When we coffee enthusiasts pay a premium to give coffee farmer’s a little more income, are we really helping them in the long-run?
Gaining in popularity, consumers often reach for Fair Trade coffee, or at least wonder if they’re doing something better for the world by buying Fair Trade beans.
Few people know that the Fair Trade model is broken, and mostly because it hasn't changed very much since Fair Trade was created.
Many former advocates of Fair Trade, (including me), know that coffee being marketed and sold as Fair Trade is often different than the coffee being produced.
It doesn't take much digging to find out why Fair Trade Coffee isn’t today living up to its most important promise: To sustainably reduce poverty. I'd even argue that Fair Trade may be keeping coffee farmers behind the curve, even as coffee grows as a hot commodity (no pun intended).
Fair Trade is a certification model for all kinds of things, including coffee.
Producers who meet specific Fair Trade certification requirements — labor, environmental and production standards — get paid an above-market “fair trade” amount for their coffee.
The organizations that certify Fair Trade include the FLO, the Fair-trade Labelling Organizations International, and Fair Trade USA, the American standards and certification arm of FLO.
There are 31 pages of standards from farm size, to reporting, to specifications on how coffee is handled and labeled, which I won't get into in this article.
In theory, Fair Trade certification should empower growers and drive sustainable growth of coffee.
But does Fair Trade really help coffee farmers? Is Fair Trade really 'fair'?
Watch this short video to learn more about some of the criticisms of Fair Trade:
What Is The Problem With Fair Trade Coffee?
A big problem I have with Fair Trade is that the organizations claiming to have helped farmers of coffee don't have a lot to show for it.
FLO and Fair Trade USA have not been able to show that Fair Trade has a long-term, positive impact on the livelihoods of coffee growers or the coffee market with real data.
While their missions claim that they “use a market-based approach that empowers farmers to get a fair price for their harvest, produce a decent living wage, and guarantees the right [for growers] to organize,” (all good things for coffee farmers) the Fair Trade system limits market potential and benefits of coffee growers and workers.
And the Fair Trade System hasn’t changed much since it started as a movement to adapt to new market pressures and standards.
Don't get me wrong. The mission of Fair Trade is awesome.
The purpose is that we make a concious investment in small-scale farmers of coffee in more than 30 countries.
According to FLO, “around the world, 25 million smallholders produce 70-80 percent of the world's coffee, which is one of the reasons why Fair Trade focuses its efforts on small producer organizations.”
But Fair Trade has proven to have specific drawbacks, for coffee, the consumer and farmers who want to grow.
Here Are My Top 3 Problems With Fair Trade Coffee
It’s no surprise that the premiums that coffee drinkers like you and I are paying for Fair Trade are not going directly to growers, but are used to maintain cooperatives and the Fair Trade model that growers participate in (and benefit from).
The quality of Fair Trade coffee is inconsistent and often poor compared to other specialty coffees in the same price range.
Fair Trade as a model hasn’t innovated with technology to make the process and rewards for farmers and coffee meant to be maintained and achieved with Fair Trade possible or up-to-date.
Fair Trade has gone from a social justice movement managed by non-profit organizations seeking to change the the ownership of coffee production to a marketing ploy that makes people feel good about buying coffee (see: Ethical Consumerism).
We're kidding ourselves if we think that buying Fair Trade means helping coffee farmers find more opportunity and scale their businesses.
Fair Trade Coffee Isn't Better Quality Coffee
When we buy Fair Trade, we assume a certain coffee quality. The expectation is that the quality of the coffee is higher than other options on the shelf, but this is typically not the case.
Here’s why: Getting a Fair Trade certification means the price of coffee beans is guaranteed by the buyer.
It does not mean that a percentage of the purchase price of coffee, the price you and I pay, is given to the farmer. It also doesn’t mean that the coffee is good.
Here’s how that price-setting works: The biggest way that FLO and Fair Trade USA try to support coffee farmers and coffee sustainability is by setting a “price floor”.
A price floor is a limit on how low a price can be charged for a product, in this case coffee.
So, when FLO fixes a price floor of a pond of green coffee beans, they also index that floor to the NY Coffee Exchange price.
When the price of a pound of coffee beans rises above the price floor FLO set, the Fair Trade price paid is always a higher than the price for commodity coffee.
My issue is that commodity coffee is graded in order to make sure the quality of coffee is standardized, no matter where the beans are from.
Coffee of one grade is going to be the same quality as coffee beans of the same grade from somewhere else, right?
