May 15, 2011 Nathan

Think before you Fairtrade: Why Fairtrade Coffee isn’t all it’s cracked up to be

Would you still drink Fairtrade Coffee if I told you you were actually doing more harm to the poorest of coffee farmers than good? I’m guessing probably not.

Ethical coffee is a good thing. Coffee labourers have been mistreated and underpaid for years. Some plantations rely on the modern equivalent of slave labour. But Fairtrade, though it has incredible market recognition in the ethical coffee field, is not the solution it claims to be. Plus, there’s a better option that doesn’t come with a certificate. Relationship coffee.

A Fairtrade Infographic

Bigger Version.
Via Good. Who want you to buy Fairtrade.

I’d suggest that while Fairtrade is a good baseline for ethical thinking, it’s the floor, not the ceiling, so far as looking after coffee workers is concerned. And there are some serious economic and social ramifications to adopting the model that you may not have considered.

This article explores some of the downsides to Fairtrade from the perspective of somebody in the speciality coffee industry.

“The fair-trade business is filled with contradictions.

For starters, it discriminates against the very poorest of the world’s coffee farmers, most of whom are African, by requiring them to pay high certification fees. These fees — one of the factors that the German study cites as contributing to the farmers’ impoverishment — are especially perverse, given that the majority of Third World farmers are not only too poor to pay the certification fees, they’re also too poor to pay for the fertilizers and the pesticides that would disqualify coffee as certified organic.

Their coffee is organic by default, but because the farmers can’t provide the fees that certification agencies demand to fly down and check on their operations, the farmers lose out on the premium prices that can be fetched by certified coffee.

To add to the perversity, it’s an open secret that the certification process is lax and almost impossible to police, making it little more than a high-priced honour system. Although the certification associations have done their best to tighten flaws in the system, farmers and middlemen who want to get around the system inevitably do, bagging unearned profits. Those who remain scrupulous and follow the onerous and costly regulations — another source of inefficiency the German study notes in its analysis — lose out.”

That’s a small picture of some of the problems. Part of the problem with Fairtrade is that they have done such a great job of capturing the zeitgeist of the movement towards ethical consumption. We want to drink coffee with a clean conscience. Fairtrade recognised that (and they want to provide a better life for farmers, I have no doubt about that). But now better alternatives are emerging, but they’re not “Fairtrade” they’re just fair trade.

More from the article…

“The contradictions extend to consumers of coffee in the West. Several years ago, I received a call from a church in Kingston, inquiring whether Green Beanery could supply it with freshly roasted fair-trade coffee on a weekly basis.

Along the way, the church officer mentioned that the parishioners wanted to do what they could to help poor farmers in the Third World. I replied that I’d be happy to supply the church, but I also advised him that fair-trade coffee would not help the poorest of farmers — these smallholders are actually hurt when Western consumers forsake them for coffee produced by better-off farmers who can afford the certification fees.

I also mentioned that various coffees produced by small farmers in some of the neediest parts of Africa would taste superb while costing the church less, allowing it to spend the difference on some other worthwhile cause.

After a long pause, the church official replied something like: “I still think the parishioners would feel better knowing that they were drinking fair-trade coffee.”

Some believe that certified coffee is superior in some way. It is not. The small-scale farms whose local ecologies produce distinctive, niche coffee beans can’t operate on a scale that would justify official certification. As the German study notes, “Certified coffees have distinct production and marketing systems with different associated costs than the conventional system.”

The Economics of Fairtrade

Certification programs are bad for people who don’t take part. That’s the reality of Fairtrade economics. Here’s a 2009 article about the economic side of Fairtrade

“But by messing with the central laws of economics—supply and demand—it ends up doing more harm than good (just like American and European subsidies do, in different ways). Farmers are forced to keep growing particular crops without regard to how much actual demand there might be for them. Minimum prices yield oversupply, which sends global prices downward—hurting farmers who don’t take part. Fair-trade farmers have no incentive to grow crops that would fill actual demand and that would, in the long run, help the economies of their countries.”

Direct Trade
In my opinion, for what it’s worth, the real leaps and bounds in ethical coffee supply are being made in the field of direct trade, or relationship coffee. Where roasters, or specialty coffee hunting companies, forge real, long lasting and committed relationships with a farm, or a handful of farms, agreeing to pay a premium price for premium quality. Cutting out the middle man. Ensuring the farmer is meeting whatever ethical parameters are set in contracts, and producing a better quality outcome for people at both end of the process.

Intelligentsia Coffee in the US made this presentation to Google about the benefit of direct trade.

Some (oldish) background on Fairtrade

Fair trade sets a price for farmers above market value for farmers who agree to meet certain conditions (like paying their workers, joining a co-op set up, not using pesticides… etc). Direct trade is where coffee roasters strike deals with farms which ensure a quality income and quality output are much better for the farmer and the end user. You. The drinker.

Here’s a description of the issue Fairtrade aims to solve. A glut of producers have moved into the market and flooded the world with sub par coffee at cheap prices. Traditional coffee producers lose out, because coffee production is suddenly a worthwhile industry…

The problem is what is known as the international coffee crisis. Simply put, there’s too much cheap coffee flooding the market these days. It comes from countries such as Brazil and, more recently, Vietnam, which have been using massive agribusiness techniques. Record low coffee prices have devastated long-standing coffee producers such as Guatemala. Coffee was once the country’s No. 1 source of cash — now more money comes from emigrants sending money home from the United States.

Here’s what this situation means for coffee producers (from an article from 2003):

  • Between 1985 and 1995 coffee proceeds getting to countries of origin from the US fell by 40% – from 38 cents of every dollar spent to 23 cents.
  • In that time the retail price of coffee increased by more than 30 percent.
  • Coffee now fetches less than one sixth of the market price it did ten years ago.
  • In Central America alone, as many as 600,000 coffee farmers and workers have lost their jobs as a result of the coffee crisis.
  • The coolest bit about this article is the little program that lets you decide how much money you think each entity in the coffee process should get from every coffee dollar you spend…

One of the things I’ve noticed in the course of my daily working life is that taking out the middle man is the new black. Direct distribution from wholesaler to purchaser is best. Taking out layers of middle men is preferable. Because producers and users get a better deal. I’ve noticed that a lot of printing companies that used to be niche printing companies are hiring designers and calling themselves one stop shops for design and printing. It makes sense. They get two bites of the cherry. They get their standard printing jobs from other designers while at the same time trying to undercut their design business…

(From a post on my other blog a couple of years ago, coffee prices have fluctuated since then)

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About the Author

Nathan Nathan is a coffee lover, home roaster, amateur barista and coffee tinkerer. He's married, has two kids, one turtle, and for a day job works for Creek Road Presbyterian Church. He previously worked in PR. This blog is his attempt to make coffee tax deductible.

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