Farmer Co-ops vs. Plantations

An update on Fair Trade coffee
By Rodney North
109 November - December - 2003
1103_coffee.jpg

In keeping with consumer cooperatives' long tradition of supporting sustainable agriculture, family farms, and greater economic justice, U.S. co-op stores have played a central role in the growth and success of the nation's Fair Trade movement. For that reason we believe it is important to update the co-op community on the current state of Fair Trade.

Specifically, we want to inform Cooperative Grocer readers about a recent proposal to change the criteria for what coffee may be labeled as Fair Trade Certified(tm). Currently only democratically organized small farmer organizations (cooperatives for the most part) are permitted to sell to the Fair Trade market. However, back in April at an important annual coffee industry conference in Boston, TransFair USA, the exclusive certifier of Fair Trade, floated a proposal for changing the eligibility requirements to permit large estates and plantations-if they met certain conditions-to also sell into the Fair Trade market.

As we have seen with some analogous efforts to broaden the eligibility for organic foods, this proposal proved controversial; it was clearly opposed by the farmers and importers, such as ourselves, who pioneered the category. But first some background.

International certification

In the U.S., Fair Trade coffee is certified as such by TransFair USA, an independent, non-profit agency. In each of 17 countries such as Germany, Japan, and Canada there is a comparable organization, and they work together within a global umbrella organization called Fair Trade Labeling Organizations International, aka FLO. Individually TransFair USA does not establish Fair Trade standards, but it may propose changes to FLO. Besides setting standards, FLO along with its member organizations monitors the export, import, labeling and marketing of Fair Trade goods. Goods certified by TransFair USA bear a small black and white seal that informs consumers that the product was sourced in accord with Fair Trade standards.

Since 1986, annual Fair Trade food sales (measured in wholesale dollars) have grown from about $100,000 to well over $30,000,000.

A crucial reason Fair Trade has struck such a chord among progressive companies in the natural food industry and among consumers is that there is such a dramatic need for it, especially in the coffee industry. Because the world market price for coffee collapsed three years ago and never recovered, millions of people who depend upon coffee for their livelihood are struggling through what can be called an economic disaster in slow motion. Measured in terms of the results-lost income, lost jobs, lost farms, malnutrition, massive migration to the cities and other countries-it is as if a drought had stricken every coffee farm in the world. Farmers just cannot make a living, even a meager one, growing coffee at current prices.

The price paid to coffee exporters is now only about 60 cents per pound, a thirty-year low and just half the price in 2000. In 2002 it fell as low as 42 cents. Further, coffee farmers, especially the small-scale farmers that grow about 70% of the world's coffee crop, do not normally receive even the 60-cent export price but only a fraction of it. This is because they typically sell their crop, minimally processed if at all, into a chain of intermediaries.

It is this structure-one that exploits the vulnerability of individual small farmers and provides them with few or no options-and not just poverty per se that Fair Trade has historically addressed. In addition to the Fair Trade price of $1.26/lb (1.41 if organic) a central element of the Fair Trade model has been the requirement that coffee importers buy from democratic small farmer cooperatives. Together small farmers can begin to overcome the barriers that before had compounded their poverty, even ensured it. Together they can gather, process, dry, and store their harvests. Collectively they can provide for their own technical training-which has helped to improve their quality, and thereby their competitiveness. They can hire professionals to manage direct exports and marketing. In short, together they can become small businessmen and women, take more control over their economic fate, and begin to change their circumstances.

Thus, Fair Trade has meant much more than simply getting more money to the farmers, though that cannot be underestimated. But when channeled through farmer co-ops, the extra Fair Trade income not only raises living standards, it also helps to build democratic, sustainable, broadly owned businesses in these rural communities. Last year Equal Exchange alone paid over $1,600,000 in Fair Trade above-market premiums to 24 different coffee farmer cooperatives.

Often it has been thanks to Fair Trade exports that some farmer co-ops were able to get on their feet and later to grow in size, capacity and durability. Beyond overcoming the typical hurdles of any start-up enterprise, many young co-ops face added barriers thrown up by established players in the local coffee industry who benefit from the status quo. Almost all the credit for the emergence of these co-ops has to go to their thousands of farmer members and to their leaders, some of whom have even been murdered because of their efforts. Yet Fair Trade has made its contributions, as well, by creating a pool of importers willing to meet the co-op's halfway, and on just terms.

Higher plantation standards?

While there is still much to explain about the scene in coffee growing regions, the reader may know enough to understand why small farmers opposed allowing large plantations into the Fair Trade system. The reasoning behind TransFair's proposal is something like this: Plantation laborers are also suffering from the current crisis of low prices (either their wages have been slashed or they're losing their jobs) as well as from the problem of chronic exploitation. Coffee plantations have been notorious for widespread labor rights abuses.

Fair Trade, however, does not presently offer a remedy for this (although it does within its tea certification). Under the proposal, plantations that adhered to higher standards of pay, job security, worker safety, etc., could sell into the Fair Trade market and thereby recoup some or all of the added expense. They would also have an incentive to adopt such practices if they did not follow them already.

