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How Fair Trade Coffee Works

How Fair Trade Coffee Works

ASK YOURSELF how you think Fairtrade might work.

And question what you want when you buy coffee: the best quality coffee possible, or the coffee that gives its farmer the best price?

It’s less likely to get both than you might think.

Telling one bean from another

At harvest, coffee is classed either as ‘commodity coffee’ or ‘specialty coffee’. Commodity coffee is bulk coffee whereas specialty coffee is more valuable.

Commodity coffee is then graded according to quality. Within each grade the quality and price is standardised, so any two batches with the same grade will fetch the same price. Not so with specialty coffee, which is judged per bag and can be worth significantly more than standardised beans.

Setting the price

Fair Trade works by introducing a ‘price floor’ that limits how low the coffee price can fall. This is intended to protect the growers. In March 2011 that price was set at $1.40 per pound of green coffee beans. Remember the Fair Trade label doesn’t have anything to do with the grower, in the way that say an ‘organic’ label does. It’s the buyer who is signing up to Fair Trade.

So what if a farmer has two bags of coffee, one commodity and one specialty, and is faced with a singled Fair Trade buyer? The farmer is aware he can sell his specialty coffee for $1.70 per pound on the open market but only $1.40 to the Fair Trade buyer. Meanwhile his commodity bean is worth $1.20 on the open market but $1.40 on the Fair Trade model.

The obvious thing to do is sell the commodity coffee as Fair Trade coffee and the specialty coffee on the more generous open market.

Remember what Fair Trade is for

Is having the best possible cup of coffee really what’s important, or is the point of consuming conscientiously to give a helping hand to the coffee growers? Fair Trade in essence is a more mindful way for global industries to function. It acknowledges the grower.

But the model is old and since its inception the market price of coffee has increased fivefold. As Starbucks’ former sustainability chief has said, the Fair Trade price became the price ceiling, not the floor. It is no longer as generous as it once was.

There is a growing number of alternatives to Fair Trade, such as TechnoServe, said to be 60% better for farmers by Shirin Moayyad of Peet’s Coffee, who claims to be ‘hook, line and sinker for the Fair Trade mission’, but who believes the vehicle for delivering this mission is a little outdated.

A popular criticism of Fair Trade is that the money doesn’t do enough for grower communities. With TechnoServe the money is invested in farm management and other ways, to create a circular coffee economy that is more sustainable than private wealth. Private wealth can lead to rich individuals who then inflict the same poor conditions on their employees, or who leave the coffee trade altogether.

Fair Trade claims its model has helped 1.5 million coffee growers in its twelve year history. It’s certainly helped consumers think about the implications of there being such massive demand for a product. Here are some tall figures to paint the picture:

Some Interesting Coffee stats

  • 23 million Americans drink specialty coffee every day
  • The US coffee market is worth $14bn per year
  • Fair Trade coffee makes up just 4% of this amount

Browse through some recent posts below:


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