FLO announces increase in Fairtrade Premium and Organic Differential for Coffee
Germany, March 20th 2007.
At its meeting on 8 March 2007, the Fairtrade Labelling Organizations (FLO) International Board of Directors ratified the Standards Committee’s recent decision to increase the Fairtrade Premium, and the Organic Differential for coffee. The decision is the end result of a multistakeholder consultation, including representation and input from producers, buyers, marketers, and FLO Labelling Initiatives.
The Fairtrade Premium will increase from 5 US cents to 10 US cents per pound for all Fairtrade Coffee, bringing the Premium level for coffee more into line with the Premium for other Fairtrade Products. The Fairtrade Premium is a payment in addition to the Fairtrade Minimum Price for certified producers to invest in strengthening their organizations and implement programmes to benefit their members and local communities. The increase of the Premium to 10 cents will provide coffee producer organizations with the additional revenue to continually invest at the individual farmer, cooperative and community level. Through this decision, FLO is strengthening its commitment to the empowerment and development of smallholder coffee growing communities.
The Fairtrade Organic Differential for all certified organic coffee will also rise by 5 US cents per pound, increasing from 15 to 20 US cents. The increase in the organic differential reflects the higher cost of organic production and compliance, as well as offering a further incentive for environmentally sustainable development.
Fairtrade Certified Coffee
Current Fairtrade Price elements
Fairtrade Price elements as of June 1, 2007
These changes will be implemented for Fairtrade coffee contracts signed from June 1, 2007 onwards. All contracts signed prior to June 1, 2007 should be honoured at current prices regardless of delivery date.
The Fairtrade Standards include Minimum Prices, Fairtrade Premiums and provide for market access and safe working conditions. Fairtrade Standards are designed to empower producers and farmworkers to improve their economic stability and standard of living, to increase the environmentalsustainability of their activities and to develop the business skills necessary for competition in theglobal marketplace.
The decision to increase the Fairtrade Premium and Organic Differential directly reflects these development goals. Consumers and industry support these goals through their purchases of Fairtrade Certified Coffee.The Standards Committee also requested a review of Fairtrade Coffee Minimum Prices. This review will be initiated by the FLO Standards Unit in April 2007.
The aim is to present a proposal on Fairtrade Coffee Minimum Prices in September 2007.
Definitions and clarifications
Fairtrade Minimum Price:
The Fairtrade Minimum Price is an agreed price that aims to cover the Cost of Sustainable Production(COSP) and to provide for market-access. If the negotiated price is higher than the Fairtrade MinimumPrice, then this negotiated price needs to be paid.
The Fairtrade Premium is a separate payment to be invested in the development of producerorganizations, their members and communities. The producer organizations decide through theirGeneral Assembly how these funds are to be spent. Examples of how producer organizations chooseto use this money include programmes to improve health, education or clean water facilities forproducers’ communities, building up market knowledge or acquiring new technology to strengthen theorganizations’ businesses, or the development of environmental protection schemes.
The Organic Differential (in coffee, previously called organic premium):
The organic differential is an economic incentive that is paid to producers who are certified organic.The organic differential is paid on top of the minimum price or negotiated price, whichever is higher,and in addition to the Fairtrade premium. The organic differential is meant to cover the additionalcosts of producing Fairtrade coffee that is organic certified.
FLO Standards Committee:
The FLO Standards Committee comprises all key Fairtrade Labelling stakeholders (labelling initiatives, producers and traders) and external experts, all appointed by the FLO Board. It is responsible for approving international Fairtrade Standards. Fairtrade Standards are set following an extensive consultation process involving a variety of stakeholders. They are set in accordance with the requirements of the ISEAL Code of Good Practice in standards setting.