It is agreed that there are a small number of exemplary plantations that hold themselves to a higher standard and treat their workers well. Some of these plantation owners feel that it is unfair that they are ineligible for Fair Trade prices. In this spirit TransFair expressed a need "to recognize and honor" the work of these plantations and to provide incentives for other plantations to follow suit. It was also stated that some Fair Trade importers, and potential importers, found the current Fair Trade supply inadequate. It was added that the proposal had been well received by a group of Fair Trade coffee importers (unnamed) with whom it had been shared.

In the room at the coffee conference where the proposal was formally introduced, the response was passionate and unequivocal. Neither those representing small farmers, nor the 100% Fair Trade importers (Equal Exchange, Peace Coffee, Dean's Beans, Café Campesino, etc.), accepted either the proposal or the logic behind it. Some pointed out that even during the boom years when coffee plantations regularly received high prices they still treated their workers abysmally. There is little confidence that plantations could be trusted to provide better conditions for their workers. Todd Caspersen, a returned Peace Corps volunteer, former United Farm Worker union organizer, and Equal Exchange's director of purchasing, explained that the work of monitoring labor conditions is quite distinct from what is currently done in Fair Trade and that the system is not equipped to carry out such functions.

Farmers pointed out that the problem was not with too little supply but rather with too little demand from importers. Currently the large majority of 160,000,000 pounds of coffee grown by the world's 300 Fair Trade registered farmer co-ops ends up being sold for conventional low world market prices, due to the lack of Fair Trade buyers. Some coffee co-ops sell less than 10% of the exports as Fair Trade, and there are many other co-ops that are still waiting to get on to FLO's Fair Trade Register. It was observed that if plantations were let in, the Fair Trade certified supply would increase at the same time that the demand for Fair Trade coffee from co-ops was weakened. Later, some pointed out that while small farmers grow 70% of the world's coffee, less than 1% of it is fairly traded-suggesting that there is much more work to be done under the current model before considering a place for large-scale farms.

I personally expressed concerns that whereas the co-op system of Fair Trade is a bottom-up model of economic development that helps create more equitable, democratic communities, the plantation proposal is a top-down paternalistic approach and as such constitutes a lowering of Fair Trade standards.

The parallels with the struggles over organic regulations are clear. In both cases thousands of people, from farmers to manufacturers to retailers to consumers, have helped to build up an alternative model for our food supply that maintains standards far above those in the conventional system. And in both cases there have been recommendations to alter the alternative to accommodate the status quo. Some of us are hoping that in this case, as with organics, those who care most will speak up to protect what has already been achieved.

For more information: www.equalexchange.com and www.transfairusa.org.

The Key Role of Consumer Food Co-ops
in the Fair Trade Movement

Most managers in American co-op grocery stores are aware of Fair Trade or at least have heard of it. Almost every co-op has stocked one or more Fair Trade products for over a dozen years or even longer.

Fair Trade has long enjoyed the enthusiastic support of many co-op store buyers and shoppers because of its resonance with the core values of the co-op movement. For example, the Fair Trade movement has actively encouraged consumers to think about where their food comes from and the social conditions of those who grow and harvest our food.

Consumer co-ops also have for years strengthened their co-op to co-op ties by buying their Fair Trade coffee from Equal Exchange, which is itself a worker-owned co-op, as well as the nation's primary source of Fair Trade coffee and cocoa. In turn, Equal Exchange sources all of its coffee and cocoa-and some of its tea-from small farmer cooperatives.

Co-op managers may know that Fair Trade is a system of international trade with specific aims. It is designed to deliver more of the consumer's dollar back to small-scale farmers in poor countries and to address some of the historic imbalances in power that have benefited many intermediaries, exporters, and food marketing companies but have kept farmers poor and vulnerable.

What many in the co-op sector may not know is that they can take a lot of pride in the success of Fair Trade, because co-ops have been supporting Fair Trade from day one. When our worker co-op first made Fair Trade coffee available in 1986 it was co-ops such as Hanover Co-op (N.H.), and Cambridge Co-op (now Harvest Co-op Markets), along with co-op distributors, that bought and sold most of what we imported. Some co-ops would sell nothing but Fair Trade coffee. For years, consumer co-ops continued to sell at least half of all the Fair Trade coffee in the United States, and in this way acted as the mid-wife for this nascent product category, just as they had earlier for bulk and organic foods.

More recently consumer co-ops have continued in this role by providing the critical early markets for new Fair Trade items such as tea, hot cocoa mix, baking cocoa, and chocolate bars. Since 1986 Fair Trade food sales (measured in wholesale dollars) have grown from about $100,000 annually to well over $30,000,000. While U.S. food co-ops overall may not have gained market share over this period, they nevertheless have continued to spur reforms in the broader U.S. food system by helping to give birth to new categories, such organic and Fair Trade, that later expanded into the other channels. Similarly, co-ops have been crucial in educating their members, who in turn educate their friends and family, or sometimes move to new towns and take with them new shopping habits and perspectives.

To this day, U.S. co-ops still sell a disproportionate percentage of all the Fair Trade foods sold nationwide. For this reason, and because of the historic role of consumer co-ops in Fair Trade, what co-ops want and expect from Fair Trade matters. Co-op members and managers should not hesitate to speak up and voice their opinion.