So I know when I buy specialty coffee, that I'm buying high grade , quality beans. It's what I pay for.
How does this relate to Fair Trade?
Well, Fair Trade certified coffee can come in any quality grade, but is by default considered to be part of the specialty coffee market.
Farmers’ coffee beans can be a range of quality and not all can be sold as Fair Trade because the number of buyers for Fair Trade is limited.
So, farmers will certify and sell lower quality beans at the higher Fair Trade price in the specialty coffee market so that the farmer can guarantee the Fair Trade price (price floor).
They will also sell their higher quality beans at market value, but many will invest more in Fair Trade for the immediate benefits and financial gains.
I don’t blame the farmers for this. They’re just trying to make a living!
But as a result, if a farmer knows that they can sell lower quality beans at a better price than higher quality beans, they may invest more resources into producing more lower quality beans — Fair Trade coffee quickly becomes consistently lower quality coffee for you and I.
I know Fair Trade is about helping farmers, but I'm essentially paying more for lower quality beans at no benefit to the farmers and I have a problem with that.
A Vicious Cycle For Fair Trade Coffee Farmers
A vicious cycle kicks in especially when price of coffee continues to sky-rocket year over year.
And it’s this same growing market ceiling that is also limiting farmers who are making just ‘okay’ coffee today that could not be sold in the open market and make the same money.
The Fair Trade price becomes a ceiling and Fair Trade cooperatives get stuck needing to sell their beans as Fair Trade over time, where they could be making a lot more over time by investing in the development of quality beans and competing for consumer’s tastes.
The Fair Trade Model that is meant to protect farmers’ labor in cooperatives, ends up limiting their potential for business growth in the coffee industry.
While private companies invest in specialty and high grade coffee and can compete to increase earning potential in the open market, Fair Trade farmers are protected, but aren’t able to set themselves up for growth.
And then, even more of a problem is that companies have caught on to the marketing potential of selling Fair Trade.
Well-intentioned people are demanding Fair Trade so corporations have jumped on the band wagon.
Companies like Starbucks and Peet’s sell Fair Trade coffee through cooperatives they’ve organized, with the same issues I’ve discussed above, except they’re able to mark up the coffee they’ve bought for resale.
The Fair Trade Foundation claims that, “Fair Trade is about ensuring that farmers get paid enough to cover the cost of their labour and allows them to invest in improvements.”
They don’t help farmers control production process and are not responsible for the marketing of their products, which puts these things in the hands of companies (the buyers).
These are the same things that control company’s profits, which farmers don't get to benefit from.
In one study of 12 research sites in Ethiopia and Uganda, the study found that non-fair-trade certified farms paid better wages and provided better working conditions than fair-trade certified farms.
“If you are interested in trying to make a difference in the lives of the very very poorest–the most poor–then you need to pay attention to wage labor,” says Christopher Cramer, study co-author.
What Are Better Alternatives To Fair Trade Coffee?
Can we make a bigger impact in the lives of coffee farmers? Could we be making a bigger contribution to their livelihoods?
I am not suggesting that we shouldn’t care about farmers, or that trying to help farmers is lost on us.
What I am saying is that today, we should work to improve the models that exist to help make better coffee and make the lives of coffee growers better.
While there are a lot of articles out there that criticize or promote Fair Trade, I think few of them really offer up solutions or alternatives to what the average coffee lover can do to to help coffee and coffee farming in the long-run.
Some Effective Alternatives to Fair Trade Coffee
- Instead of buying Fair Trade, which is more expensive than non Fair Trade products, give the money you save to charities that actually help coffee farmers build and grow business, like The Coffee Trust.
- Learn more about buying direct! Third-wave coffee is becoming more popular, and coffee buyers like Counter Culture Coffee, Intelligentsia and Stump Town Coffee Roasters are making this possible.
- Pressure Fair Trade to improve their standards and opportunities for farmers by contacting them. In response to criticisms around the Fair Trade model, improvements have been made in recent years like allowing for larger farmers to certify Fair Trade so there’s opportunity for them to scale.
If we want to improve the relationship between the coffee we’re buying and how it’s produced, then we’re going to need to start pressuring suppliers to know more and do more, with our buying power.
Maybe we can have it all: More coffee, better coffee, and a better world for everyone.
**(In this article, the term Fair Trade coffee refers to coffee that has been certified as “Fair Trade” by FLO or Fair Trade USA; the term Fair Trade refers to the certification model of FLO and Fair Trade USA; and the term fair trade refers to the movement to improve the lives of growers and other producers through trade.)