Fairtrade International is calling for the coffee industry to pay a fairer price to coffee farmers, estimating that today’s global market price of around US$1/pound is only half of what is needed for farmers to earn a living income.
According to Fairtrade’s Global Product Manager – Coffee, Peter Kettler, coffee farmers are being forced to sell their crop below the cost of production, effectively subsidizing the profits of a booming global coffee market. On top of climate change, market speculation and other challenges, the low price of coffee is condemning farmers to poverty or forcing them to abandon coffee altogether.
“We urgently need the entire coffee sector, as well as coffee lovers, to face up to this crisis,” said Kettler. “We can’t go on pretending that business as usual can continue.”
While many sustainability efforts focus on improving crop yield or quality, Kettler says price needs to be addressed first in order to keep farms viable, and ultimately provide a living income for farmers. A living income is the amount a household needs to support a decent standard of living, covering basic housing, food, healthcare, education, transportation and a bit extra for unexpected expenses. The actual value depends on household size and local cost of living. On top of that, farming households also need to be able to recover their farm expenses.
Fairtrade’s preliminary estimates show that the export price for coffee would need to reach US$2.00 per pound – about double the current global market price – for a four-person farming household to earn a living income in northern Colombia, assuming a high but achievable level of productivity.
Fairtrade guarantees a minimum price to be paid to certified coffee cooperatives, currently US$1.40 per pound (US$1.70 per pound for organic). Buyers also pay an additional Fairtrade Premium of 20 cents per pound, of which cooperatives invest at least 25 per cent in productivity and quality initiatives, and the rest in other business or community projects. Fairtrade coffee producers earned more than US$94 million in Premium in 2017.
Mr Kettler is calling on coffee companies to step up and pay a fair price for their beans. He notes that, while the Fairtrade Minimum Price is about 40 per cent higher than the current market price, significantly raising the Fairtrade price without the rest of the sector coming along risks farmers losing Fairtrade sales and ending up in a worse position.
He highlighted the need for support to farmers to improve yields in a sustainable way, and for governments to encourage more sustainable practices, including changing their own procurement policies. Mr Kettler invited companies to work with Fairtrade to test different models, such as improving quality or voluntarily paying above the Fairtrade Minimum Price, to move closer to a living income for farmers in their supply chains.
“It’s the right thing to do in many ways,” said Kettler. “Unless there’s a good business case for the farmers at the very beginning of the coffee supply chain, we all – including consumers – have to bear some responsibility for the decline of coffee.”