18 November 2013
Coffee and Sustainability: Direct Trade Versus Fair Trade
The production of coffee bares varying levels of significance to different social groups. For many North American consumers, coffee is a simple commodity. To the corporations that import and export it, coffee is a product from which profit is gained. To farmers and producers, coffee is their livelihood. The relationship between consumer and producer is reliant on this ever-popular product. The fluctuating nature of the coffee industries’ prices and production techniques results in an unstable market. This makes coffee farmers’ income inconsistent and unreliable. At the opposite end of the spectrum is the consumer who ultimately purchases the product and determines the price of the good. The sustainability of the coffee industry is therefore reliant on the purchasing habits of the consumer. Consumers have become more informed of their buying habits and how they impact the farmers who produce coffee. As a result, many consumers want to know how they can help support more sustainable practices. Purchasing coffee through direct trade methods better supports producers and the sustainability of their livelihood than that of fair trade.
Fair trade is a complex term with a simple concept. In response to the instability of the coffee market, Fair Trade Labeling Organizations (FLO) International formed in 1997 (Lyons 453). FLO define fair trade as “an alternative approach to conventional trade based on a partnership between producers and traders, businesses and consumers” (Fair Trade International 2013). Fair trade for coffee producers is a method in which co-operatives are offered a floor price for the coffee beans they produce. This floor price ensures a consistent income for the farmers within the co-ops. Farmers benefit from this because their livelihood is no longer at the whim of the consumer market in western countries. The simple concept behind fair trade is that all producers are offered an equal and stable price. To summarize, fair trade is an alternative to conventional trade practices in which all participants receive a set price.
Fair Trade use and support has grown consistently since the FLO’s inception in 1997. Just six years later, in 2003, international fair trade sales for the US totaled more than $500 million. This represents an annual growth rate of thirty percent, with the amount of fair trade certified coffee roasted in the US showing a ninety-one percent increase from 2002 at over 18 million pounds (Lyon 453). Based on information from Sarah Lyon’s 2006 study, the number of fair trade coffee producing organizations has risen from zero in 1997, to one-hundred and ninety-seven. One hundred and sixty-five of these organizations are located in Latin America (453)
Farmers from Latin America are not the only coffee producers benefiting from fair trade co-ops. The Ketiara Coffee Cooperative is a fair trade certified coffee producer from Indonesia. Ibu Rahmah, chairwoman of the cooperative, has this to say about coffee cooperatives:
“As coffee farmers, we want to secure a better life for the future, in the past, we sold our coffee to a middleman. A middleman keeps the prices very low. That’s why we established a cooperative, to increase our income from the coffee” (“The Unshakeable Ketiara Coffee Family”).
The growth of fair trade has had obvious benefits to both coffee consumers and producers.
Though the fair trade model has done much to improve the standards of sustainability in the coffee industry, it is not without its drawbacks. One important situation where fair trade fails to live up to its goal is the current dilemma facing the farmers of Mountain Coffee Exporters (MCE) in Peru. Currently Peruvian based producers selling to MCE are earning $175 dollars per sack of certified fair trade coffee while their breakeven price is $180 (Tegel 2). This hardly exemplifies a fair system for coffee buying.
Another flaw in the fair trade model is its inability to reach the poorest of the poor in the coffee farming community. The poorest members of the coffee community are the laborers who harvest the coffee cherries. In fair trade cooperatives, labor standards are implemented, however, in order to be part of a cooperative, one must own land. The workers who do not own property, therefore, do not receive fair trade benefits. Paul Rice of Fair Trade International argues that, “yields are so low on a small farm and it’s basically family run, the migrant labor issue is not as relevant” (Haight 78). This claim does little to increase the credibility of Rice’s company in light of their many failures.
Sarah Lyons suggests a more important drawback to the fair trade model that threatens the sustainability of the coffee industry, rather than working to better it. Lyons states that, “more fair trade coffee is produced than is currently sold, challenging the market’s ability to meet the needs of the many smallholders who do not have access to fair trading conditions” (Lyons 454). Many farmers and producers may lead more sustainable careers as a result of fair trade, however, this is not true in all cases. More importantly, when the amount of product produced exceeds demand, fair trade can actually threaten the livelihood of the farmers it set out to support.
