Report on the Fair Trade Organization Coffee Production

Introduction

As we know coffee is the second most widely traded commodity after oil and that’s the trouble. Coffee has been adopted as a sophisticated beverage in the world and coffee trade has worked well for the retailers, exporters, importers and the coffee consumers, but it’s not the other way round for some of the producers, as coffee production has resulted in poverty, disease and conflicts. To make this trade better we need.

A fair producer, a fair exporter, a fair importer and a fair consumer. To deal with the volatile movements and sudden changes in the market, one answer growing in popularity is Fair Trade Organization. Fair Trade is a social movement which not only focuses on the monetary benefits to a producer but also ensures product quality, accountability and various social and environmental aspects.

Critical Evaluation

The idea of fair-trade coffee is very well intentioned and sounds wonderful. Prime motive of the fair-trade organization is to exclude the middlemen from the trade, poverty relief to the producers and protect them from local ruthless monopsonist coffee buyers, called coyotes. Fair trade guarantees the producer a minimum selling price even at the times when there is a fall in international coffee prices, in this manner the producers can get the labour cost and the production cost incurred during the coffee production.

Fair Trade is an alternative model of International Trade which just aims to adjust some of the inequalities in the conventional trading system. If we talk about the fair trade certification popularly known as FLO-CERT, the coffee producers have to produce coffee under strict regulations, restricting them to use any chemicals, herbicides, limits on child labour and pesticides which also includes dialogue, transparency and respect between the trade. Also, joining the fair trade network is very expensive for the low-income farmer and this network does not guarantee a potential or a willing buyer for the coffee. We can say it’s a glass half full and half empty.

Fair trade has improved the lives of the producers in the developing countries and encouraged them to maintain and harvest the barren lands which were neglected and abandoned, which resulted in a moderate boost in household incomes. Fair trade is benefitting most of the certified farmer families resulting in improved social services, training, credit, economic infrastructure. Recent research on the fair trade farmers indicates that the level of animal stock and agricultural assets have accumulatively grown in the past years.

One of the interesting facts to keep in mind is that fair trade certified coffee once leaves the producers organizations, is tracked all the way to the roaster because the producers and the roasting companies both are fair trade certified, this ensures transparency within the whole system.

On the other hand, some of the critics have to say that since 2007 the minimum price guaranteed by fair trade organization have rarely changed and because of the complex structure of the fair trade the producers take help of marketing agents and local cooperatives. Fair trade premium is one of the highlighted benefits which the organization provides to the producers, the farmers of Peru (Ref2) received limited information about the fair trade premium benefits and its existence.

The recent survey indicates that the organic coffee yields in Nicaragua are slightly better than the normal coffee yields and they require higher labour efforts, are more time consuming. It indicates a moderate change in income of the farmers despite being connected to fair trade organic markets. The survey also indicated that off-farm employment generated more income then coffee production. (Ref2)

Thus, we can say that the fair trade organization helps the farmers to reach higher gross coffee revenues, but the net coffee revenues remains limited since many farmers could not sell their final product at the guaranteed prices.

Conclusion

To conclude, I would say that the fair trade organization is giving the benefit of guaranteed minimum price but at the same time fair trade does not constitute of a fairer and sustainable market. Coffee production or any other business does not depend on the product only, it also depends on the marketing skills, strategies, competitiveness and literacy level of the producer. The problem in the developing countries is that they are not focusing on the producer (provide them with low-cost and simple human capital investment in nutrition and basic math & language skills) they focus on the product.

The illiteracy and involvement of corrupt dictators & bureaucrats is what is making the producers prone to poverty, a solution to this will leave a positive impact on the farmers and the success ratio will increase significantly.