Daily Coffee News photo by Nick Brown
Fair Trade USA is putting a freeze on minimum prices and price premiums for all green coffee sold under its Fair Trade Certified seal through the end of 2023.
The move comes as coffee price minimums and premiums for coffee certified by a separate agency, Fairtrade International (FLO), are slated to increase on contracts beginning next month, on Aug. 1.
In an announcement today, Fair Trade USA also said it is launching a multi-stakeholder initiative called “Innovation for Impact,” designed to result in a redesigned Fair Trade Certified program that prioritizes scaleability of volume, impact to producers and specific sustainability-related issues such as climate change.
“If our singular focus in the past was on price and premium, our focus in the future is going to be much more holistically on the wellbeing of the producers and the value to the industry,” Fair Trade USA Founder and CEO Paul Rice told Daily Coffee News.
The Fair Trade USA Fair Trade Certified seal. Press image.
[Editor’s note: For the purposes of this story, the term “fair trade” refers to the fair trade coffee movement in a broad sense, whereas “Fair Trade USA” and “Fairtrade” (one word) refer to distinct organizations or certifications.]
A Fair Trade Coffee Price Split
The announcement from Fair Trade USA comes 14 weeks after Fairtrade International (FLO) said it was raising minimum prices for arabica and robusta coffees. Fairtrade International said the price increases were in response to mounting economic and climate-related pressures facing coffee farmers all over the world.
“Despite the recent spikes in global coffee prices, coffee farmers are struggling with inflation, skyrocketing production costs, and crop loss due to the effects of climate change,” Fairtrade International Senior Manager for Coffee Monika Firl said at the time.
The new Fairtrade International minimum price for washed arabica coffee, which represents more than 80% of the Fairtrade coffee sold globally, is US$1.80 per pound, an increase of 40 cents over the current price. The Fairtrade International minimum price for natural robusta is increasing by 19 cents to $1.20 per pound. Additionally, the guaranteed premium for coffee sold as both Fairtrade and USDA Organic (FTO) is increasing from 30 cents to 40 cents per pound.
Those price increase will not be met by Fair Trade USA, which since its inception has voluntarily adopted the Fairtrade International price points. Asked how choosing to not raise price minimums could benefit producers, Rice referred to recent consultations with stakeholders in the industry.
“If our goal is to increase farmer income, and we do that by raising price in such a way that we kill demand, then the impact will be negative,” Rice told DCN. “And that’s what we were told very directly from the vast majority of the companies that we interviewed.”
Daily Coffee News photo by Nick Brown
Fair Trade USA was previously part Fairtrade International for 13 years until it split off under Rice’s leadership in 2011, maintaining the same price model but softening the requirements of the certification scheme to allow for certification among larger plantation farms.
Rice acknowledged that the decision not to raise prices alongside Fairtrade is likely to elicit “different opinions,” although he noted that price is only part of a fair trade model.
“From a model perspective, historically, Fairtade International, Fairtrade USA, we all focused on the price and premium, in order to achieve impact, in order to achieve a better livelihood for farmers,” Rice told DCN. “In the future, what you will see Fair Trade USA doing is implementing a much more holistic model for producer impact and for industry impact. Because at the end of the day, fair trade is a handshake. It’s a handshake between the producers and the industry. It has to be based on collaboration and deep understanding on how to create value for both sides.”
Fair Trade USA certified approximately 210 million pounds of coffee last year, representing 6% of all green coffee imported in the United States.
“What needs to change about this model so we can scale it, so we can double it, so we can triple it?” said Rice. “We believe the road to impact is not to have a model that is 6% of market share, or a model that only accommodates 20-30% of a co-op’s volume. We want to evolve the design of our model so that we can be much more relevant to the industry, much more relevant to the growers and a much bigger percentage of market share. That’s going to drive more dollars back to more people.”
‘What Needs to Change About This Model?’
Fair Trade’s “Innovation for Impact” initiative was publicly announced today. It follows an extensive outreach that solicited feedback from more than 500 U.S. roasters, importers and retailers, as well as more than 400 producer organizations. The group said the respondents represent more than 84% of all Fair Trade USA-certified coffee sold in the U.S.
According to Fair Trade USA, more than two thirds of the responding roasters, importers and retailers advised the group not to raise price minimums.
“The major finding: the overwhelming majority of these companies warned that an increase in price in the current inflationary environment would significantly lower demand and volume over the next 12-24 months, reducing overall producer impact,” Fair Trade USA said in today’s announcement, adding, “While many producer leaders interviewed supported the price increase in principle, they also expressed concerns about the magnitude of the increase, the timeline for implementation and the risk of reduced market demand.”
Fair Trade USA is currently forming an advisory board to help guide the “Innovation for Impact” initiative. The founding CEO of FLOCERT, Rüdiger Meyer, plans to chair the board. Other board members include the former managing director of Keurig Trading, Lindsey Bolger; general manager of Costa Rica’s CoopeTarrazú, Carlos Vargas; and Colombian Coffee Federation (FNC) executive vice president Guido Fernandez.
