I am reading Starbucked by Taylor Clark, and the book is quite enjoyable, both as a look inside the coffee industry, and as a business case study of Starbucks. Clark dedicates an entire chapter to fair trade coffee practices, that I wasn’t too familiar with, but as anybody else, assumed it was a Good Thing. Fair trade coffee practices, controlled by a non-profit TransFair USA, pay farmers participating in the program $1.26 a pound for regular coffee, and $1.31 for certified organic. Under the fair trade label it’s resold to you at $12-15 a pound, making the retailer quite a winner in this transaction (originally fair trade was supposed to eliminate the middleman, and thereby lower the final cost of coffee).
When the price of coffee beans can occasionally go under 40c, this seems like a good deal, if you’re a coffee farmer, so what’s the catch?
- Fair trade contracts are binding, and requiring the coffee bean farmers to commit to $1.26-$1.31 even if market surges (as it does when there’s a cold summer in Brazil). Ok, this is a bit hypothetical, but coffee markets have been known to swing wildly nevertheless. In 2006 Starbucks (the largest seller of fair trade coffee in the US) has actually paid its non-fair-trade growers an average of $1.42 per pound. Oops.
- TransFair requires that each coffee farm participating in the program be coop-owned and employ no outside seasonal labor. This rules out private farms, family-owned farms, and corporation-owned farms. A family of coffee bean growers starts out a farm, hires seasonal labor to pick the beans, and wants to sell it as fair trade coffee? TransFair doesn’t let those capitalist pigs get anywhere near the application form.
- Roasters admit that fair trade coffee is of inferior quality. While the rest of the coffee farms have to compete in lower-priced open market, they frequently do it by quality of their product. When a fair trade farm is guaranteed $1.26-$1.31 a pound, the economic rationales start to take over, and growers always try to cut their costs to enjoy higher profit margins.
- TransFair requires every participant in the fair trade program – retailer or coffee grower – to sign a release form promising never to criticize the program in public.