Fair Trade Coffee: The Commodity Chain

Erika PaguiriganGeog 2750

What is Fair Trade?

• Farmers from developing countries are often unfairly treated and exploited for their goods

– Wages are much lower than standard living

– Mass-use of pesticides and growth hormones for maximum production

• Middle men buy coffee beans less than they are worth and keep most of the profits

• The more people that the exports have to go through between the farmer and consumer, the more probability of unfair trading

What is Fair Trade?

• Fair trade allows for just wages and fair treatment for farmers

• The middle men are cut out from the conventional commodity chain

• Stringent conditions on being Fair trade-certified promote environment-friendly farming practices

• Funds are allotted for social, economic, and environmental projects

– Women’s rights– Education– Proper health care

Small farmer

Farmer cooperative

Equal Exchange

Conventional vs. Fair Trade Commodity Chains

Producer

Middle man

Processor

Exporter

US Broker

Corporation

Distributer

Store/Café

Consumer

Conventional Fair Trade

The Small Farmer

• Mexico, Peru, Colombia, Guatemala, Nicaragua, Brazil

• Focused on the small farmer– Primarily rely on family’s labor for

income

• Allows for fair wages, sustainable, reliable businesses, and basic working rights

• On the conventional commodity chain, wages do not allow for basic rights and a satisfactory standard of living

– Widespread poverty

The Small Farmer

• Fair wages prevent farmers from living in poverty

• More money allotted towards education

– Provides families with incomes to keep their children in schools and not working in the fields

– Some funds are used to fund free school meals and building schools

• Health care programs can be established

– Fair Trade requires workers to have basic access to medicine and doctors

• However, Fair Trade is only focused on the small farmer and not large plantations

Growing the Coffee Beans & the Land

• Mexico, Peru, Colombia, Guatemala, Nicaragua, Brazil

• To be “Fair Trade Certified,” certain farming practices have to be followed

– Most of these practices align with organic farming

• Farmers have to learn and use environmentally-friendly practices

– Do not use a harmful amount of pesticides

– Prevent deforestation and erosion– Promote water conservation

Growing the Coffee Beans & the Land

• These techniques are encouraged for land to be preserved and kept for future generations

• Reduces carbon footprint of farming by not using heavy machinery

• Land is not as polluted and unsafe for inhabitants

The Farming Cooperative

• Mexico, Peru, Colombia, Guatemala, Nicaragua, Brazil

• A group of farmers that collect together their resources for communal use

• Pool a portion of income together and vote where to allot money within the community

– i.e. for education, healthcare, etc.– Expensive machinery all of the

farmers can use

• Discusses prices and initiatives with the processor

The Farming Cooperative

• Differing prices and an unstable economy affect small farmers the hardest

– Don’t have large enough of an income and ability to overcome changes

• Having a cooperative creates safeguards for all of the farmers

– They do not have to go through fluctuations in the market alone

– Another way to prevent the farmer from relapsing into poverty

Equal Exchange

• The minimum price of the coffee beans are already established

– Discussed between the farmer cooperative and processor

– Equal and long-term partnerships

• Dealings are not to be competitive for the lowest price

• Instead, more concern for just wages for the farmers and reasonable prices for the consumers

• Info about the market and sales are given to the farmer cooperative

Equal Exchange

Farming Cooperative Processor

• Coffee Beans

• Ideas and thoughts about export pricing

• Profits from export countries

• Information on export market and sales

• Equal Exchange allows for transparent communication between farmers and processor

• No abuse or misuse of farmers and their exports Farmers have more power and say in what they want

• Equal exchange increases the cost to the consumer, the cost difference is minimal• Although the difference is minimal, it is enough to increase farmer’s wages to

satisfactory

Store/Café

• Around the world, mostly to the United States

• After passing the requirements, the coffee beans (or grounds) can be “Fair Trade Certified”

• Exports go from being packaged by the processor to being sent to be sold at stores and cafes

• Importers and businesses pay a fee to receive and sell Fair trade exports

Store/Café

• Fair trade products used to be only sold in small, local coffee shops and high-end grocery stores

• Due to recent growth in popularity, Fair trade coffee is now found in Starbucks and even in McDonald’s and Walmart

• Fair trade products bring light to the injustices and abuse foreign workers face in order to produce exports and make a living wage

– Makes customers more informed about the origins of foreign exports

The Consumer

• Around the world, mostly the United States

• The United States is the top coffee importer of the world• Fair trade coffee costs slightly more than coffee from conventional

techniques– Cutting out the middlemen that the coffee beans go through– Increase in price for increase in wages

The Consumer

• The consumer is more aware of the exploitation of powerless farmers against big corporations through Fair trade products

• Movements for fair wages for exporters have been started and continued throughout the world

• Each purchase makes a difference for coffee bean farmers in South America

Commodity Chain Map

https://mapsengine.google.com/map/edit?mid=z-R5hkH2qW1A.kQoCimKPnPGI

Sources

• http://fairtradeusa.org/• http://www.globalexchange.org/fairtrade/coffee/faq• http://www.equalexchange.coop/products/coffee• http://graduateinstitute.ch/files/live/sites/iheid/files/

sites/international_economics/shared/international_economics/publications/working%20papers/2007/HEIWP06-2007.pdf