Rice told DCN that the board will address producer-related issues beyond price, such as climate resilience and adaptation, gender equity, youth engagement and regenerative agriculture. He said that the organization hopes to announce the “next chapter of fair trade” by some time this fall, with a revised model for the certification scheme officially rolling out some time next year.
Asked whether these new developments were creating a wider market chasm between Fair Trade USA and Fairtrade International, Rice suggested both schemes might reasonably be part of a diversified marketing approach.
“The average fair trade coop, they only sell, today, 30% of their total harvest to a fair trade buyer,” he said. “That’s a really important statistic, because what it means is that you can’t live by fair trade alone.”
Fair Trade USA plans to publish a report on its initial findings in the coming weeks.
Does your coffee business have news to share? Let DCN’s editors know here.
Nick Brown
Nick Brown is the editor of Daily Coffee News by Roast Magazine.
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Dear Sir/Madam,
My name is Anis Kuri (Mr), a 0wner Manager for Baglaga Coffee Plantation in the Western Highlands Province, Papua New Guinea. The Coffee Industry in PNG is not healthy, and production over the years has declined from 1, 500, 000 x 60kg bags to 700,000 bags due to over 90 % of Coffee Plantations being neglected and rundown for multiple reasons
It needs partnerships with investors and excess markets such as Fair Trade International and Fair-trade USA to revive these Plantations boost production. From my experience, a good partnership with individual Plantations and Fair-trade will help Plantation Owners (growers) to fully revive the Plantations and, in turn, produce quality coffee for export through Fair-trade International and Fair-trade USA.
From my experience with my Plantation for the last 22 years, no matter how best I try to keep my Plantation Operational, I am handicapped in selling my produce ( g.b coffees) as the markets are controlled by Exporting Companies and most if not all of them don’t participate in farming or growing Coffee
FTUSA chose a different model years ago when it began certifying coffee plantations rather than giving preference to democratically organized farmer cooperatives. Following their own rules rather than internationally established fair trade practices is their right – but then they should take “fair trade” out of their name and marketing because it is misleading to shoppers.
When Rice states, “If our goal is to increase farmer income, and we do that by raising price in such a way that we kill demand, then the impact will be negative….And that’s what we were told very directly from the vast majority of the companies that we interviewed.” – This is exactly what the CEO of a corporation would say when responding to protecting the interests of its shareholders, but his shareholders are NOT the cooperatives or smallholder producers providing the goods. He quite blatantly stated, “the vast majority of the companies” were the driving force behind his decision making process. This is quite the opposite when looking at Fairtrade International, where their stakeholders are actually cooperatives and smallholder producers.
The double-speak which is being presented to justify price-freezing is a classic move to protect their own existence. I’m not too surprised that Rice decided to demonstrate this price freezing by interviewing companies rather than smallholder producers and cooperatives Fair Trade USA claims to be “helping”.. This is going to be a PR nightmare for Fair Trade USA , while at the same time, very damaging to Fairtrade International because the volumes which these roasters and corporations how are simply buying blanketed “Fair Trade” coffee off an offering sheet will likely end up buying the cheaper Fair Trade USA certification version because roasting businesses will naturally seek the more affordable pricing, especially if the quality of the value proposition is the same (aka , in this case, Fair Trade was traditionally just Fair Trade, but now, they have drastically different standards).
So now, it appears that Fairtrade International and Fair Trade USA are not even close to being the same.
One is fighting for cooperatives to achieve higher prices, and the other is fighting for corporations to maintain lower prices.
I think the definition of fair trading should not be confused, demand, quality verses sustainable income must be well looked when defining FAIR TRADE. but the mistake which are always miss led the international policy implementers or stake holders is that they neglect the views of the producers and only base on views of traders which is very difficult to get proper defination of the word in common.
The producer is the manufacturer of the product. Without a small farmer we shall not have the coffee. Which means the producer is the first person or first stage in coffee trading industry. The question would be what is the cost of producing 1kg of green coffee beans from the farm to the warehouse before it is exported? What is the quality?’ It’s sustainability? Is there a living incomes among the producers? Basing on the price we are giving is the producer trading?.
I believe when some of you are arguing, you don’t look at the above but that is the major point. Becuase if the producer is trading he or she will automatically take in consideration of climate and environmental impact as he or she is looking at the sustainable business relationship and conteneouse productions. Genda and other sorts will not be an issue Becuase there revenue.
So come back to my point , The U.S. position on fair trade premiums is based on traders perception which doesn’t address the producers problem and it doesn’t define the true meaning of Fair Trading as farmers are not meeting their break even point in that business.
Giving an example of the vehicle manufacturers in Japan, it is the manufacturer of the vehicle to put the price targ becuase he or she knows the cost of production of the care it is not client’s. What a client or consumer puts in consideration is its quality. Why is it in coffee trading industry is a consumer who want to set the price targ.
It would have been very important for fair trade foundation to put more effort on the factors that influence the coffee prices and remiums to a nable us meet the living income ad we sale coffee above the break even point in that business relationship such that things like environment, Natural resource conservation and soil managment for sustainable social economic transformation is automatically influenced as we need to protect our crop.