Fair Trade Coffee

Coffee, which is one of the most frequently traded items in the world right behind oil, is an enormous business with its grasp encircling the entire planet. Fairly traded coffee is an alternative for coffee drinkers that care about creating a better world through their consumption of coffee.

Fair Trade Coffee

    Coffee, which is one of the most frequently traded items in the world right behind oil, is an enormous business with its grasp encircling the entire planet. Fairly traded coffee is an alternative for coffee drinkers that care about creating a better world through their consumption of coffee. Fair trade coffee is a somewhat new model on how a business can work efficiently while promoting fair deals with producers and labors, protecting the environment, and bringing profits for all parties in the line of production. The international movement was spawned nearly 50 years ago and has been building steam ever since. Martin Sheen said, “Fair trade guarantees farmers $1.26 per pound – enough to feed their families, and send their kids to school instead of into the fields (Transfair USA, 2002).”

    According to the Fair Trade Labeling Organization within the last years the price of coffee has increased to consumers, and some distributors have been making record profits while the producers of coffee seem to have been left out in the cold, that is until the fair trade business idea was put into practice. During the past three years the average price of coffee dropped by a half to US$0.40-0.50 per lb., the lowest it has been in 40 years. Coffee producers were losing their livelihood and were no longer able to provide the basic needs to their families by solely producing coffee, causing many coffee farmers to produce their coca for cocaine processing or move to the cities to find work. A large factor of the low prices was in 1989 when the last worldwide coffee agreement fell through allowing large corporations to dominate small businesses. For instance in 2001, Nestle, the worlds biggest coffee buyer, was making record profits and made a 4.5 billion Euro profit or 16% higher than the year before. Kraft Foods also gained 16% in 2001 to approximately 4.5 thousand million Euros.  Another problem is the over production of coffee, for example over the past several years the coffee production in Vietnam has sky rocketed due to multinational coffee corporations, the Vietnamese government, and the international banks assistance (Fair Trade Labeling Organization).

Fair trade cooperatives are created through a process of certifications to ensure the fair trade standards. The workers on fair trade cooperatives learn to organize, the ins and outs of international trade, they gain experience improving their product, and the importance of workers rights. The international criteria for fair trade coffee is: That producer cooperatives are guaranteed a fair price with a floor price of US$1.26 per lb. or 5 cents above the prevailing market price and US$1.41 for certified organic coffee or 15 cents above the market price (Transfair USA, 2002)). The Fair Trade Labeling Organization has determined the prices by calculating the cost of sustainable production with the cost of sustainable living (Fair Trade Labeling Organization). Fair trade coffee is sold directly to the retailers and businesses brewing the coffee, excluding the “middle man” who usually purchases the coffee from the producers, which has lead in the past to unfair prices. The producers must belong to cooperatives or associations, which are transparent and democratically controlled by its members. Also the importers of fair trade coffee must agree to establish stable long-term relationships with the producers. Also whenever the producers request credit the importers must provide them with a pre-harvest financing of up to 60% of each order.  On top of all this the producers must use crop management and create environmental protection plans and the producers are encouraged to work towards organic production with price incentives. Becoming fair trade certified is no easy process with applications to file and visits by fair trade inspectors to insure that all of the fair trade regulations are being upheld. After being certified, yearly visits are made to the producers to ensure their commitment to the fair trade rules (Transfair USA, 2002).

According to the Fair Trade Labeling Organization around the world there are a total of 185 cooperatives that produce fair trade coffee, including 90 in Central America, 57 in South America, 23 in Africa, and 9 in the Caribbean, and 6 in Asia. The countries consuming fair trade coffee are Austria, Belgium, Canada, Denmark, Finland, France, Germany, UK, Ireland, Italy, Japan, Luxembourg, Netherlands, Norway, Sweden, Switzerland, and the USA. The Netherlands is the largest consumer with 3,139.7 metric tons (mt) in 2002, followed by Germany with 2,942 mt, the UK with 2,079 mt, and the USA with 1854 mt.