Coffee and Sustainability: Direct Trade vs FairTrade (Part 1)

FairTrade CertifiedHave you ever wondered what the difference is between Direct Trade and Fair Trade?
There are many initiatives dealing with sustainability in coffee but two of the most popular that I hear talked about would be Direct Trade and Fair Trade.

In the next three weeks we will be diving into it a little bit further thanks to our social media friend Joel Jeschke who just wrote a piece on it for a university paper.

ENTER JOEL———————————————————————————————————————————–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. FLO defines 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. 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.

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 which we’ll talk about next week.

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