Coffee farmers have a problem. Even with global coffee prices surging in 2021, extreme weather in Brazil, the world's largest coffee exporter, and social upheaval in Colombia are making it difficult for small producers worldwide.
A new study cataloguing prices Colombian coffee farmers need to charge in order to earn a living income, or enough money to live comfortably, may pave the way for a pricing system to even out the industry’s booms and busts. The report done by international certification body Fairtrade last month on Colombia was the first in a suite of studies developing minimum price guidelines — technically called a Living Income Reference Price (LIRP) — for other major coffee-producing regions. It is the first certification to calculate the price farmers need to live well, in addition to setting a global minimum price certified coffee roasters must pay farmers. Fairtrade-certified companies don’t need to pay farmers the LIRP, but must pay them at least the minimum price set by the organization.
“For a long time, we've had a minimum price that really worked as a safety net to shelter producers from the highs and lows of the global economy, but it wasn't really linked to protecting a specific level of income,” explained Julie Francoeur, Fairtrade Canada's executive director.
The new approach aims to reflect how much it costs to grow coffee and earn a decent living in different coffee-producing regions. That will make it easier for coffee farmers to demand better prices, and help consumers ensure the money they spend on their morning Joe ends up helping those who grow it.
While the reference prices are voluntary, Francoeur explained their existence aims to encourage major coffee roasters and brokers to be more transparent about who gets the greatest share of their sales. Prior to the recent price surge, low prices globally for bulk coffee mixed with comparatively high retail prices in Canada and other countries had fuelled healthy profit margins for many of these companies, she said.
“It's not saying that (the price) of coffee should be increased for the final consumer,” she explained. “It's about redistribution, and understanding what the power dynamics in the chain are.”
Still, whether the Fairtrade International reference prices will succeed in giving farmers enough power to demand a more equitable share of profits from the world's coffee addiction remains to be seen, said Janina Garbs, an expert on sustainable coffee supply chains and professor of business and society at the ESADE business school in Barcelona.
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Traditionally, the minimum price set by Fairtrade International for coffee and other commodities aimed to strike a balance between the costs of production, and what coffee brokers — and consumers — are willing to pay. Though it is better than nothing, that price isn't necessarily enough to cover farmers' costs or compete with cheaper, uncertified coffee.
The new LIRP will highlight this discrepancy, adjusted to reflect the needs of farmers in different parts of the coffee-producing world. It's an approach she said could potentially be translated to help farmers struggling to grow other major commodity crops, like wheat or corn.
“It's an almost philosophical question,” she said.
Currently, most commodity crop prices are based on global supply and demand, including Fairtrade products, leaving it at the whim of global markets and unattached to the actual cost of growing food. That leaves farmers in a difficult position: If prices fall, they have little choice but to stop farming or change crops each season, an impossible change for perennial crops like coffee.
Initiatives like the living income reference proposed by Fairtrade can help alleviate these boom and bust cycles, but deeper changes — a global supply management system, for instance — are needed for a truly sustainable global system, she said.
“The general question is: Whose responsibility is it to ensure a living income?” she asked. “Is it the responsibility of the buying company? Is it the responsibility of a government that has a social safety net? Or is it the responsibility of the farmer?”
This story has been updated to clarify the difference between Fairtrade's minimum price standard and the Living Income Reference Price outlined in its recent report.