What Is Fair Trade?

To understand what Fair Trade is, we first have to discuss why it became necessary. Fair Trade became a necessity to protecting the future of the coffee industry for several reasons;

- The majority of coffee (certainly not all coffee, Kenyan coffee is one exception that comes to mind) is sold on what is called the “C” Markets or coffee markets in New York as “coffee futures”. Futures, for those who may not know, is guessing at the future value of a commodity due to events known and unknown. For example: at the time of writing this there is a massive locust swarm heading to East Africa, this will likely reduce the crop for this year, meaning supply will diminish, and demand increase, so the future's market will increase in price next month. Futures is essentially trading in the future value of something.

That means several things for the coffee farmer. First, the only economic factor relevant to the coffee farmer, is to produce quantity (leaving no measurable reward system for quality). And secondly, the coffee farmer had little to no control over what price they could get for their product, the price is determined on some sterile trading floor thousands of miles away by some Suit-and-Tie that is only interested in making a buck based on their guessing how the future price of coffee is going to go. The C Markets are constantly changing and at the time of this writing, coffee was selling for around $1.02 US per lb (454 grams, or $2.25 US per kg), however, in the previous year the price has been as low as $0.92 US per lb.

- Considering that the average cost to produce a lb of coffee is between $0.80 and $1.00 US, it doesn’t take a Rocket Scientist to figure out this doesn’t leave the farmer much to live off.

The result?

  1. Farmers don’t earn enough to send their children to school (even though it costs a whopping $100 to send a child to school for a year in Central America including clothing, books and supplies, very few are able to pay these fees). Instead, children end up working on the farm from a very young age, leaving them with very little options for their own future beyond repeating the cycle of poverty.
  2. Farmers get paid once a year for their crop, and without proper training in how to work with the money earned, funds tend to run dry quickly.
  3. Farmers can rarely afford nutritious food, proper lodging or clean water for themselves and their families.
  4. The problem is further compounded by the fact that farmers are unable to afford agricultural training, purchase better equipment, seed or fertilizer to improve their crops, so their crops shrink further with each passing year.
  5. Further, because the average yield of one coffee tree is only 1 lb (of roasted coffee) per year, for a coffee farmer to produce a substantial and sustainable amount of coffee to survive, they have to own a very large amount of land, which often covers steep and rocky terrain (the best coffees are grown on the sides of volcanoes at very high altitude) that cannot be serviced with roads, proper water supplies or even basic sanitary needs. This also means that farmers are only able to produce small volumes of coffee, and therefore the individual farmer has very little negotiating power and often results in the lowest possible price earned.

Historically, some well-known coffee companies have taken advantage of this situation. Buying the farmers next years crop a full year ahead of time. That sounds generous, and even "business savvy", the reality is much more sinister. Sadly the farmer lacks the education to realize that they haven’t hit a windfall, and often end up losing the farm to these companies. The ubiquitous “Green” logo on the walls of farms throughout Central America speaks to this fact.

Unfortunately, in recent years coffee farmers have removed coffee trees from their farms in favour of more profitable, less legal crops, which seem to thrive in similar climates!

Fair Trade was created to protect the future of the coffee industry.

The concept of Fair Trade was created in the mid 1990’s. The concept was simple: create a set of criteria that everyone from the farmer to the roaster must comply with to ensure that the farmers receive a fair (living) wage for their product, and the purchaser will receive a premium quality product and an eased conscience.

Minimum Fair Trade prices at the time of this writing was $1.40 US per lb ($3.08 US per kg). However a good quality Organic Fair Trade coffee can sell in excess of $3.00 US per lb ($6.60 US per kg), a substantial difference from the $2.25 per kg on the C Markets.

To be Fair Trade Certified:

Farmers – have to form cooperatives and democratically elect a leader. These cooperatives “pool” their collective products giving them greater negotiating power, but it also means that the coop can purchase equipment for all to use, seed and fertilizer in larger quantities and therefore for less. In addition, training and schooling is usually offered for coffee kids, as well as for the farmer in better farming techniques, the economic benefits of organic farming, improved cultivation and processing techniques. Child labor is strictly forbidden. These cooperatives have to be certified by the Fair-Trade Labeling Organization or “FLO”.

Importers – in turn receive a certificate that the coffee they have sourced is in fact from a fair trade source. Importers have to be certified and audited as Fair Trade importers, meaning that non-fair trade product is handled accurately, and that non-fair trade product doesn’t end up labeled as fair trade.

Roasters – also have to be certified as fair trade roasters and a detailed auditing process ensures that non-fair trade coffee is not labeled as fair trade. Sadly however, fair trade certified roasters are not held accountable to the same fair trade standards for how they treat and pay their employees, in my opinion a major deficiency in the fair trade process.

It is also important to understand that many roasters will try pass off all Fair Trade coffee as Organic. This is not true. Fair Trade and Organic often go hand in hand, however, these are independent certifications.

The Fair Trade Quality Conundrum

Fair Trade was created to protect the future of the coffee industry, yet ironically, after almost three decades of Fair Trade’s existence it is perpetuating another problem threatening coffees future, driven by coffee’s other economic factor – Quality.

In order to be a certified fair trade coffee producer, the farmer has to be part of a certified cooperative and that’s about it! Independent farmers that otherwise meet the Fair Trade criteria cannot be certified Fair Trade if they are not part of a cooperative. Co-ops “pool” their beans in order to increase negotiating power, however at the same time, the pooling process means that the overall quality of any given batch of Fair Trade Coffee, is only as good as the worst quality bean in that batch, making the quality of one farmers product dependent on someone else’s ability to grow a quality bean.

The problem with this approach is that it does nothing to reward quality, in fact, it does the opposite, Fair Trade promotes complacency.

While no one in the coffee industry will argue the necessity at the time for the creation of Fair Trade, nor will they deny the good that they have done for the industry and awareness they have created, it appears that fair trade has - in my opinion - outlived its usefulness and is now strictly a marketing ploy.

Over the past few years a new movement has been increasing in popularity which embraces the “Quality” economic driver as the source for reward and the solution to the economic challenges of the coffee farmer. The Cup of Excellence program coordinate quality competitions in many producing countries.

These competitions are open to any coffee farmers and the access to these competitions is constantly improving. Individual farmers submit a lot of coffee (usually small batches of one or two bags) to the competition. An international panel of trained judges with years of cupping experience, take part in a blind taste test judging the coffee. The results are published and the top coffees (an indefinite number) are auctioned, and will often fetch in excess of $6.00 US per lb. Winners from each country are submitted to the international competition, and the winners of the international competition have fetched hundreds of dollars per lb.

Another approach taken by some Roasters is a “Direct” or “Relationship” coffee approach, paying more than Fair Trade prices directly to farms they have identified as farms producing a consistently exceptional product that they have built relationships with. As part of these relationships, the Roasters will help the farmers grow a better product, often paying for the construction of schools and other education for farmers.

What the “Direct” approach means, is that often the best coffees produced, have been purchased long before they could even be submitted to competitions or sourced to the open market.

It is our firm belief, that the single defining characteristic of an exceptional Roaster, it’s ability to consistently source exceptional coffees directly from the farmers and rewarding these farmers for producing a quality product, with more than just money, ensuring lasting relationships and ensuring the future of the coffee industry.

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