Fairtrade Coffee Price Review: the way forward
Bonn, 23rd January 2007. Over the last two months, Fairtrade Labelling Organisations (FLO) International has been carrying out a review of Fairtrade Minimum Coffee Prices. The review process was initiated with a proposal presented to the FLO Board by the Coordinadora Latino Americana y del Caribe de Comercio Justo (CLAC), the network of Fairtrade Certified Producer Organizations for Latin America. The CLAC presented a cost of production study, which was the basis of the review process. The two months review involved a stakeholder consultation – with coffee traders, Labelling Initiatives as well as producer organizations.
FLO Standards Committee, in which stakeholders from FLO’s member organizations, producer organizations, traders and external experts participate, was due to take a decision on new coffee prices in its January 16th Meeting. After analyzing the information provided by the different stakeholders and the data currently available on production costs, FLO’s Standards Committee members have unanimously decided not to change the Fairtrade Minimum Prices and Premiums at this early stage. It was also decided that a more extensive review on coffee prices will be carried out during 2007.
The Standards Committee based its decision on a lack of consensus among the different stakeholders as well as on the lack of key data of production costs and market impact for coffee. The Committee noticed the “wide variety of views among stakeholders about the need to increase the price, and the rationale, timing and wisdom of doing so”, and in particular the view held by many stakeholders that “the result of a rapid or large increase of the price would be to significantly reduce sales or limit growth, which would actually harm producers most.” The Standards Committee members identified the need to obtain more extensive cost and market data on coffee, currently not available.
However, the Committee recognized the urgent need for a robust review of Fairtrade Coffee Minimum Prices and acknowledged the value of the data submitted by the CLAC. In view of the diversity of Fairtrade coffee-producing regions and coffee-consuming markets, a team at FLO will now obtain and study cost of production data for all coffee regions (including the study provided by the CLAC), seeking further data where necessary, and obtain information to allow a proper assessment of the market impact of different pricing options.
Andreas Kratz, Director of FLO’s Standards Unit says: “The decision of the Standards Committee has a clear intention. A proposal shall be put forward giving time for a more thorough research and consultation process with the aim of greater consensus amongst stakeholders and more insight into the risks of prices changes particularly for producers.”
The Chair of FLO’s Board, Barbara Fiorito supports the decision taken: “The Board recognizes the essential importance of the process and decisions taken by the FLO Standards Committee. The producer’s request has been very seriously considered by the Board and the Standards Committee. I am encouraged that this request will be taken forward in an inclusive, robust and timely manner with the aim to reach as constructive a broad stakeholder consensus as possible.”
The project on coffee prices, which will involve extensive input and collaboration from all of FLO’s stakeholder groups – producers, traders, Labelling Initiatives, and staff – has the aim of implementing new prices in October 2007 latest.
FLO: a truly multi-stakeholder association
Unlike other certification systems, FLO guarantees the producers a Minimum Price for their produce, which takes into account the costs of sustainable production (COSP). Producers also receive the ‘Fairtrade Premium’, which is invested for the benefit of the producers, their organizations or their communities, and an extra payment for organic production.
When a group of stakeholders notify the need to review a Standard or the Fairtrade Minimum Prices and Premium, FLO Standards Unit studies the proposal and initiates a broad consultation process involving all Fairtrade Labelling stakeholders. FLO actively encourages all its stakeholders to take an active role in the development of Fairtrade Standards and Prices for the benefit of producers in the South.
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