Is "Fair Trade" Really Fair?

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I’ll be the first to admit – for a long time I believed that when I was buying fair trade I was actually making a difference. While that may be true in some cases, the majority of coffee farmers who participate in fair trade practices are not getting the compensation they deserve.

Most coffee farmers make just $2,000 a year. Think about how much you would be able to do – or not do – with that kind of salary. Fair trade claims to provide a “safety net” for coffee farmers by ensuring that they receive a set price per pound (no less than $1.40) regardless of the current market price. Unfortunately, in most cases fair trade practices fail the very farmers they are trying to protect.

In order to participate in a fair trade cooperative and receive the fair trade minimum, farmers must first make a significant investment to ensure their crop is up to par with minimum quality standards and have very little guarantee that their crop will be purchased for a few years until their coffee is "cupped" at a minimum score.  This is something many of them simply do not have the time or money for.

Once selected to participate in a fair trade cooperative, farmers are often beholden to the minimum fair trade price, even if the market price is significantly higher. Any additional premiums are sent back to the cooperatives to be used as an investment in their communities and in the materials and facilities the cooperatives provide for the farmers.

At this point you’re probably thinking: But aren’t they using the additional premiums to help all the farmers? Won’t this, in turn, increase the quality of the coffee? Here’s why you should think twice:

  1. A set price per pound means there is no incentive to produce higher quality coffee beans.

Think about it. Would you be motivated to produce something of higher quality if you knew you’d be paid the same amount of money for a lower quality product? It’s human nature. People will only work as hard as you incentivize them to. Although the set price has good intentions, it does nothing to ensure the quality of the coffee the farmers are producing. Do you want to pay top dollar for coffee that doesn’t even taste good?

  1. Most fair trade coffee benefits farmers who don’t need as much help.

Some of the poorest coffee-producing countries are in Africa. Yet, African coffee only accounts for 10 percent of the fair trade coffee produced each year. Why, you ask? Because the poorest farmers do not have the money to invest in their farms to become fair trade certified. It’s a perpetual cycle of inopportunity and it’s an unfortunate side effect of fair trade practices.

  1. There are too many cooks in the kitchen.

A typically coffee farmer sells their beans to a local trader. That local trader, referred to as a coyote processes the coffee and then gives it to an exporter. The exporter then sells it to an importer and the coffee is then purchased from the importer by roasting companies. The coffee is then roasted and sold to retailers who then sell it to you, the consumer. Wait, how many steps was that? Let’s break it down.


Farmer

 ⇓

Local Trader

 ⇓

Exporter

 ⇓

Importer

 ⇓

Roasting Company

 ⇓

Retailer

 ⇓

Consumer


That means there are FIVE “middle men” between you and your coffee producer. You know what that means – profit for everyone. That's not always a bad thing because a farmer would often times not be able to export his coffee without the dry mill of an exporter, and likewise a coffee roaster doesn't have time to both roast coffee and then also operate a storefront. But the cold, hard reality is that the typical profit a farmer receives is around one to two percent of the retail price of a cup of coffee at your local cafe.

Here’s where direct trade comes in. Direct trade cuts off the fat. A typical supply chain for direct trade is Farmer ⇒ Roaster ⇒ Retailer ⇒ Consumer. Sometimes, the roaster can even be the retailer. Direct trade pays the farmers what their beans are worth – usually much more than the $1.40 minimum. Most importantly, because farmers are paid based on the quality of their coffee, they have more incentive to invest in their crop and make it taste better.

Wouldn’t you support something that provided a better quality of living for the farmer and a better quality product for you? I know I would.

 

About Meaghan, our guest blogger

Between content writing, whipping up yummy recipes, and playing the piano, Meaghan is a “Jill-of-all-trades." Digital marketer by day and coffee-lover every hour in between, her greatest passion lies in providing opportunities to those most in need. Charlotte, NC has been her home base for the past four yearsa decision she will never regret.

 

Resources:

https://www.fairtrade.net/fileadmin/user_upload/content/2009/resources/2012_Fairtrade_and_coffee_Briefing.pdf

https://www.huffingtonpost.com/bruce-wydick/10-reasons-fair-trade-coffee-doesnt-work_b_5651663.html

https://ssir.org/articles/entry/the_problem_with_fair_trade_coffee

http://fairtradeamerica.org/Fairtrade-Products/Coffee

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