Is Fairtrade ‘fair’ to farmers?

23-01-2015 Coffee culture

Today we’re talking Fairtrade… and specifically about the ‘fair’ in the ‘trade’.

The term ‘fair trade’ and the “Fairtrade” brand have become much more well known in recent years, but maybe less understood. A fair trade between consumer and producer of course represents the holy grail of production, farming and trading best practice, a transformational approach that has the ability to improve the condition of the farmers and workers in poorer producer countries. But the attempt to achieve this through the Fairtrade Organisation and the ideas behind it have also been the subject of much criticism due to the range of controversial issues it raises.

The scheme was originally set up with the idealistic mission of providing “better prices, decent working conditions, local sustainability and fair terms of trade for farmers and workers in the developing world”. Farmers who pay for Fairtrade certification are assured a minimum price for their beans – which can never fall below market level – and a premium on top to invest in their communities.

Before going on, we should point out that Fairtrade is not a system Jones Brothers Coffee supports and for some good reasons. The reality is that many of us consumers pick up items in the supermarket on sight of the Fairtrade symbol. We believe that somehow this means we’re contributing more directly to the farmers and workers in the developing world. But, at Jones Brothers we believe, like many others, that the Fairtrade system could easily be renamed “Unfair-trade”.

Here’s why. Very often, brokers, coffee suppliers and particularly retailers just see Fairtrade items as a reason to raise prices higher to the consumer in order to generate greater profit for themselves. There is no regulatory or enforcing body in place to ensure that a percentage of the additional profits generated are returned to the farmers. Put simply, by buying Fairtrade, the ‘good’ you are doing is often just the lining of the retailers pockets.

Secondly, the Fairtrade system guarantees a minimum price for farmers, but not a minimum quality – so Fairtrade labelled coffee can often be of lower quality. The humble coffee bean is a commodity with prices moving up and down on international markets, and as such market prices can often be above the guaranteed minimum price from Fairtrade, as coffee buyers are buying based on quality at market rates.

This means that Fairtrade coffee continues to occupy a very low percentage of overall traded coffee! This is paricularly acute in a situation of rising market prices, the result for example of drought and lower crop yields in big coffee growing countries like Brazil, the world’s biggest producer and exporter. The Fairtrade system becomes practically null and void when their lower quality coffees are competing on the commodity market at the same price.

So the Fairtrade system very often offers little security to these farmers, who can become locked into the system. Or, the benefits are focussed around just a select few farmers who grow bigger and then are able to unfairly compete against their neighbour.

And Fairtrade certainly doesn’t provide a long term safety net to help poorer farmers earn a better living. Because if prices rise, then volumes for these certified farmers could fall.

Fairtrade has been accused by many as an example of western society feel-good tokenism that holds back modernisation in developing economies.

This topic is huge of course, generating strong opinions on both sides of the argument but at Jones Brothers we feel there are better alternatives that contribute more directly to the long term welfare of farmers and their families.

Here are some key points for you to consider:

  • Most consumers are willing to pay more for Fairtrade products in the belief that this helps the farmers. Sadly, not all of this premium reaches the farmers!
  • The Fairtrade Foundation does not monitor how much more money retailers charge for Fairtrade goods or how much money actually reaches the farmer.
  • Retailers almost never sell identical Fairtrade and non-Fairtrade lines side by side, so it is rarely possible to determine how much extra is being charged by them as a premium.
  • Fairtrade farmers are forced to sell through cooperatives, which in many countries are often inefficient or corrupt. They cannot choose the buyer who offers the best price or switch when their cooperative is not performing.
  • Fairtrade is undoubtedly profitable for traders in rich countries. In fact, it’s even aimed at richer farmers: in order to join Fairtrade, cooperatives must meet quality and political standards which means their farmers must be relatively skilled, educated and well capitalised. There is no room for the many smallholder farmers to be part of this system.
  • The majority of Fairtrade suppliers are in the higher income or middle income Third World countries, such as Costa Rica and Mexico, with relatively few in the poorest countries. Mexico has 70 times the GNP per head of Sierra Leone and much larger coffee farms. Is the focus of Fairtrade really on the poorest farmers?
  • Fairtrade reduces the incentive to diversify crop production and encourages the utilisation of resources on marginal land that could be better employed for other produce.
  • Fairtrade coffee farms are not required to employ any full-time workers.This means that during harvest season migrant workers are often only employed on short-term contracts. These rural poor are therefore expressly excluded from the stability of long-term employment, a condition Fairtrade has not sought to change.

Here at Jones Brothers Coffee, we buy Specialty Graded coffee, sourced direct from the farmers and quality producers. This coffees is priced higher than commodity coffee and Fairtrade coffee due to its higher quality. We also actively support UTZ Certified (www.utzcertified.org), which is based on the principles of long term sustainability of farmers, traceability, social and agricultural policies to improve quality and living standards. By not focusing only on price, it eradicates many of the flaws of the Fairtrade system.

Just remember one thing:

The next time you find yourself browsing the shelves at the supermarket, think twice before picking out the item with the Fairtrade logo. It might try to swing your moral compass but hopefully, you know now better!

Love what we brew!

The Bean Team