Fairtrade Addresses Challenges in the Coffee Sector

Valentín Chinchay, president of a
cooperative in Ecuador, collects
coffee cherries.

03 November 2010

Market volatility in the coffee trade has created new challenges for Fairtrade coffee producers. The current high market price of US$2 per pound of coffee* ($2.35 as of 7 January 2011) masks a series of crises affecting coffee production around the world.

Impacts of climate change and disease, coffee bushes that are reaching the end of their productive cycle, a credit crisis that has limited access to finance, a weakening dollar, and the challenges of poverty and food security are just some of the difficulties facing coffee farmers.

The volatility of the current market causes extreme pressure in all parts of the coffee chain. It also creates challenging circumstances for Fairtrade certified small producer organizations trying to fulfill coffee contracts with international buyers and secure supply from their members. In the current market, some local prices are actually higher than the global market price given the dynamics of local supply and demand and the fierce competition for high quality coffee.

For all involved in the coffee trade, the shortage of high quality coffee, the need to replenish stocks, and the pressure on brands and retailers to pass higher coffee prices onto consumers threaten the financial health and viability of the coffee industry.

Whether markets are high or low, the Fairtrade system – including Labelling Initiatives, Producer Networks and FLO – works to ensure stability in coffee production and trade. Fairtrade is stepping up to implement short-, medium-, and long-term measures to address the challenging dynamics.

The measures include:

  • Dedicating significant staff and resources to conduct an expedited review of Fairtrade coffee prices and related contracting rules and trade standards, the results of which will be announced in spring 2011. Click here to read details of the project.
  • Bringing industry and producers together through advisory councils and at industry events to address issues such as: how Fairtrade operates in high market situations, supply and demand, organic production, and meeting the technical and capacity-building needs of producers;
  • Convening a roundtable with alternative lenders to ensure that pre-finance requirements allow small producer organizations to provide their members with the best offer possible;
  • Collaboration with Producer Networks and Labelling Initiatives to facilitate dialogue for producers or traders that have suffered a default or been forced into a premature fixation of a contract;
  • Providing funding for producer training in contract negotiation and risk management and seeking funding for producer finance and technical assistance for quality and productivity improvements;
  • Expanding the scope of FLO’s Producer Certification Fund, which provides financial assistance to small producer organizations to help cover certification fees;
  • Working to reduce compliance costs.

Fairtrade is working with all sectors of the coffee industry, from producers to sellers to ensure that these activities contribute to the betterment of the coffee trade and deliver benefits to producers, traders, retailers and consumers.

*Price based on the ICE Coffee 'C' Futures contract for Arabica coffee.

 
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