– An Easy Spread –

What the Hell is Fair Trade Coffee?

You stumble down the coffee aisle of your local Giant Food, six-pack of Pabst in your right hand, case of beef ramen in your left. A bold Ethiopian roast catches your eye, but it’s one of those tree-hugger varieties that costs $2 more than the other brands, and you’re on a budget. You wonder, why the extra expense? Allow me to explain:

Fair trade is an alternative trading approach that provides coffee producers security against unpredictable market swings. Think of it as a social contract between the buyer and the producer: the buyer agrees to pay a higher price based on future sustainability. The producer in turn grows high quality beans and invests his profits into the community. The result: better coffee for us and improved working conditions, education and healthcare for the producer’s community.

How does it work?

· Fair trade guarantees a minimum price – currently $1.25 per pound of washed Arabica beans (but pays the market price if it’s higher)

· An additional $0.10 premium per pound goes to social and economic investments in the community

· The producer receives an additional $0.20 per pound if beans are certified organic[1]

Why is this important?

The coffee market is susceptible to wild price fluctuations. An early frost in Brazil (the largest coffee exporter in the world) can squash the supply. A government subsidization (as in Vietnam in the early 1990s) can flood the market with inferior beans, lowering demand worldwide. The plants themselves are fragile, requiring four years to yield beans, making it nearly impossible to recover from a poor growing season. However, while prices fluctuate, the general trend spirals downward. In the early 1980s, the market price for a pound of coffee was $1.20. By 2002, it was $0.50.[2]

But that’s the market, baby.

Champions of the free market (see articles in The Economist , The Times, etc.) rail against fair trade. It rigs the market, keeping growers dependent on industrialized countries, they argue. Low-income countries need investment, not charity. But fair trade isn’t charity, I’ll retort. It’s a conscious partnership between producer and consumer. The consumer chooses to pay more so that producers can invest in their community while growing superior beans. And should a quarter of the Ethiopian population (already living on less than $1 a day[3]) really suffer on account of the Vietnamese government’s decision to flood the market with subsidized coffee?

The volatile coffee market continues to favor retailers in industrialized countries. But consider this: retail sales of coffee in the U.S. make up only 0.35% of our GDP[4], while coffee exports account for 54% percent of GDP in Ethiopia.[5] While industrialized economies like ours make insignificant gains, falling coffee prices cripple producers.

What are the consequences?

In producing countries, less capital is available for education and healthcare, suicide and crime rates increase, and more people fall into poverty. If you appreciate good coffee, losses for producers mean a lower quality brew. The best beans are produced at a higher cost, which producers won’t be able to afford. Harvesting practices will also change. A producer who pays workers to collect beans three times a day may be forced to cut back to twice a day. Fewer trips into the field result in hasty picking and more unripe or overripe beans in the bag you find on the shelf.

So think about that Ethiopian (or Colombian, or Costa Rican, or Filipino) family living on less than $1 per day the next time you find yourself in the coffee aisle. Is the extra two bucks really such a big deal?

Written by new staff member, Warren Ciabattoni

Photo Credits: Matt Hildebrandt