Coffee's implications as a commodity are large and far reaching. Approximately 30 million lives are directly linked to its production and trade.
Over 2.25 billion cups of coffee are consumed in the world every day. Over 90% of coffee production takes place in developing countries - mostly South America, while consumption happens mainly in the industrialized economies.
The coffee industry has a commodity chain that involves producers, middlemen exporters, importers, roasters, and retailers before reaching the end consumer. Middlemen exporters, often referred to as coffee "coyotes," purchase coffee directly from small farmers. Unfortunately, "coyotes" or middlemen can take advantage of farmers and small producers by offering a 'reduced' price for a crop ahead of the harvest season. Since most coffee growing regions only yield 1-2 coffee harvests a year, a small coffee producer often finds themselves and their family struggling for money ahead of the next harvest. This type of transaction/relationship is not unlike "pay-day" loans or 'insta-cash' banks here in North America. Since the farmer excepts less than market value for their crop in exchange for money upfront, he/she might find themselves in a similar or worst situation the following year.
Fairtrade co-operatives aim to address this middle-men issue by offering better trading conditions to marginalized producers and workers. Fair trade organizations, along with the backing of consumers, campaign for change in the rules and practice of conventional international trade.
Fact 3: Fairtrade Provides a base or "floor" price in a volatile market.
Farmers are also the worst affected by the notorious volatility of world coffee prices. In recent years the price of Arabica coffee has swung from a 30-year low of 45 cents a pound in 2001 to a 34-year high of almost 309 cents in 2011. Between May 2011 and December 2013, prices fell by 65% as a result of the Euro crisis and oversupply of coffee. And after drought in Brazil saw prices rise briefly in 2014, prices fell back to a range of 115 to 145 cents a pound in 2015 and 2016. This price volatility has significant consequences for those who depend on coffee for their livelihood, making it difficult for growers to predict their income for the coming season and budget for their household and farming needs.
When prices are low farmers have neither the incentive nor resources to invest in good maintenance of their farms by applying natural fertilizers and pesticides or replacing old trees. When prices fall below the costs of production, farmers struggle to put adequate food on the table and pay medical bills and school fees.
Fairtrade was set up to ensure coffee farmers receive a fair and stable price for their coffee that covers average costs of sustainable production. Fairtrade certified co-operatives can count on at least the Fairtrade Minimum Price of $1.40 per pound for arabica coffee sold on Fairtrade terms (30 cents more if organic), plus an extra 20 cents per pound Fairtrade Premium to invest as they see fit – 5 cents of which is dedicated to improving productivity and quality.