Fair Trade Coffee, Direct Trade, and Beyond!

This is our second post of the series $1 – $1000. The series has the daunting task of explaining in a simple way the imbalances in the coffee industry, especially related to the economic rewards for the coffee farmer.

The first post, A Coffee Crisis is Brewing laid the groundwork showing you the reality for many farmers worldwide. This post will focus on some of the commendable efforts of organizations and different approaches designed to provide coffee producers with a sustainable living. 

It must be noted that the coffee industry is an extremely complicated one. There is no “one size fits all” solution to these massively complicated issues. There is no sinister “THEY” or conspiracy of the super-rich and powerful people trying to keep coffee farmers destitute.

Coffee is grown in some of the poorest countries in the world. Each country has its own idiosyncrasies and they sell to all the other countries in the world with its own set of rules and bureaucracies. 

The 1989 Coffee Crisis

From the early 1960s to 1989, coffee prices were controlled by the “International Coffee Agreement” (ICA). This organization followed a similar pattern as OPEC for oil which imposed quotas and controlled prices for producing and consuming nations. This provided a relatively stable market called the “C price” or the commodity market. The range was between $1.00 – $1.50 a pound. 

The agreement would be renegotiated every 5 years. However, in 1989 no agreement could be reached and the ICA crashed. This was mostly due to the political positioning of the United States at the time which strongly opposed the ICA while promoting a “free market”. 

Meanwhile, Vietnam was becoming a very prominent coffee producer. The market was flooded with much more coffee than it could sell. This “perfect storm” knocked the bottom out of the fair or acceptable prices for coffee farmers. 

Under the new “free market” system the C price plunged to around 49¢ a lb. What the farmer received was much less and their costs were generally much higher than their income. This was especially burdensome to the small farm holders who had no cushion at all to fall back on.

Fairtrade Coffee as the First Responder

The Fair Trade movement took its first steps aiding the embattled coffee producers in Mexico in the late 1980s. This product found its way into Dutch supermarkets appropriately named “Max Havelaar”, a fictional Dutch character who was opposed to the abuses of coffee producers in the Dutch colonies in the 1800s.

The Fairtrade mission is to secure a sustainable price for their coffee. How does it work? Coffee cooperatives and associations need to be certified by Fairtrade. These are then able to receive the marketing benefits of the organization. “Pay a little more to support the coffee farmer” is the call to arms. 

As of April 2011, the minimum price set by Fairtrade International to certified cooperatives is US $1.40 a pound. An additional 30¢ a lb is added for organic certification. This money is paid to the cooperative. The cooperative decides how the funds will be used. It could be for agricultural education, community improvements, and more. 

Fairtrade currently works with more than 762,392 coffee farmers globally through 582 Fair Trade certified coffee producer organizations. In 2017, Fair Trade coffee farmers cultivated coffee on more than 938,000 hectares worldwide producing an estimated 214,335 tonnes of coffee. Its standards are to defend all three pillars of sustainability: economic, social, and environmental.

Due credit needs to be given to Fairtrade International for being a frontrunner to the aid of coffee farmers on small farms everywhere. It has also established an effective transparency program. A wake-up call has been sounded and people are listening.

Fair Trade Coffee
More and more coffee shops are selling fair trade coffee

Direct Trade

With more people waking up to the plight of the farmer new ideas started being formed on how to improve the situation. One of which is called “Direct Trade”, which takes on a different approach to the problem. 

Fairtrade uses a minimum price as a base, recognizing that quality comes with a price. That paying a bit more to the farmer will help him improve quality and quantity. The Direct Trade approach, on the other hand, focuses on quality as its base, believing that a better price is paid for a better product. This method was developed due to the irregularities in green bean quality. With the coming of the “Third Wave Coffee”, the quality was now paramount. 

Direct Trade is popular with roasters and “Specialty” grade farmers alike. Direct relationships can be formed, a big step in purchasing exactly what the roaster wants. Middle-men are being cut out and that money can go towards farmers without raising the prices for the consumer. 

Getting Involved

It is a sad fact that many small farm holders do not have the means to process their green beans for export. In many cases, there is not enough money to pay for fertilizers or fungicides to help their farms produce better. Even the few that may be able to maintain their farms will probably not have access to wet mills, dry mills, or have the connections to finish the process and export their product.

Realizing this, there is a growing number of people from developed lands getting involved at the small farmer level. These are ones who move to these countries with the purpose of marketing the green beans produced in small farms. 

Once there, they are busy setting up the infrastructure to help these people upgrade their products and get them into the international market. Many times, funding it themselves. 

It is an extremely difficult row to hoe, very expensive, and time-consuming. There are a lot of unforeseen challenges that present themselves. This is even more so when they do not really understand the business or coffee culture where they are doing the project. However, the fruits of their labours are worth it when it is successful.

Why would these people do this? They are not coffee farmers, they are not importers or roasters. Whatever their motives are, they too deserve an honourable mention for supporting the stranded coffee farmers. These are true believers.

Results and Forward Action

As mentioned in the previous article, consumer education is needed to aid the coffee farmer. People are noticing and reacting. Fairtrade continues to promote the small farmer with its programs; Direct Trade has cut out some of the middlemen by developing relationships with farmers.

Direct Trade, unfortunately, only benefits those that are already in the Specialty Coffee market and does little to help the ones trying to get into that elite group. 

The few individuals that have moved down to work directly with the farmers are few and far between. There is no register of these ones or of their successes or failures. Some have gone broke and given-up. Some are managing. We would love to hear about these warriors and see how to promote their efforts. Maybe you, the reader, can help.

It is clear that the efforts of Fair Trade, Direct Trade and all who support them have made an indelible mark on the consciences of coffee lovers everywhere. The movement continues as new ideas begin to materialize. Our next post in the series $1 – $1000 will look at “Farmgate and Traceability”.


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