Why fair trade still matters when coffee and cocoa prices are high • FRANCE 24 English

Key Concepts

• Coffee Price Surge: Significant increase in coffee prices, reaching record highs and impacting consumers.
• Fair Trade Certification: A system designed to support farmers by ensuring a minimum price and providing a community premium.
• Underinvestment in Farmers: A primary driver of high coffee prices, stemming from farmers' inability to invest in their farms due to various challenges.
• Climate Change Impact: Unpredictable weather conditions affecting harvests and making land unsuitable for coffee and cocoa farming.
• Farmer Share of Retail Price: Farmers typically earn less than 10% of the final retail price of coffee and chocolate.
• Fair Trade Premium: Additional funds provided to farmers on top of the minimum price, intended for community development and farm investment.
• Community Premium: A component of the Fair Trade Premium used for projects like schools and improved tools.
• Climate-Resilient Varieties: Development and adoption of coffee and cocoa plant types that can withstand changing climate conditions.
• Enabling Environment: The creation of supportive government policies and regulatory frameworks to encourage businesses to adopt fair trade practices.
• Cooperatives: Farmer organizations that play a crucial role in managing and investing the Fair Trade Premium.
• Youth Engagement in Farming: Using the Fair Trade Premium to train and encourage younger generations to enter the agricultural sector.

Coffee Prices and Farmer Challenges

The video highlights a significant surge in coffee prices, with a recent study in France showing a jump of up to 37% in August compared to the previous year. This price increase is attributed to a combination of factors including volatile weather affecting harvests, global trade uncertainties, and rising production costs. These conditions are making everyday commodities like coffee, tea, and chocolate potentially unaffordable for consumers.

Key Points:

• Record High Prices: Both Arabica and Robusta coffee prices have reached record highs, with Arabica constituting the majority of global production. Bloomberg reported a 52-year high for coffee prices in December.
• Global Market Trends: Similar price surges have been observed in the global tea and cacao markets.
• Primary Driver: Underinvestment: Jason Archia Champong, sustainable sourcing lead for coffee and cocoa at the Fair Trade Foundation, identifies underinvestment in farmers as the fundamental driver of these high prices.
• Compounding Factors: Climate change exacerbates existing challenges, preventing farmers from investing in their farms, enhancing productivity, and meeting demand.
• Low Farmer Share: Coffee and cocoa farmers typically earn less than 10% of the final retail price of their products.
• Future Suitability Concerns: Studies indicate that by 2050, nearly 50% of the global surface area used for coffee and cocoa farming may become unsuitable.

The Fair Trade Certification System

The Fair Trade certification system, established in the 1980s, aims to address the challenges faced by farmers by providing stability and support. While products with the Fair Trade label may cost consumers slightly more, the impact on farmers is significant.

How Fair Trade Helps Farmers:

1. Securing a Minimum Price: Fair Trade guarantees a minimum price for farmers, even when global market prices drop.
2. Providing a Community Premium: Farmers receive extra money, known as a community premium, which can be invested in essential community projects such as schools and improved farming tools.
3. Education and Support: Fair Trade offers education and support to farmers to enhance coffee quality, improve negotiation skills for better prices, access more buyers, and build resilience against volatile markets.

Farmer Testimonial:

One farmer shared, "They have really helped us uh to teach us on how to care for the environment and then the coffee bushes becomes healthy and then we get now better quantity, good quality and the women have got better income."

Challenges for Fair Trade:

• Cost of Entry: The cost of joining the Fair Trade system presents a significant burden for many farmers, especially as they grapple with the impacts of climate change.
• Limited Reach: Out of approximately 570 million farms worldwide, only about 1.9 million are currently included in the Fair Trade system.

Fair Trade's Continued Relevance and Impact

Despite rising global prices, the Fair Trade system remains crucial. Jason Archia Champong emphasizes that high prices often signal supply issues, and without adequate support for farmers, this supply can be jeopardized.

Arguments for Fair Trade's Importance:

• Ensuring Supply: Fair Trade helps farmers invest back into their farms, ensuring the continued availability of essential commodities like coffee and chocolate.
• Addressing Climate Risks: Fair Trade implements programs to help farmers mitigate climate risks. This includes promoting the planting of climate-resilient coffee varieties in regions like Latin America and East Africa, and assisting with challenges like disease in cocoa farming.
• Investment in Productivity: The system focuses on helping farmers improve their productivity to meet demand.

The Fair Trade Premium in Action:

• Investment in Cooperatives: Farmers use the premium to invest in their cooperatives, strengthening their infrastructure and support systems, particularly during challenging times.
• Community-Driven Decisions: Cooperatives, with their farmer membership, independently decide how to invest the premium within their communities.
• Meaningful Outcomes: The premium has been invested in community infrastructure, enhancing farmer productivity to address climate change impacts, and crucially, in training and supporting young people to enter farming. This investment equips them with skills in technology and climate adaptation, addressing the challenge of encouraging the younger generation to pursue agriculture.
• Financial Impact: Last year, the Fair Trade system globally generated nearly £210 million in additional premium for farmers. The absence of this premium would leave many farmers and cooperatives with minimal alternative options for support.

Growing the Fair Trade Network

A key challenge for Fair Trade is the slow growth of its network. While consumers recognize the Fair Trade label and are willing to pay more for ethically sourced products, the number of certified farmers remains low.

Reasons for Limited Growth and Solutions:

• Business Engagement: Fair Trade is actively working with businesses to encourage them to understand and address the fundamental challenges faced by farmers.
• Consumer Action: Consumers are encouraged to purchase Fair Trade certified products, as this drives further investment on the ground and supports other farmers in growing and selling Fair Trade certified goods.
• Government Collaboration: Fair Trade is collaborating with governments to create an "enabling environment" that levels the playing field for businesses committed to addressing human rights issues in their supply chains. This involves establishing a supportive regulatory framework.
• Partnerships and Advocacy: The Fair Trade Foundation believes in the power of partnerships, programs, pricing premiums, and continued advocacy with governments and stakeholders across value chains.
• UK Market Example: In the UK, there are approximately 400 businesses offering around 5,000 Fair Trade products, indicating a good foundation but also room for expansion. The video notes that only about 10% of tea sold in the UK is Fair Trade certified, highlighting the need for greater market penetration.

Conclusion

The video underscores the critical role of the Fair Trade system in ensuring fair compensation and support for farmers amidst volatile global markets and the escalating impacts of climate change. While coffee and other commodity prices are soaring, the benefits are not consistently reaching the farmers who produce them. Fair Trade's minimum price guarantee and community premium are vital mechanisms for farmer investment and community development. However, the system faces challenges in terms of farmer accessibility and broader market adoption. Increased collaboration between businesses, governments, and consumers is essential to expand the reach of Fair Trade, ensuring a more sustainable and equitable future for agricultural producers and the availability of essential commodities.