James McWilliams published an article on Costa Rican coffee farmer Kenneth Lander and the experiences Lander had with fair trade co-operations. McWilliams claims that, “fair trade is fair, but evidently not fair enough” (McWilliams). Over the past decade, many farmers, buyers, and roasters have found that fair trade is not enough to ensure a sustainable future in the coffee industry. In response to this instability, the method of direct trade was implemented.
Direct trade provides a way to pay farmers higher and more sustainable prices. Not unlike fair trade, direct trade cuts out the middleman in order to work directly with farmers. Direct trade differs from fair trade in several areas. First, direct trade does not require participating producers to be members of co-ops, which, in turn, allows smaller farms to benefit from the higher prices. Secondly, direct trade pays based on the quality of the beans picked rather than a set price like fair trade offers. Part owner of Edmonton-based direct trade practitioners Transcend Coffee Roasters, James Schutz, states, “we’re after the very best quality and want to pay sustainable prices to the farmers, so we’re willing to pay the higher prices” (Barnes). Dennis Macray, former director of global sustainability at Starbucks Coffee Co. also acknowledges the new direct trade model:
“The model for sustainable coffee that was popular five years ago has changed quite a bit. Years ago it was common practice to just go out and buy certified coffees and check the box; and today it’s about integrating sustainability and transparency into your supply chain. Companies are making it a core way of doing business” (Haight 79).
In 2012, Starbucks says they paid an average price of $2.56 per pound of green coffee. In 2013 Transcend is paying an average price of $4.82 per pound of green coffee (Barnes). Paying nearly double the price of the already ethical and sustainable practices of Starbucks, Transcend provides an example of how much more sustainable buying direct trade coffee can be.
Although coffee producing organizations and import/export companies play a huge role in the economics of the coffee industry, it is ultimately the consumer who decides the price and sustainability of the product through his/her purchasing habits. Since the fair trade movement began in the late 20th century, awareness of the affects of coffee purchasing has increased significantly. According to Fair Trade USA, the percent of American households aware of Fair Trade coffee went from nine percent to fifty percent in the year 2005 alone. Representatives from major brands such as Starbucks and Green Mountain Coffee Roasters also report a growth in the interest of consumers in transparency of socially responsible business practices (Haight 79). In the research paper, Do Consumers Care About Ethics? Willingness To Pay For Fair-Trade Coffee, published in the International Journal of Consumer Studies, the researchers concluded that, “a substantial number of surveys showed that consumers value the ethical aspect in a product” (Pelsmacker, Driesen, Rayp, 381). With coffee consumers’ increasing awareness and apparent interest in ethical buying, they must now determine how to best support sustainability in the coffee industry.
Direct trade coffee purchasing is the best way for consumers to support sustainability in the coffee industry. Although fair trade has done much to provide stability in prices for cooperatives as well as raise awareness for coffee farmers amongst consumers, it is ultimately not as effective as direct trade. This is because direct trade pays higher prices and is a more inclusive system in which the only requirement is providing a high quality product. In an industry that has a history of massive price fluctuations, the fair trade movement provided a push for more ethical practices that led to the development of direct trade, which, ultimately, is the best model for sustainability. It is now up to the consumer to determine whether or not, and to what extent they will support a sustainable model to ensure the future, of this beloved commodity.
Barnes, Dan. “Edmonton’s Transcend Coffee Finds It’s Worth It To Pay Top Price For Quality Beans.” Edmontonjournal.com. Edmonton Journal,23 October 2013. Web. 10 November 2013.
Haight, Colleen. “The Problem With Fair Trade Coffee” Stanford Social Innovation Review Vol. 9 Summer 2011: 73-79. Print.
Lyon, Sarah. “Fair Trade Consumption: Politics, Defetishization and Producer Participation.” International Journal of Consumer Studies 30 (5 September 2006) 452-464. Print.
McWilliams, James. “Fair, But Not Fair Enough: Beyond Fair Trade Coffee.” Pacific Standard Magazine 13September 2013.
Pelsmacker, De Patrick, Liesbeth Driesen, and Glenn Rayp. “Do Consumers Care About Ethics? Willingness To Pay For Fair-Trade Coffee.” The Journal of Consumer Affairs 39 No. 2 (2005): 363-385. Print.
Tegel, Simeon. “That Coffee You Are Drinking Might Not Be So Fair Trade After All.” www.globalpost.com. Global Post, 9 November 2013. Web. 11 November 2013.
“The Unshakeable Ketiara Coffee Family.” Fair Trade International. 8 August 2013. Web. 13 November 2013.
Fair Trade International. 2011. Web. 13 November 2013