FLO International inaugurates Fairtrade Minimum Pricing for tea
From February, 1st, 2008, the first Fairtrade Minimum Prices for tea will be integrated into the Fairtrade Standards.
Tea is one of Fairtrade’s most diverse products, with grades and types of tea ranging from the fine-grade mass-market teas that are used in tea-bags to high quality specialty leaf and organic teas. The market prices for tea vary tremendously, not just according to grade and type, but also depending on what production methods are used and the geographical origin of the tea. The agreement to implement Minimum Prices for such a complex product represents a major achievement for FLO, and we are grateful to the many tea producers, traders, and labeling initiatives who have worked with us over many months in support of this project.
The decision to introduce Minimum Prices reflects concerns over downward trends in global market prices for tea over the past five years. Faced with global oversupply of tea, producers in many regions are now selling much of their product at below the cost of production. Fairtrade Labelling is anticipating that the new pricing system for tea will help tea farmers around the world to meet their costs of production, and to support the sustainable development of their business, even if market prices fall still further.
The conclusion to introduce Minimum Prices for some teas is the result of an extensive process of research and consultation, following ISEAL best-practice for standard-setting. In addition to research into the cost of production of tea in several producing regions, FLO has led direct consultations with Fairtrade certified producers in Africa and Asia as well as with other stakeholders.
The new Fairtrade Minimum Prices for tea will apply only to those teas which are typically sold at lower prices and where Minimum Prices can make a real difference to producers’ income security. Specifically, FLO is introducing prices only for non-organic teas produced using the Crush-Tear-Curl production method, and for certain lower grades of tea produced using the orthodox production method. FLO may introduce Minimum Prices for specialty leaf and organic teas in the future. It has been agreed to introduce Minimum Prices that vary according to countries and regions of origin, reflecting the diversity in cost of production and market prices for different origins.
As with all Fairtrade products, it is expected that many Fairtrade teas will continue to trade at market prices considerably above the new Minimum Price levels.
The Fairtrade Premium for tea has traditionally been set at a high level relative to other Fairtrade products. With the introduction of Minimum Prices, and after extensive consideration, FLO has decided to slightly reduce the Fairtrade Premium in order to maximise market access opportunities for Fairtrade certified producers within the tea market. FLO has balanced this against the need to ensure that the Fairtrade Premium for tea continues to generate sufficient resources to allow producers to invest in their future.
Acknowledging the difficulty of covering the costs of sustainable production for tea in current market conditions, FLO has also agreed that a small portion of Fairtrade Premium monies can be used by tea estates to contribute to meeting the cost of improving conditions for their workers and putting in place more sustainable production techniques, as required by Fairtrade. Under existing Fairtrade criteria, all Small Farmer Organizations (SFO) are already free to use the Fairtrade Premium monies for this.
Finally, FLO has also agreed to introduce stricter conditions surrounding the trade of Fairtrade tea, in order to ensure greater transparency in the system, as well as supporting faster payments to producers.
FLO appreciates that these decisions represent a major change of policy for tea and will be closely monitoring the impacts of the new tea pricing system on producers and the market, prior to a full review planned for 2009.