use economic power to shape nominally independent production practices (Mutersbaugh, 2005, p. 3).
Does it matter to farmers whether Fair Trade certification is determined by an independent, third party or if Fair Trade is self-certified by large roasters or retailers? According to Sarah Lyon, “Not all fair trade coffee roasters are equally committed to these tasks nor is the producer-roaster relationship universally positive. However, there are multiple studies demonstrating that many fair trade groups receive extensive assistance from their Northern coffee roasters and that this assistance helps them produce a higher quality product and secure their long-term market access which in turn bolsters their community development efforts” (2007, p. 7). Often, large roasters or retailers that self-certify Fair Trade production simultaneously seek other social marketing strategies, by encouraging or requiring various forms of environmentally sustainable production. In particular, many Fair Trade coffee initiatives also encourage shade-grown production, in which indigenous rainforest trees are maintained in coffee orchards to provide habitat for birds and other wildlife. Farmers’ incentives for maintaining shade trees are diverse, but in the end this complement to Fair Trade production can further increase farmer incomes (Bosselmann, Dons, Oberthur, Smith Olsen, Ræbild, and Usma, 2009, p. 3). Of course, environmentally sustainable production does not guarantee equitable business relationships in the same way Fair Trade production does, and the added value of environmentally sustainable production does not always benefit farmers significantly (Mutersbaugh, 2005, p. 10).
Conclusion
The benefits of Fair Trade coffee for small coffee farmers are not conclusive, but there is evidence that Fair Trade initiatives have helped improve farmers’ incomes. Fair Trade has provided increased economic stability to participants, which has in turn led to improvements in productivity and the quality of small-producer coffee. Farmers’ families have also benefited, for instance through greater access to education for their children. Many indigenous farmers also saw Fair Trade as an important vehicle for cultural revival, most notably in the cases of the Tzotzilotic and La Selva cooperatives in the southern Mexico state of Chiapas, and the La Voz cooperative in the Guatemalan highlands (Murray, Raynolds, and Taylor, 2006, p. 9).
The future challenge will be to maintain Fair Trade’s commitment to trade equity and human rights while also continuing Fair Trade coffee’s consumer market growth. Certainly, the entry of retail giants into Fair Trade coffee will help increase its market share, but it remains to be seen whether the participation of these giants in Fair Trade will weaken the mission of equity and human rights promotion.
In any case, Fair Trade has helped enable some small-scale producers to survive the coffee crisis of the 1990s and 2000s. These farmers have stayed on their land, stayed in their communities, and even experienced a degree of prosperity. Through access to Fair Trade markets, these farmers have been able to sell their coffee at prices more than double the street price paid by local buyers, who often have predatory business practices yet are the primary means of access to the global coffee market for most small producers (Murray, Raynolds, and Taylor, 2006, p. 9). Fair Trade price guarantees have meant the difference between survival and bankruptcy for many small-scale coffee growers. In the words of one Latin American coffee farmer, “We are able to keep producing because of the more favorable Fair Trade price. We are able to provide food and clothes for our families, even medicine. The children still attend school. We are not rich, but we are moving forward” (Raynolds, 2002, p. 10).
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